CRE CLO Resurgence: A Conversation with Christina Moy & Margit Grejdus from KBRA

(Austin, Texas photo courtesy of Jeremy Doddridge via Unsplash)

The CMBS market was particularly strong in the first quarter of 2025 before slowing in April. KBRA’s March 2025 CMBS Trend Watch reported that year-over-year issuance more than doubled to $37.1 billion for the first quarter.  

Given the increasing number of CRE CLO issuers and securitizations coming to market in 2025, some perspective about credit trends in new transactions and legacy ones is timely.

MBA Newslink interviewed Christina Moy and Margit Greydus at Kroll Bond Rating Agency, who shared insights about CRE CLO credit from their respective vantage points handling new issuance and surveillance credit ratings.

MBA Newslink: What structural and collateral trends is KBRA observing in the CRE CLO market?

Christina Moy, Managing Director, CMBS: Structurally, there has been a shift toward managed deals over static transactions. While early vintage transactions favored static structures, managed deals now represent a larger share of issuance. Over the last year, even the issuers who previously favored static transactions have shifted towards managed deals. 

Additionally, reinvestment periods are getting longer. Where two-year reinvestment windows were standard until a year ago, we’re now seeing 2.5- to 3-year periods becoming more common. Longer reinvestment periods allow collateral managers more flexibility but may also increase credit risk for noteholders. The pools may have a higher amount of loan turnover and delayed bond paydown as principal proceeds are used for acquisition of new loans instead of paying down the bonds.

On the collateral side, there’s a continued migration toward multifamily assets and away from office and other non-residential property types. This is generally in sync with the broader market risk sentiment, with investors and issuers favoring sectors with historically more stable fundamentals.

LTV of loans has been lower over the last year and a half compared to transactions done in 2021 and 2022 owing to lesser competition and coverage constraints resulting from a higher interest rate environment.

MBA Newslink: What are issuance expectations looking forward?

Christina Moy: CRE CLO issuance saw a strong rebound in the first quarter of 2025, with issuance reaching $8.4 billion, nearly matching the full-year 2024 total of $8.7 billion. However, tariff induced market volatility in April paused the market, with no deals issued during the month. As we move beyond the initial disruptions, the market appears to be stabilizing, and issuers seem to be cautiously moving forward again with their plans to issue new transactions.

We expect issuers may still look for windows of opportunity to launch deals. We anticipate the structural and collateral characteristics of deals to remain consistent with recent trends – managed transactions with longer reinvestment periods, collateral predominantly concentrated in multifamily properties and lower (albeit rising, as the market becomes more competitive) leverage.

MBA Newslink: Describe KBRA’s experience providing credit ratings in this sector.

Margit Grejdus, Senior Director, CMBS Surveillance: KBRA has been actively involved in rating CRE CLOs since 2012, though the transaction type gained popularity in 2016-2017. To date, KBRA has issued 533 ratings across 74 transactions. Once ratings have been assigned, KBRA monitors CRE CLO transactions on an ongoing basis.

Historically, KBRA has affirmed—and in some cases upgraded—its ratings over the life of the CRE CLO transactions we rate. While there have been a few downgrades, upgrades far outnumber the downgrades, and the downgrades have been largely limited to below investment-grade classes. To date, 100% of KBRA’s AAA, AA, and A CRE CLO ratings have been stable or have improved (stability ratio), and BBBs and non-investment grade ratings have had a 98% and 95% stability ratio, respectively.

MBA Newslink: How has KBRA’s portfolio of legacy CRE CLO ratings performed over the last few years?

Margit Grejdus: Overall, KBRA-rated CRE CLO transactions have continued to perform well over the past few years. The majority of transactions continue to pass their respective par value and interest coverage tests, with a few exceptions. Realized losses have been minimal to date.

That said, loan performance has shown signs of increased stress in CRE CLOs issued post-pandemic, particularly in the 2021 and 2022 vintages, which have exhibited higher delinquency rates relative to historical levels and have experienced slower loan payoffs.

Notably, several deals now contain REO assets—an occurrence that was relatively rare pre-pandemic. The structural flexibility of these transactions has played a key role in mitigating risk, enabling collateral managers to modify loans and extend maturities. There has also been continued activity around the repurchase of defaulted or credit-impaired assets by collateral managers. 

MBA Newslink: Could you discuss the role of the collateral manager and how they are impactful to process and outcomes?

Christina Moy: The collateral manager plays a key role throughout the life of a CRE CLO transaction. At the time of issuance, the sponsor, as an affiliate of the collateral manager, is responsible for selecting the initial loan collateral and directing the structure of the transaction. Some structural considerations that are influenced by the manager are, but not limited to, determining reinvestment period terms and eligibility criteria, note protection test covenants, modification criteria, and interest and principal payment waterfalls.

After issuance, the manager controls which assets may be purchased during the reinvestment period, if any, and is also responsible for monitoring each loan’s performance.

Given that these pools are generally comprised of non-stabilized assets, a collateral manager’s ability to proactively monitor borrowers’ progress on their business plans and react to distress is extremely important to the performance of the transaction.

Margit Grejdus: The collateral manager plays a critical role throughout the life of a CRE CLO transaction, and each sponsor utilizes the available tools in a different way. For transactions with a reinvestment period—particularly when new loans are permitted to be added to the pool—the collateral manager has the ability to control the transaction’s collateral composition well beyond the closing date with respect to property type and geographic concentrations, as well as overall pool diversity.

Their involvement continues even after the reinvestment period ends. Collateral managers remain actively engaged in asset management particularly when addressing underperforming or distressed assets. In some cases, they may also serve in the special servicing role.

As I mentioned earlier, the collateral manager’s ability to modify loans or repurchase troubled assets serves as a key mechanism to mitigate losses and support overall transaction performance.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)