Media: CRE-CLOs are toxic and will blow up real estate
JP Morgan analyst: Actually...
Investors: What he said...
Borrowers: Whew...
For the past two years, the consensus was clear: CRE-CLOs were going to trigger a commercial real estate crisis.
Headlines told a consistent story:
-- WSJ: "Office Loans Are Toxic, but Apartment Loans Are in Bad Shape Too"
-- Bloomberg: CRE-CLOs are the "canary in the coal mine"
-- YouTube: "Oh Sh*t, Commercial Real Estate CLO Loans Are Collapsing" (100K+ views)
-- CRED iQ: "CRE CLO Distress Rates See-Saws Back Above 13%"
But reality hasn't followed this narrative:
-- CRE-CLO production volumes increased
-- Distress has been contained (so far)
-- Bond prices stabilized and found a floor
-- The predicted collapse didn't materialize
While most were focused on the doom narrative, one team was studying the details.
Chong Sin, JP Morgan's lead CMBS analyst, took a different approach.
Instead of following the headlines, his team analyzed what was actually happening in the market and in this report published right after 'Liberation Day,' they led the market's understanding of what was actually going on in this important corner of the real estate capital markets.
What they found...
1. Sponsors were calling underperforming capital, pulling bad loans out of securitization pools
2. Interim financing was providing unexpected liquidity features
3. This created a floor for some CRE-CLO securities
4. The market had more resilience than the narrative suggested
The result?
While others were paralyzed by fear and/or praying for distressed sales, JP Morgan's analysis provided clarity.
This isn't unusual in our industry. The most accurate insights often come from experts analyzing the market through proven frameworks rather than those making the loudest predictions.
The takeaway...
In a world of constant commentary, the quiet experts studying mechanics often see what others miss.
Kudos to Chong Sin, Eli Khaim, and Terrell Bobb at JP Morgan for finding signal in a real estate world full of noise.
JP Morgan analyst: Actually...
Investors: What he said...
Borrowers: Whew...
For the past two years, the consensus was clear: CRE-CLOs were going to trigger a commercial real estate crisis.
Headlines told a consistent story:
-- WSJ: "Office Loans Are Toxic, but Apartment Loans Are in Bad Shape Too"
-- Bloomberg: CRE-CLOs are the "canary in the coal mine"
-- YouTube: "Oh Sh*t, Commercial Real Estate CLO Loans Are Collapsing" (100K+ views)
-- CRED iQ: "CRE CLO Distress Rates See-Saws Back Above 13%"
But reality hasn't followed this narrative:
-- CRE-CLO production volumes increased
-- Distress has been contained (so far)
-- Bond prices stabilized and found a floor
-- The predicted collapse didn't materialize
While most were focused on the doom narrative, one team was studying the details.
Chong Sin, JP Morgan's lead CMBS analyst, took a different approach.
Instead of following the headlines, his team analyzed what was actually happening in the market and in this report published right after 'Liberation Day,' they led the market's understanding of what was actually going on in this important corner of the real estate capital markets.
What they found...
1. Sponsors were calling underperforming capital, pulling bad loans out of securitization pools
2. Interim financing was providing unexpected liquidity features
3. This created a floor for some CRE-CLO securities
4. The market had more resilience than the narrative suggested
The result?
While others were paralyzed by fear and/or praying for distressed sales, JP Morgan's analysis provided clarity.
This isn't unusual in our industry. The most accurate insights often come from experts analyzing the market through proven frameworks rather than those making the loudest predictions.
The takeaway...
In a world of constant commentary, the quiet experts studying mechanics often see what others miss.
Kudos to Chong Sin, Eli Khaim, and Terrell Bobb at JP Morgan for finding signal in a real estate world full of noise.
PS -- Who are the other analysts or experts in CRE that you think deserve more attention for their accuracy over noise? We don't sell newsletters or data and want to use this platform to highlight our industry's best and brightest. Feel free to comment below or DM us with leads.
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