"Uncovering Real Estate Distress in Niche Investments"
Commercial real estate collateralized loan obligations (CRE CLOs), an investment product used to finance risky real estate projects, are facing unprecedented stress as borrowers struggle to repay loans tied to commercial property ventures. The share of troubled assets held by these niche products has surged four-fold in the last seven months, reaching more than 7.4%. Rising interest rates and tepid demand for office space are causing borrowers to struggle to meet their obligations, leading to major players in the market rushing to rework loans and short sellers ramping up attacks on publicly-traded issuers. The pain in the CRE CLO market is part of a broader shakeout in the US commercial real estate market, with industry observers warning that few products are more exposed than CRE CLOs.
