top of page
  • Writer's pictureHoward Kline


In this video, I interview Stuart Goldstein, is an attorney at Cadwalader, Wickersham and Taft, New York City’s oldest law firm. I ask the question, where are we at in this current economic recovery. Stuart begins by explaining what a CLO is, or Collateralized Loan Obligation. Wikipidea defines a CLO as “a form of securitization where payments from multiple middle sized and large business loans are pooled together and passed on to different classes of owners in various tranches. A CLO is a type of collateralized debt obligation.” describes a CLO as security, backed by a pool of debt, often low-rated corporate loans. Collateralized loan obligations are similar to collateralized mortgage obligations (CMO), except that the underlying loans are of a different type and character.

Explained differently, and in a very simplified fashion, imagine that every commercial mortgage generated over the last 3 years is sold by the originally lenders and packaged, as a whole into one asset, that I will describe as “Loan Holder 1”. That one asset, Loan Holder 1, may be comprised of thousands of loans. The borrowers and obligors on these loans pay their mortgage obligations to Loan Holder 1. Loan Holder One may be owned by 1 or more owners, who share in the profits and losses of Loan Holder 1, in accordance with the ownership or equity terms of Loan Holder 1.

The term, Commercial Mortgage Backed Securities or CMBS is a form of CLO, which, during the recession beginning in 2008, came into disfavor. Fast forward to 2018, ten years later, commercial finance professionals are again talking about the re-emergence of CLO’s as a financing option.

Stuart describes the commercial real estate CLO as a “more transitional loan product, farther out in the cycle. Stuart is seeing a greater interest among investors for smaller or more developmental type of properties, perhaps signaling a greater maturity in the market and appetite among investors for risk. I think that it is fair to say that early into the recovery, investors shied away from riskier investments.

Being well into the recovery should be of little shock to anyone. The real question is, how much life is left in this recovery. Now that is the million dollar question. Stuart is of the opinion that there is still some “runway” left.

Finally, Stuart mentions some of the changes and current drivers that are affecting our investment decisions.


bottom of page