What strategies are you using to manage risk and maintain liquidity across your CRE CLO deals?

Peter B. Morral,

Chief Development Officer & Co-Head of Originations, Granite Point Mortgage Trust, Inc.

Rishi Bansal,

Chief Investment Officer, BankUnited

Issuers in general have a battle-tested / standard playbook when it comes to managing CRE CLOs. One of the attractive features of CRE CLOs for investors is that there is an inherent alignment of interests given that issuers are the risk retention party and these vehicles are used by issuers as a financing vehicle (unlike some arbitrage CDO deals prior to the GFC. The various strategies employed by issuers, take into account this alignment of interests when managing CLOs.

We mostly invest in Senior AAA’s.
We prefer to have deals underwritten by seasoned broker dealers who provide liquidity.

We keep liquidity in the form of uncalled capital to deal with any unforeseen seen issues with loans in our CLOs. We have exercised our par purchase option buy troubled assets out of CLOS to shield bond buyers and work them out on the balance sheet.

Erik Gutman
Principal, Head of Mortgage Lending, Prime Finance Partners