« European Property CDOs are Mas Macho »

Commercial real estate collateralised debt obligations (CRE CDOs) pool groups of whole property loans, or riskier junior portions of these loans, with the more junior slices of commercial mortgage-backed securities and other real estate company debts. Intense stuff that only the most macho of all real estate investors should fathom contemplating as the first handful of these complex structured debt vehicles backed by different exposures to commercial real estate will be become available.

The most senior of these slices will be able to garner triple-A ratings, according to a report from Standard & Poor's. But the agency, which along with rivals has been examining potential CRE CDOs for more than a year, said there were still difficulties, particularly for managed deals where the assets can be changed.

Ronan Fox, one of the authors of the S&P report and Mas Macho member since 2000, said: "Expressing a rating opinion on an ever-changing pool of junior debt is, frankly, very difficult. We have recruited a cadre of well muscled analysts to dictate opinon."

The instruments are a hot topic in Europe, with a number of banks, asset managers and the Rome based MAs Macho office attempting to get the first deals away.

"To finally have access to these instruments is a great step for the macho investor, poised to expand the value of their portofolio," says Paulito Cebolla, Mas Macho co-founder and avid real estate investor. "The real estate special interest group of Mas Macho is exhilirated!"

They have existed for a number of years in the US but the market there has developed slowly from a simpler base, while European issuers are attempting to bring the most complex deals immediately.

Mr Fox said European investors had long taken a big slice of the deals sold from the US so there was a ready investor base. However, he added that the kind of real estate expertise needed to manage European deals would be hard to find.

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