Warehouse lenders are giving CRE CLO managers a reason to smile – and to call. When your source of funding says they will bankroll collapses on vehicles that include your most ulcer-inducing multifamily syndication deals, you thank your saints and do it. This year so far, managers have collapsed 24 CRE CLOs, per a terrific new dive by CMA, compared to 17 in all of ‘24. Three-fourths of those collapsed vehicles include deals done in peak ZIRP-era exuberance, including deals in which the DSCR numbers got rough.

It’s a fascinating shift in dynamic, and one which allows debt funds to potentially put the nightmare deals of ‘21 and ‘22 behind them. For a long time, debt funds were doing what they needed to do to avoid their warehouse lines being pulled. So even when sponsors were hella delinquent, you would see lenders take it.

“Everyone’s being delusional – whether on purpose or by accident,” one lender told The Promote last year of this ostrich-in-the-sand alliance between lenders and their naughty borrowers. Now though, w/ warehouse lenders providing an escape hatch, debt funds have incentive to act.

Take Ready Capital, a key syndicator financier that was staring down severe distress in its book (“We’re certainly encouraging them to have a greater sense of urgency,” Ready’s chief credit officer Adam Zausner said last May of delinquent borrowers). Now, seven of its peak ZIRP-era deals have been collapsed, per CMA, and a couple more are coming down the pike, putting Ready’s exposure in a much happier space. Zausner told the publication that the collapses indicate that the portfolio’s distress is manageable, and that Ready will return to the market in Q4 after 2Y on the sidelines.

One issuer framed the trend vividly: “From an investor perspective, there are no losses, ever. You are buying three-or four-year paper, and as the deal is winding down, the issuer buys it all back.” In conduit CMBS, by contrast, you’d be on edge until the last loans get repaid, the issuer added. The action here, the issuer added, is being driven by the warehouse lenders rather than the CRE CLO managers – the warehouse lenders see CRE CLO collapses as a profitable and low-risk business to fund. And this functions like a quasi-exit of sorts, noted JPMorgan’s head CMBS analyst Chong Sin - which means investors don’t have to rely solely on stabilized refis or foreclosures/liquidations to get their money out.

“It makes the CRE CLO market and warehouse lines more fungible,” Sin added. “Some of the savvier credit investors realized this early on.”

News just rolled in that Kering, parent to Gucci 👛, has tapped a new CEO: Luca de Meo will replace son of the founder François-Henri Pinault effective Sept. Why we care: Prime retail real estate – the kind that Jeff Sutton can sell for a blended $6K/foot to such brands – is one of the fronts in the great luxury war. Both megabrands have sought to capture some of the world’s most desired street corners. LVMH overlord Bernard Arnault, via his PE arm L Catterton, dropped $2.7B on RE acquisitions in ‘23, and à la Marlo Stanfield uses his property muscle to bump rivals off the best corners. Kering, in contrast, is already showing signs of retreating from its portfolio bets: it’s in talks w/ buyout group Ardian about selling 717 Fifth, the property it bought from Sutton for nearly $1B just over a year ago. Kering is trying to bring down its $12B net debt tab, which it racked up partly through its wave of CRE acquisitions; the firm’s deputy CEO said it expects to raise $2B+ from dispositions over the next 2Y. If new Kering CEO de Meo continues this pullback, will LVMH take advantage?

Amid this wave of M&A and AUM gobbling ™ happening at CRE’s institutional shops, The Promote has been tracking the consiglieres – the law firms, the I-bankers & assorted intermediaries – that are making it rain. Here’s a non-exhaustive list of who’s in on the action. Key ( 💼 = law firm, 🕴 = financial advisor)

1) Barings-Artemis:
💼: Dechert (for Barings), Paul Hastings (for Artemis)
🕴: Berkshire Global Advisors (Drew Murphy runs that team)

2) Blue Owl - IPI
💼: Kirkland & Ellis (Blue Owl), Gibson, Dunn (IPI)
🕴: Pretty much all the big guys (DB, JPM, MS, SG, TD) on the Blue Owl side, and Berkshire Global on the Iron Point (IPI seller) side

3) Ares - GLP
💼: Latham & Watkins (Ares), Kirkland & Ellis (GCP)
🕴: Eastdil, Barclays, GS, Wells (Ares), Citi, MS, Greenhill, UOB, DB (GCP)

4) Newpoint - Benefit Street Partners
💼: Paul Weiss (NewPoint), Hogans Lovell & Reed Smith (Benefit St.)
🕴️: BofA (NewPoint), Barclays (Benefit St.)

5) Sixth Street – L+M (more on this deal in the pod this week, look out for it)
💼: Latham & Watkins & Nixon Peabody (Sixth St.), Fried Frank (L+M)
🕴️: Newmark (Sixth St.), GS (L+M)

If anyone has insight into how these advisory deals are structured/the comp on them, please hit us up by replying to this email.