More commercial real estate bridge lenders are turning to the Commercial Loan Obligation (CLO) market to package their floating rate loans into securities, in what is shaping up to be a record-setting year. Some $14.6 billion of commercial real estate (CRE) CLO deals have priced through May 13, and the market is on track to break the annual record of $19.2 billion set in 2019 by midyear. “With active loan origination, availability of investor capital and attractive funding levels, we are seeing CRE CLO activity that is strong and continuing,” said Steven Kolyer, who leads the CLO practice at Sidley Austin. “The current strong CRE CLO market is looking less temporary and more sustainable for some time.”
Lument, the New York bridge lender formerly known as ORIX Real Estate Capital, is preparing its first deal since it merged three originators and rebranded in October. It is expected to begin tapping the market regularly again.
Charlotte-based Barings, another bridge lender, is tentatively slated to launch its debut deal in the second half of 2021.Barings is building its staff. It has a deep-pocketed parent in MassMutual and vast experience with corporate CLOs. That side of its business issues in the United States and Europe, and has long been among the more active producers, with 11 deals totaling $4.2 billion during the pandemic.
Those who have issued CRE CLOs since the onset of the coronavirus crisis last year include a mix of lenders that rely heavily on the capital markets, such as Arbor Realty, Bridge Investment, LoanCore Capital and MF1 REIT, as well as others that are more opportunistic, such as Starwood Property. The latter is among shops that have ready access to many forms of cheap capital and typically tap the CLO market only when spreads are very tight.