The small size and poor liquidity of lower-rated CMBS tranches have curbed demand for this paper among large buyers, said Ethan Penner, president of CBRE Capital Partners.

“AAA buyers are attracted to CMBS because their class is large and thus likely to be liquid,” Penner said via e-mail. Lower-rated tranches tend to be in the $30 million-to-$50 million range, which limits their appeal to big investors. “The more junior one goes the greater the need for time-consuming and costly due diligence,” he added.

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