KBRA Releases Research – CRE CLO Cash Balances Trend Upward as Market Slows

KBRA releases a report that examines how cash balances in commercial real estate collateralized loan obligations (CRE CLO) trended upward in 2022 as the market slowed. In the report, KBRA tracks the amount of cash held each month among 33 managed CRE CLOs issued in 2021, which includes non-KBRA-rated deals. Cash as a percentage of pool balance has generally trended upward during the year—reaching a high of 4.8% in September 2022. This equates to $1.5 billion across a deal population with $31.9 billion in outstanding balance.

This trend may indicate the challenges issuers are facing originating new loans for CRE CLO reinvestment, owing to rising coupons as well as uncertainty surrounding CRE fundamentals. However, reinvestment activity did increase in October 2022, reducing cash as a percentage of the pool balance to 3.9% ($1.3 billion). It is not yet clear if the trend will continue, as it is only a one-month observation. In the report, KBRA also looks at the pace of payoffs and reinvestment activity month-over-month as well as how property type composition among the transactions changed during the year.

Click here to view the report.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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