The past year of our environmental, social, and governance journey features milestones for Pretium and our operating companies.
We believe sound ESG principles and practices can help maximize returns to our investors by having a positive impact on our employees, our residents, our borrowers, the communities in which we operate, and the businesses we serve.
Build-to-Rent Community by Crescent Communities and Pretium Expands Housing Choice in Desirable Market
First HARMON Community to be Certified by the National Green Building Standard
CHARLOTTE, NC and NEW YORK (January 19, 2023) – Crescent Communities and Pretium are pleased to announce leasing will begin soon at HARMON Five Points, the fourth build-to-rent (BTR) community under development, and the second in Charlotte, as part of their previously announced joint venture. The community is comprised of 76 BTR homes with accompanying shared amenities. Progress Residential, Pretium’s single-family rental management services platform, is providing the leasing and property management services.
HARMON Five Points offers residents the option to rent three-story townhomes with three bedrooms, three and a half baths, outdoor balconies, private garages, and driveways. Interior finishes include modern, stainless-steel appliances, granite countertops, elevated flooring, spacious nine-foot ceilings, ample window exposure for natural light, and SMART home technology. The community is the first for the HARMON brand to be certified by the National Green Building Standard (NGBS), a residential building certification for sustainable construction and development. Each home is designed to be energy and water efficient, while offering residents a greater degree of comfort and lower utility bills.
Residents of HARMON Five Points will also have access to dedicated communal spaces such as a fire pit with outdoor lounge seating, a lawn area for gatherings and pets, and a direct connection to Five Points Park and Stewart Creek Greenway. HARMON Five Points is located two miles from Uptown and is walking distance from the Gold Line Streetcar.
“HARMON Five Points offers a much-needed new construction infill housing option to the historic West End neighborhood to accommodate the migration and population growth in Charlotte over the past several years,” said Tony Chen, Senior Managing Director of Single-Family Build-to-Rent at Crescent Communities. “We are pleased to have reached the leasing milestone ahead of schedule, and are also excited for the NGBS Bronze certification achievement. Stewardship is fundamental to Crescent Communities’ mission to build community and better people’s lives, and we are excited to extend our commitment to stewardship into our BTR platform through our goal of achieving NGBS Bronze or greater on each HARMON home. We strive to have a positive impact on the planet, people, and places we build and call home, and we look forward to seeing the HARMON Five Points community flourish.”
“Pretium is a leading investor in homes throughout some of the most desirable areas across the country, and we are thrilled to have another build-to-rent community welcome residents—bringing our total footprint in the Charlotte market to more than 5,300 homes and demonstrating our commitment to housing choice across growing regions,” said Matt Johnston, Managing Director and Head of Build-to-Rent at Pretium. “In addition to increasing housing access and offering consumers more choices, HARMON Five Points is delivering modern, sustainable homes that will be an important addition to the Charlotte community for years to come. We are committed to continuing our investments to increase the supply of move-in ready homes and contribute to the long-term health of our communities.”
HARMON Five Points is located at 360 Seldon Drive, Charlotte, NC, and was constructed by DRB Group. Additional partners include lender Atlantic Union Bank, landscape architect LandDesign and architectural review by 505Design. Progress Residential, which currently oversees more than 90,000 homes, is a market leader, with the people, technology, scale, and data-driven solutions that streamline operations, optimize asset performance, and provide an exceptional renting and living experience for residents.
Imagery of HARMON Five Points is available here and floorplans can be found here. For more information, please visit: www.liveatharmon.com and rentprogress.com.
About Crescent Communities
Crescent Communities is a nationally recognized, market-leading real estate investor, developer and operator of mixed-use communities. We create high-quality, differentiated residential and commercial communities in many of the fastest growing markets in the United States. Since 1963, our development portfolio has included more than 83 multifamily communities, 24 million square feet of commercial space and 60 single family master-planned communities. Crescent Communities has offices in Charlotte, DC, Atlanta, Orlando, Nashville, Dallas, Denver, Phoenix and Salt Lake City. Our residential communities are branded NOVEL, RENDER and HARMON by Crescent Communities and our industrial developments are branded AXIAL by Crescent Communities and our life science developments are branded THE YIELD by Crescent Communities.
About Pretium
Pretium is a specialized investment firm focused on U.S. residential real estate, residential credit, and corporate credit. Pretium was founded in 2012 to capitalize on investment and lending opportunities arising as a result of structural changes, disruptions, and inefficiencies within the economy. Pretium has built an integrated analytical and operational ecosystem within the U.S. housing, residential credit, and corporate credit markets, and believes that its insight and experience within these markets create a strategic advantage over other investment managers. Pretium’s platform has approximately $50 billion of assets, comprising real estate investments across 30 markets in the U.S., and employs more than 4,000 people across 30 offices, including its New York headquarters, Dubai, London, Seoul and Sydney. Please visit www.pretium.com for additional information.
About Progress Residential
Progress Residential is a market leader in intelligent single-family rental management services, with people, technology, scale and data-driven solutions that streamline operations, optimize asset performance, and provide an exceptional renting and living experience for our residents. Progress Residential’s approximately 3,000 employees currently manage approximately 90,000 homes across 30 markets. Progress Residential also offers third-party property management service for investors with mid-to-large single-family rental home portfolios and Built to Rent communities through its Progress Residential Management Services. For more information, please visit www.rentprogress.com
Summary
Expanding build-to-rent construction increases
housing supply and preserves rental access
Build-to-rent typically produces smaller, more affordable homes that
are in shortest supply
Pretium believes single-family rentals are an essential part of the US housing landscape because they provide access to suburban neighborhoods where opportunities and amenities for residents have historically been most abundant.1 Unfortunately, the housing market has over time struggled to create enough rentals in single-family neighborhoods. Recent research by Harvard’s Joint Center for Housing Studies finds that rental deserts — neighborhoods with the fewest rental options — tend to be disproportionately found in suburban locations.2 We believe the primary driver of the shortfall of single-family rental options is that relatively few single-family homes have historically been built as rentals. As shown in Exhibit 1, over the past 10 years only 5% of single-family homes were built as rentals — a much smaller proportion than the 18% of existing single-family homes that serve as rentals. The burden to create single-family rentals thus falls on investors purchasing existing homes; however, as described in Pretium’s October Housing Insights the stock of single-family rentals fell during the pandemic despite increased investor activity.3 Build-to-rent capital flows have increased in recent years4 and residential land surveys show increased activity in the build-to-rent sector5, but even with this increased activity the percent of homes built for rent in the four quarters ending 3Q22 was just 6%.6 Overall, the data suggests that there is considerable scope to increase investment in the build-to-rent sector. Not only would this investment broaden access to single-family rentals; but also, it would help to alleviate the long-term housing supply shortage that has worsened housing affordability.
Growth in the build-to-rent sector would be particularly beneficial in terms of creating new housing supply because the sector has consistently built smaller, more affordable units compared to homes that are built for sale/ownership. As shown in Exhibit 2, the existing stock of single-family rentals is both older and smaller than the existing stock of owned homes. Importantly, homes built for rent in 2021 remain similar in size to existing singlefamily rentals at just over 1,500 sq. ft. By contrast, homes built for sale have become progressively larger over time to the extent that recently built homes for sale are 17% larger than existing owned homes. In other words, even as worsening supply constraints over time have prompted homebuilders to build larger homes for sale, the build-to-rent sector has maintained its focus on creating the affordable home supply that is in greatest need.
Source: US Census, American Housing Survey, 2021; Annual Characteristics of New Housing, 2021; Quarterly Starts and Completions
by Purpose and Design, as of 3Q22. % of Construction is calculated on a trailing 10-year basis as of 3Q22.
1. Whitney Airgood-Obrycki, “Suburban Status and Neighbourhood Change”, Urban Studies, November 2019.
2. Harvard Joint Center for Housing Studies, “Rental Deserts Perpetuate Socioeconomic and Racial Segregation”, August 4, 2022.
3. “Investor activity in housing had no discernible impact on homeownership during the pandemic”, Pretium Housing Insights, October 2022.
4. John Burns Real Estate Consulting, “The Light: Now Tracking $50+ Billion of Capital Flooding SFR and BTR Sector”, January 28, 2022.
5. John Burns Real Estate Consulting, “3Q22 Residential Land Survey”, October 26, 2022.
6. US Census, Quarterly Starts and Completions by Purpose and Design, as of 3Q22.
This is not an offer, advertisement, or solicitation for interests in any Pretium managed vehicle and should not be construed or relied upon as
investment advice or as predictive of future market or investment performance. Past performance is not indicative of future results.
Summary
BB CLOs earn a persistent yield premium – currently over 6% - relative to corporate bonds of equal risk
Pretium believes that most investors who are allocating to high yield corporate bonds should also be considering bonds from the collateralized loan obligation (CLO) sector as well. Per Exhibit 1 below, BB rated CLO bonds have market yields of 13.9% as of November 22, 2022, vs. an average 7.2% yield for BB corporate bonds. Exhibit 2 shows that the extra yield that CLOs earn vs. corporate bonds, the CLO’s “complexity premium”, has grown in recent months, a trend that, we think, has improved the long-run value proposition associated with CLO debt. This yield premium reflects index, or average returns – i.e., “beta”. Industry researchers appear to share the view that CLOs can offer value, as highlighted by the quotations below:
While CLOs offer higher yields vs. corporate bonds, a Federal Reserve Bank of Philadelphia study shows that CLO bond instruments have historically had lower default rates compared with the default rates on similarly rated corporate bonds.4 CLOs are backed by senior secured bank loans to corporations, which typically offer higher recovery rates compared with unsecured corporate bonds5; this relatively high collateral quality has helped to limit losses for CLO bond investors.
CLOs don’t require investors to make material bets on the direction of interest rates
The floating rate nature of CLO bonds tends to reduce risks to investors in high inflation, rising interest rate environments. The BBB rated corporate bond index has suffered a 17% loss in 2022 year-to-date through November 18, 2022; by contrast, the BBB rated CLO index has experienced just a 5% loss, reflecting the relatively lower sensitivity of CLOs to interest rate market drivers including inflation and Federal Reserve policy shifts.6
The CLO asset class has become too large to ignore
CLOs have become a large asset class; in part because of the strong and stable historical performance of the sector, the US CLO market has grown so that over 65% of the $1.4 trillion of leveraged loan debt outstanding is now owned within CLO vehicles.7 Reflecting the growth and maturation of the CLO asset class, a broad range of financial institutions – including banks, insurance companies, mutual funds, pension funds, private equity funds, private credit funds, and hedge funds – are now investing in CLOs.
Why do CLOs earn higher yields than comparably rated corporate bonds?
There are a few possible explanations for why bonds from the CLO sector consistently tend to earn higher yields in comparison with fixed rate corporate bonds. For one, while CLO liquidity has increased over time as the sector has grown, the bonds are not yet quite as liquid as generic corporate bonds. Second, CLO bond cashflows are determined by the performance of a pool of underlying loan assets, and so there may be a complexity premium vs. fixed rate bonds, which are simpler instruments with cashflows driven by a single underlying reference credit. Finally, we think the premium associated with CLOs in part reflects broad underinvestment in the sector, due to investor concerns that CLOs were connected to the problems associated with the global financial crisis. These concerns are, we think, misplaced; while CDO, RMBS and CMBS instruments indeed suffered high default rates in the 2007-2014 period, CLO structures performed far better, with low default rates and high realized returns.8
In light of the current high yields offered by CLO debt instruments, and the relative return stability of CLOs in periods of volatile interest rates, we think incorporating CLO debt can improve the risk/return profiles of many investors’ portfolios.
1. Source: Morgan Stanley, 2023 US CLO Outlook: Margin of Safety, November 2022.
2. Source: Bank of America, Securitization Weekly, November 4, 2022.
3. Source: Bloomberg, BCBAYW BB Corporate Bond Index and Palmer Square PCLOBBY BB CLO Index, Pretium internal analysis; as of November 22, 2022.
4. Source: “CLO Performance”, Federal Reserve Bank of Philadelphia Working Paper No. 20-48, November 2021, Table 7: Default Rates for CLO Tranches and Corporate Bonds.
5. Source: “Annual default study: After a sharp decline in 2021, defaults will rise modestly this year”, Moody’s, Exhibit 6, February 2022.
6. Source: Bloomberg, LCB1TRUU BBB Corporate Bond Index and Palmer Square PCLOBBBT BBB CLO Index, Pretium internal analysis; as of November 18, 2022.
7. Source: BoA, US CLO Outstanding by Rating, as of November 23, 2022.
8. Source: CLO Performance Report, November 2022, Pretium Partners: https://pretium.com/clo-performance-report.
9. Source: Bloomberg, BCBAYW BB Corporate Bond Index and Palmer Square PCLOBBY BB CLO Index, Pretium internal analysis; as of November 22, 2022.
10. Source: Pretium calculation – BB annual yield compounded over a 5-year period.
11. Source: Bloomberg, BCBATRUU BB Corporate Bond Index and Palmer Square PCLOBBTR BB CLO Index, Pretium internal analysis; as of November 23, 2022.
12. Source: BofA CLO Factbook, Bloomberg LF98TRUU High Yield Corporate Bond Index, Pretium internal analysis; as of November 23, 2022.
Josh Pristaw Will Lead Real Estate Platform
New York, NY – December 6, 2022 – Pretium, a specialized investment firm with approximately $50 billion in assets under management, today announced that Senior Managing Director and Co-Head of Real Estate, Dana Hamilton, is retiring from the Firm. Josh Pristaw, Senior Managing Director and Co-Head of Real Estate, will lead the Firm’s real estate platform going forward, including investing in and managing the single-family rental funds and separately managed accounts. Ms. Hamilton will stay on as a Senior Advisor into next year in order to ensure a smooth transition.
“Dana’s leadership in the institutionalization of single-family rentals cannot be overstated, nor can her role in helping Pretium’s platform become the owner of the most single-family rental homes in America,” said Don Mullen, Founder and CEO of Pretium. “Today, we manage investments in nearly 100,000 homes valued at more than $33 billion and have some of the best institutional investors in the world as partners in our funds.”
“We are extremely grateful to Dana for the expertise, commitment, talent, and growth that she brought to Pretium, and we are pleased she will continue to support our business in an advisory capacity,” stated Mullen.
“When Don asked me to join Pretium in 2017, our goal was to establish Progress Residential as a leading single-family residential platform in the U.S.,” said Dana Hamilton, Senior Managing Director and Co-Head of Real Estate. “With tremendous support from the Pretium and Progress Residential teams, I’m proud to say we have done that and much more.”
“Part of Pretium’s competitive advantage is the depth of talent we have across the SFR platform,” continued Hamilton. “Josh and the real estate team are poised to take the platform to the next level with an unparalleled strategy that delivers positive returns for Pretium’s stakeholders and the communities in which they invest.”
“I’m looking forward to building on the strong foundation that Dana has put in place and the success we have achieved together,” said Josh Pristaw, Senior Managing Director and Co-Head of Real Estate. “Our team will continue to prioritize housing choice and investments in our communities as we lead the way in single-family rental housing.”
Ms. Hamilton joined Pretium in 2017 with nearly 25 years of experience in building successful real estate operating companies in the U.S. and Europe. She worked with Archstone for nearly 20 years, where most recently she was President, Europe, responsible for building Archstone’s non-U.S. operating and investment platform. Prior to that role, she was Executive Vice President, in charge of national (U.S.) multi-family operations. Ms. Hamilton received a BA from Stanford University and an MBA from the Haas School of Business at the University of California, Berkeley. She currently serves on the board of Life Storage, Inc. (NYSE:LSI).
New York, NY – November 30, 2022 – Pretium, a specialized investment firm with approximately $50 billion in assets under management, today congratulated Roberta Goss, Senior Managing Director and Head of the Bank Loan and CLO Platform, for being named one of the “Most Notable Women on Wall Street” by Crain’s New York Business. Award recipients are selected by the Crain’s New York editorial team and recognize influential women who have made a positive impact on the New York City financial sector.
In her three years since joining Pretium, Ms. Goss has played an instrumental role leading the development of the firm’s Crown Point collateralized loan obligation (CLO) business and managing investments across its other leveraged loan portfolios. Pretium’s CLO and leveraged loan portfolio total approximately $3 billion in assets.
“We are incredibly proud to join Crain’s in recognizing Roberta’s leadership and contributions both within Pretium and beyond our organization’s walls,” said Don Mullen, Founder and CEO of Pretium. “Her deep expertise in the CLO space, combined with her abilities as a mentor to the many talented members of her team, brings tremendous value to our organization and the industry overall. We congratulate Roberta on this well-deserved honor.”
In addition to Ms. Goss’ responsibilities overseeing Pretium’s portfolio management and marketing efforts for the bank loan and CLO platforms, she is also heavily involved in mentoring future talent within the credit space. Ms. Goss helps manage the firm’s summer internship program with Girls Who Invest, a program that seeks to bring more women into portfolio management, and serves as co-head of Pretium’s Women’s Resource Group, an initiative focused on developing and fostering opportunities for the firm’s female employees. Ms. Goss is also a member of Pretium’s Executive and Finance Committees and was named to the Kayo Conference Series’ “Top 22 in ‘22: Leaders in Credit and Debt Finance.”
To read more about Ms. Goss’ recognition, please visit the Crain’s New York Business website.
About Pretium
Pretium is a specialized investment firm focused on U.S. residential real estate, residential credit, and corporate credit. Pretium was founded in 2012 to capitalize on secular investment and lending opportunities arising as a result of structural changes, disruptions, and inefficiencies within the economy. Pretium has built an integrated analytical and operational ecosystem within the U.S. housing, residential credit, and corporate credit markets, and believes that its insight and experience within these markets create a strategic advantage over other investment managers. Pretium’s platform has approximately $50 billion of assets and employs more than 4,000 people across 30 offices, including Dubai, London, Seoul and Sydney. Please visit www.pretium.com for additional information.
Media Contact
Josh Clarkson / Sheila Kulik
pro-pretium@prosek.com
Summary
The US is already underbuilding housing again, worsening the long-term supply shortage
Single-family housing construction has fallen meaningfully below long-term averages1
Rising rates have achieved the Federal Reserve’s intended effect of dampening housing demand and bringing down the rate of home price and rent growth. But increased demand was just one side of a historic supply-demand imbalance that drove rapid home price and rent growth during the pandemic. The other side was years of underproduction leading up to the pandemic, especially of single-family homes. The Fed induced rate shock may have brought housing supply & demand back into balance; however, it has also prompted builders and developers to sharply reduce rates of construction, particularly of single-family homes. Consensus forecasts call for rates of construction to continue to decline into 2023, which means the pandemic construction surge lasted less than two years. This wasn’t enough to address housing’s pre-pandemic housing shortage, let alone a post-pandemic housing market that could feature structurally higher levels of demand driven by factors such as hybrid work, increased migration, and an increased focus on the home. Longer-term, Pretium expects that the housing supply shortage is likely to remain a central driver of US housing market dynamics and that this supply shortage will be more pronounced for single-family vs. multifamily homes.
Permits are the first step in the construction process and monthly permits trends provide an early gauge of overall housing construction levels. In October, US housing permits are down nearly 20% from their early 2022 peaks. As shown in Exhibit 1 this decline is almost entirely driven by declining single-family permits that are down roughly 30%; by contrast, multifamily activity is down just 5%. Single-family permits fell below the rate of single-family completions in June, so homebuilder construction backlogs have been declining since then. On the other hand, multifamily permits remain well above multifamily completions and construction backlogs are still increasing. In the near-term single-family homebuilders have curtailed production more sharply than multifamily developers because of the sensitivity of home purchase demand to rising mortgage rates; over the longer-term, Pretium believes that land and housing supply constraints are also more acutely felt in the single-family market.
Starts represent ground-breaking for new homes and provide the longest time series for analyzing levels of construction. As shown in Exhibit 2, the average level of single-family starts since 1959 has been 1.02 mm. October’s single-family starts pace of 0.86 mm is 16% below this long-term average and consensus forecasts project construction levels to continue to decline in 2023. For example, Fannie Mae forecasts that single-family starts will decrease to 0.79 mm in 2023. Multifamily starts remain above their long-term average, but the decrease in single-family activity has been significant enough to drive overall housing starts below their long-term averages. If housing starts begin to recover in 2024 at the same roughly 6% annual growth rate the market experienced from 2013-19, it could take until 2027 for total housing starts to again exceed their long-term averages. This would result in a 20-year period from 2007-2026 where total housing starts only exceeded their long-term average for two years during the pandemic.
1. Source: US Census, New Residential Construction, as of October 1, 2022; Fannie Mae Housing Forecast, as of October 10, 2022.
This is not an offer, advertisement, or solicitation for interests in any Pretium managed vehicle and should not be construed or relied upon as investment advice or as predictive of future market or investment performance. Past performance is not indicative of future results.
Seasoned Executive to Lead Pretium’s European Fundraising Efforts, Business Development Strategy
NEW YORK – November 14, 2022 – Pretium, a specialized investment firm with approximately $50 billion in assets under management, today announced that Rune Sanbeck has joined the firm as Managing Director, Business Development. In this role, Mr. Sanbeck will lead fundraising, client support, and business development strategy for Europe-based allocators and institutional investors, primarily supporting Pretium’s real estate and private credit offerings.
Mr. Sanbeck brings over 20 years of experience and deep expertise identifying, implementing, and executing long-term growth strategies to expand institutional relationships and distribution efforts, with significant experience across private, public, and real asset classes. Most recently, Mr. Sanbeck served as Managing Director and Head of International Business at AIG First Principles. Prior to AIG, Mr. Sanbeck served as Head of EMEA, CEO of Nuveen UK, and Director of Nuveen Europe Asset Management. He has also held senior roles with BlackRock/BGI, Danske Capital, and Dimensional Fund Advisors.
“As we continue to build our diversified investment platform, we view Europe as a long-term strategic priority and are committed to ensuring we have the most talented and driven team in the industry,” said Don Mullen, CEO and Founder of Pretium. “Rune’s multifaceted business experience and global connections will strengthen our presence in Europe, and we are excited to welcome him to our team.”
“Rune’s extensive fundraising experience and growth-oriented track record are a natural fit for Pretium and our London-based business development team,” said Jennifer Strickland, Senior Managing Director and Head of Business Development at Pretium. “Rune has a deep network of relationships, an intimate understanding of the European institutional investment landscape, and a seasoned business acumen that we believe will enhance our capabilities to support new and existing clients.”
“Joining Pretium is an incredible opportunity to be part of one of the strongest and most innovative teams in the industry,” Mr. Sanbeck said. “I look forward to working alongside Eugenie Dadachpour in London and with colleagues around the world to support and expand Pretium’s network of institutional clients, while executing on long-term fundraising objectives for real estate and private credit.”
About Pretium
Pretium is a specialized investment firm focused on U.S. residential real estate, residential credit, and corporate credit. Pretium was founded in 2012 to capitalize on secular investment and lending opportunities arising as a result of structural changes, disruptions, and inefficiencies within the economy. Pretium has built an integrated analytical and operational ecosystem within the U.S. housing, residential credit, and corporate credit markets, and believes that its insight and experience within these markets create a strategic advantage over other investment managers. Pretium’s platform has approximately $50 billion of assets and employs more than 4,000 people across 30 offices, including Dubai, London, Seoul and Sydney. Please visit www.pretium.com for additional information.
Contacts
Jon Keehner / Kate Thompson / Lyle Weston
Joele Frank, Wilkinson Brimmer Katcher
212-355-4449
Media-SFR@pretium.com
Summary
CLO equity delivered strong returns through the financial crisis period
During the Global Financial Crisis (GFC) episode, default rates on the bonds issued by collateralized loan obligations, or CLOs, were far lower than those for other structured credit products such as CDOs, RMBS, CMBS, and ABS. Legacy structured finance CDOs (SF CDOs) and subprime RMBS had average annualized impairment rates of 24.1% and 10.0% respectively, vs. just 0.2% for CLO debt tranches (Exhibit 1). CLO equity tranches also performed well through the GFC. A study by researchers at the Federal Reserve Bank of Philadelphia finds that the median CLO equity tranches issued during 2005-2007 earned 13%-18% lifetime IRRs (Exhibit 2). In contrast, most of the equity and debt securities from RMBS, CMBS, and CDO transactions from the same period experienced negative returns.
How were CLOs able to avoid the distress experienced by so many seemingly similar sectors during the financial crisis? We highlight three factors that contributed to the success of CLO equity and that differentiated CLOs relative to other structured finance asset classes of this era:
Long-term funding: CLO equity tranches achieve leverage via long-term funding at fixed credit spreads. As a result, CLO managers were not forced to sell loan assets in the periods of deep market distress experienced during the GFC. By contrast, structures that relied on shorter term funding instruments (e.g., repo financing) faced margin calls and thus were forced to sell assets at distressed prices, eroding returns.
Benefits of senior-secured corporate lending: The business loans that back CLOs are senior in the issuers’ capital structures and are typically secured by real estate or other corporate assets. As a result, the recovery rates on loans have historically been much higher than for high yield corporate bonds, say, which are typically junior and unsecured. The high recovery rates on defaulted CLO loan assets in turn helped to limit the losses experienced by CLO equity and debt investors during the financial crisis period.
Industry diversification: CLO collateral pools are highly diversified across industry sectors. Most prospectuses limit the fraction of total pool balance that can be allocated to any one sector or obligor. By contrast, many other structured finance products were backed by highly similar assets (such as mezzanine subprime RMBS bond tranches in the case of CDOs)1, which all defaulted at the same time when US real estate prices declined and mortgage foreclosure rates rose.
We believe that the factors above which contributed to solid CLO equity returns during the financial crisis period continue to be broadly relevant going forward. While past performance is never a guarantee of future returns, the resilience shown by CLO equity through the historically extreme global financial crisis scenario helps contribute to confidence that the strategy can offer positive returns even if, as we expect, economic volatility remains elevated over the medium-term horizon.
1. “Collateral Damage: Sizing and Assessing the Subprime CDO Crisis”, Federal Reserve Bank of Philadelphia Working Paper No. 11-30/R.
Former Goldman Sachs Urban Investment Group COO, Andrea Gift Allan, to Lead Pretium’s Affordable Housing Investment Portfolio Strategy, Innovation, and Execution
NEW YORK – November 8, 2022 – Pretium, a specialized investment firm with approximately $50 billion in assets under management, today announced, in a joint press release with Progress Residential, the next steps in its plans to increase access to affordable single family rental housing. Andrea Gift Allan has joined Pretium as Managing Director, Real Estate, to lead the firm’s affordable housing investments across the United States. In this role, Ms. Allan will partner with internal and external stakeholders to develop and manage Pretium’s affordable housing portfolio, in alignment with the firm’s key business and social impact goals. This will include serving as a strategic advisor to Progress Residential’s affordable housing team as they engage with residents, local housing authorities, and community partners to meet persistent and growing affordable housing demand in markets across the country.
Ms. Allan brings over 20 years of experience in asset and portfolio management, as well as expertise valuing and reporting on real estate investments and loans. She spent more than two decades at Goldman Sachs, where she most recently served as Managing Director and Chief Operating Officer of the Urban Investment Group within the Asset Management Division. In that role, she was responsible for developing and advancing the business’ strategy to deliver community impact and drive strong risk-adjusted returns, while meeting evolving regulatory requirements. She also oversaw a broad real assets portfolio, which included mixed-use, affordable and market rate multifamily, commercial and community facility real estate assets.
“Increasing quality, affordable housing supply across our markets is a business imperative,” said Don Mullen, Founder and CEO of Pretium. “Andrea’s decade plus of affordable housing investment experience will be an invaluable addition to the Pretium and Progress teams as we work with residents, investors, policymakers, lenders, developers, business leaders, and community organizations to achieve our ambitious goals.”
“Andrea has a successful track record of building business infrastructure across asset classes to drive both revenue and community impact, and we are excited to welcome a leader of her caliber to our team,” added Josh Pristaw, Co-Head of Real Estate at Pretium. “The residential housing landscape continues to grow and transform, and we look forward to benefiting from Andrea’s fresh perspectives and insights as we lead the way.”
“As affordability continues to play an integral role in today’s housing market, this is an opportune time to join Pretium, a market leader committed to developing solutions to our nation’s housing crisis,” said Andrea Gift Allan. “I am energized to be joining a team focused on innovating in this critical area, and I look forward to building upon the work Pretium and Progress have already done to further expand our affordable housing offerings.”
About Pretium
Pretium is a specialized investment firm focused on U.S. residential real estate, residential credit, and corporate credit. Pretium was founded in 2012 to capitalize on secular investment and lending opportunities arising as a result of structural changes, disruptions, and inefficiencies within the economy. Pretium has built an integrated analytical and operational ecosystem within the U.S. housing, residential credit, and corporate credit markets, and believes that its insight and experience within these markets create a strategic advantage over other investment managers. Pretium’s platform has approximately $50 billion of assets and employs more than 4,000 people across 30 offices, including Dubai, London, Seoul and Sydney. Please visit www.pretium.com for additional information.
