In another sign of the rising popularity in collateralized loan obligations (CLO), Dallas-based financial services firm ORIX USA announced it closed on a $350 million CLO fund, with a sizable portion of the loans collateralized by senior housing.
CLOs are pools of below investment-grade loans sold in pieces to investors. When loans are paid off, they can be replaced with like-minded capital.
The fund’s initial pool consists of $299.4 million in existing commercial mortgages originated between 2014 and 2018 — 12 in the past year — plus a $50.6 million reserve for assets ORIX plans to acquire during a 120-day ramp-up period. Four of the loans in the initial collateral pool are secured by private-pay assisted living facilities, representing 17.1% of the pool. Fourteen loans are backed by multifamily properties, representing 62.3%. The rest is backed by self-storage, retail and a hotel.
Lancaster Pollard and ORIX affiliates RED Capital Group and ORIX Real Estate Americas originated loans of the CLO, ORIX USA chairman, President and CEO Hideto Nishitani said in a statement. Several of the RED Capital loans were originated to drive business to another ORIX subsidiary, Boston Financial Investment Management, the statement read.
ORIX USA and its family of companies hold $8 billion of assets and manage an extra $34 billion. The company acquired Lancaster Pollard in 2017.
CLOs are growing in popularity since a March 2018 federal court ruled that the funds no longer have to comply with risk retention rules. Greystone launched a $300 million CLO last October, backed by bridge loans on senior housing and care assets. The fund would be a complement to Greystone’s lending activities and other financing platforms, Senior Managing Director Art Hatzopoulos told Senior Housing News at the time.
J.P. Morgan Securities acted as sole structuring agent and lead placement agent for the transaction. Wells Fargo Securities was co-lead manager, and Citi acted as co-manager for the offering.