The U.S. Commercial Mortgage Strategy invests primarily in investment-grade equivalent commercial mortgage whole loans. These are fixed-rate, first mortgage loans, secured by high-quality, income-producing office, retail, industrial and multi-family properties, located in core U.S. markets and sponsored by financially strong and experienced commercial real estate investors and operators. Commercial mortgage loans are customized to suit both the underwriting criteria of the lender and the needs of the borrower.
The strategy’s objective is to achieve express spread relative to similarly-rated corporate bonds, while preserving capital.
Commercial mortgage investments have the potential to generate enhanced yields over comparatively rated public bonds with limited volatility. Commercial mortgage loans are less susceptible to event risk due to the cash flows being derived from multiple tenants and customized covenants. They also provide call protection in the form of make whole or yield maintenance provisions. The team sources U.S. mortgages through correspondents with local representation in over 35 markets, with repeat borrowers representing approximately 60% of origination.
Each commercial mortgage asset that is purchased or held by the strategy is subject to a rigorous, in-house loan analysis and periodic review, as well as an independent credit risk review. Downside protection can be achieved through the structuring of additional credit enhancements to mitigate perceived cash flow risks. Active management of a diversified loan portfolio, by property type and location, can provide additional fee income through asset management and servicing, while loan structuring can provide call protection in the form of make-whole or yield maintenance provisions.