Morris Chen, lead portfolio manager of the DoubleLine Commercial Real Estate ETF (ticker DCRE), Feb. 5, 2024, discusses on Bloomberg Television the fund and his outlook for a bottoming process in the months ahead as private credit and new issuance of commercial mortgage-backed securities take market share in the space from banks.
0:35 - A closer look into a challenging earnings call at New York Community Bank, Mr. Chen notes, shows that the drag on results due to commercial real estate loans relates to idiosyncratic problems, including new rent regulations affecting multifamily housing in New York state, rather than reflecting broad conditions in commercial real estate.
2:20 - The end of the Federal Reserve’s rate-hiking campaign has placed a cap on the interest expense faced by commercial properties. This paves the way, Mr. Chen predicts, for more property transactions and more financing deals between lenders and borrowers, resulting in more price transparency in the market. He expects to see some properties transact at haircuts of 30% to 60%. “The glass-half-full side is that’s marketing for commercial real estate, meaning a lot of dry powder on the sidelines is going to look at this and bolster the confidence to step back into the market.”
3:48 - Morris Chen, Director of DoubleLine’s Commercial Mortgage-Backed Securities and Commercial Real Estate Debt team, discusses the team’s approach to security selection and portfolio construction, with the aims of managing duration, targeting specific property types and minimizing credit risk.
5:23 - On who will take up the financing of commercial real estate in the months and years ahead, Mr. Chen foresees two types of lenders. New issuance in “the commercial mortgage-backed securities market will take market share from banks,” expanding loan availability to commercial properties. “The second component is the private credit market” as these providers of capital pursue “bank disintermediation plays.”
Mr. Chen joined DoubleLine at its inception in 2009. He is a Portfolio Manager leading the CMBS/CRE Debt Investment team and CRE New Investment Review Group, and is responsible for the oversight and management of all CRE Debt related investments at DoubleLine. Mr. Chen is a permanent member of the Fixed Income Asset Allocation and Structured Products Committees providing valued insight into the CMBS sector. He is also an active participant and speaker at CREFC events. Prior to DoubleLine, Mr. Chen was a Vice President at TCW where he was responsible for CMBS credit analysis and trading from 2004-2009. He holds a BS in Business Administration with concentrations in Business Development and Finance from the University of California, Riverside.
