Ready Capital Closes $629M CRE CLO, Its Biggest to Date


Ready Capital Corporation has closed a $629 million commercial real estate collateralized loan obligation (CRE CLO), Commercial Observer can first report.  

The deal, RCMF 2021-FL5, is the firm’s fifth CRE CLO, and its largest to date. It closed yesterday, and includes the right to acquire all or part of $139 million in future funding participation interests.

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Moody’s Investors Service and Kroll Bond Rating Agency assigned the issuance a Aaa and AAA rating, respectively, to the senior certificates. 

RCMF 2021-FL5 comprises 58 mortgage loans on 65 properties, located across 16 states. The top three property-type exposures are multifamily (61 percent), office (23 percent) and industrial (8 percent). Roughly 74 percent of the loans were originated after pandemic’s onset in March 2020. 

“The Ready Capital team has had great momentum at the start of this year, closing over $650 million in bridge loans during the first quarter,” Anuj Gupta, president of commercial real estate lending at Ready Capital, said. “We were fortunate to reemerge quickly with strength out of the pandemic, bringing multi-product financing solutions to our clients”  

Headquartered in New York City, the firm specializes in agency multifamily, investor and bridge loans, as well as SBA 7(a) business loans. 

“We slowed down business when COVID hit in March, because we’re a capital-intensive business, and we wanted to conserve capital because nobody knew what was going to happen,” Gupta said. “But we managed to reorient our firm and did a lot of PPP loans, which produced some pretty good income for us. Given the stability we got from that, we relaunched our [origination] businesses in the fourth quarter of last year. I think what was exciting for us was that we were probably one of the first to get out and start relaunching, and with strength. It helped us build a lot of momentum.”

The relaunch helped Ready Capital gain market share, while some of its competitors were still finding their feet and returning to the market more slowly. 

“The good news for us is that our mentality has always been to maintain very low losses,” Gupta said. “For us, maintaining very close eyes on risk and volatility is extremely important. We were always very disciplined about not doing aggressive things, and we never did a lot of hotel or retail loans. I think what that did was it helped us get through COVID, and our portfolio was in relatively good shape.” 

The company built up a pipeline of business very quickly coming into 2021. It uses a metric called “money up” to refer to any time it has a signed term sheet plus a deposit from a borrower. “Our money up pipeline was very strong coming into ‘21, and we just continue to capitalize on that momentum,” Gupta said. 

Speaking generally about the transitional lending space and the market volatility experienced, Gupta said borrowers aren’t necessarily refinancing their loans with a long-term, fixed-rate loan today, but rather, “they’re saying, ‘Hey, let me take a bridge loan, stabilize the property, optimize the income, and then refinance with a CMBS loan.’ I find that that’s driving a lot of activity.” 

Additionally, the Federal Housing Finance Agency reduced the size of the multifamily caps for Fannie Mae and Freddie Mac in 2021, while increasing the share of lending dedicated to mission-driven affordable housing, sending some product that otherwise would have gone to the agencies to the private sector. 

Ready Capital’s bridge program focused on Tier 1, 2 and 3 locations — at high-level, liquid markets located within 25 miles from a major city. “We tend to focus on markets that are liquid, where we feel activity will be strong, and there will be good rebound post-COVID,” Gupta said. 

As for investor sentiment around the CRE CLO space, Gupta described investors as being “very plugged into what’s going on in the market. They’re making sure that folks aren’t being careless, so they’re looking at how people are underwriting deals, how they’re looking at COVID’s impact on the property, and how their view lines up with our view. If you’re being aggressive, investors will know that, and they’ll express that view on your deal.” 

And will the company outdo itself by issuing an even larger CLO later this year?

“Given the increase in activity in Q4 of last year, some of what we [originated] there has gone into this deal, and we do have a very robust pipeline ahead. So, although we just closed this CLO yesterday, I think in a week we’ll start working on the next one,” Gupta said.

The bank syndicate that arranged the CRE CLO included J.P. Morgan as sole structuring agent, Deutsche Bank as co-lead manager, with Piper Sandler as the co-manager.