Europe might well see its first CRE CDO by the end of the year (see Real estate CDOs: One size fits all?, Euromoney, October 2006). Blackrock Financial Management has structured a €342.5 million deal backed by predominantly UK and German CMBS tranches and B notes with an average rating of single B/single B plus. As the first of its kind, the CRE CDO was always going to be conservatively structured, and Blackrock is indeed taking a large chunk of equity – nearly 18%. As investors become more familiar with this asset class perhaps leverage levels will rise. But this first deal, lead managed by Morgan Stanley, will be closely watched as a blueprint for how this busy US sector might transfer to Europe.
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