Introducing the CRE CLO Annex A Standard
April 28, 2023
The CRE Finance Council (CREFC) released its new Commercial Real Estate Collateralized Loan Obligation (CRE CLO) Standardized Annex A (Click here). The release of the Annex A represents an important step in the ongoing maturation of the CRE CLO marketplace.
CREFC and the committee have enjoyed significant participation from investors, issuers, placement agents and all involved parties. And the effort has benefitted greatly from the numerous conversations and input with key industry stakeholders, including investors, issuers, attorneys and due-diligence providers.
In particular we would like to recognize the work of the drafting committee, with special thanks to Michael Barbieri, Executive Director at UBS (through STS Structured Products) for guiding the process as our member chair of the committee.
Why it matters: CREFC and its members embarked on this important market initiative with two main goals in mind:
- Standardize the data fields to be used by all CRE CLO issuers at issuance; and
- Establish a best practice for issuers to update the Annex A when a reinvestment is made and a new asset added to the pool.
Key Benefits
- CRE CLO annexes are extremely robust and often include almost all fields found in the comfort tape. This effort compiled those CRE CLO fields and provided guidance behind field names and inputs to ensure heightened transparency and ease-of-use for investors.
- The standardized annex allows for greater inclusivity of information, with 268 data points provided compared to the average of 212 data points provided today.
- A key benefit to investors is the heightened efficiency standardization brings to their investment due-diligence efforts. Such heightened efficiencies will assist both on the new-issue front and when reinvestments occur within the CRE CLO pool.
CRE CLO vs. Conduit CMBS Annex-A
Given that many of the loans contributed to CRE CLOs are floating-rate and transitional in nature, CRE CLO Annex-As require more data fields than those found in conduit CMBS. The additional fields capture:
- Loan details such as the floating-rate benchmark, loan extension options/description, margin, lookback periods, etc.) and
- Additional balance and reserve fields given the transitional nature of the assets.
In all other aspects, the new CRE CLO Annex A is largely in line with the fixed-rate conduit CMBS Annex.
What’s next: CREFC will move soon to the second phase of CRE CLO reporting that addresses the non-static nature of pool collateral given the ability to add new loans and remove existing loans. A monthly CRE CLO Loan Periodic Update and other files would contain specialized fields necessary for a full picture of these transactions.
We Want to Hear from You
CREFC and its issuer members strive to provide heightened transparency and collateral and structural detail that ensures investors have all the information necessary to make informed and appropriate investment decisions. We do that best when we hear directly from our investor community. We hope you find this effort supportive to your investment success.
Please reach out to Rohit Narayanan with any questions you may have on this important project.