Quarterly U.S. CRE CLO Report: Q4 2023 Wraps Up a Year With Record Low Issuance and Performance Concerns on the Rise

With only two transactions in Q4 2023, commercial real estate (CRE) collateralized loan obligations (CLO) annual issuance fell well short of market expectations set at the beginning of the year. New issuance was muted most notably from the rise in interest rates and lack of investment sales. This quarter’s deals—MF1 2023-FL12 and HIG 2023-FL1—totaled $1.57 billion, falling from the prior quarter’s four transactions with volume of $2.99 billion. Total issuance in 2023 ended at $6.7 billion, representing a sharp decline of nearly 78% from 2022.

The delinquency rate saw a meaningful 284-basis point increase to 6.18% from 3.33% at Q3 2023. Between Q3 2023 and Q4 2023 quarter-end December 2023, 98 loans totaling $3.13 billion became delinquent. As of December 2023 reporting, all loans were still flagged as delinquent and includes loans that are past the maturity date (non-performing matured balloon and performing matured balloon). The magnitude of this increase portends further volatility in loan payment status.