9.1.15: Life Insurance Companies Increase Commercial Real Estate Lending

Slowly and steadily, life insurance companies are increasing their commercial real estate lending. Market participants expect the industry’s current expansion to run for at least two or three more years, signaling a further pickup in life company lending volume.

“It’s a robust environment,” said David Hendrickson, managing director with JLL’s Capital Markets Group. “Life insurance companies still have a need to place money in real estate and have still been very cautious in that. The underwriting is solid. And life companies certainly aren’t being too aggressive, where it creates some kind of worry in my mind that things are getting overheated.”

The Mortgage Bankers Association’s quarterly survey found that life companies’ loan volume rose 29% year over year during the first half of the year. That increase kept pace with commercial banks, which likewise boosted originations 29%, and edged out a 22% uptick in CMBS volume. (Of note, Fannie Mae and Freddie Mac loans surged 177%.)

MetLife, for example, generated $6.7 billion in commercial real estate lending volume during the first half of the year. That puts the financial services giant on track to exceed last year’s total volume of $12.1 billion, which was, in turn, an uptick from $11.5 billion in 2013. For its part, Lincoln Financial Group has grown its commercial real estate loan portfolio from $6.9 billion in 2011 to more than $8 billion as of the first half. That amounts to a 17% increase in the face of plentiful prepayments.

“Based on life company experience, the performance of commercial real estate has been really, really good,” said Donald Dibble, senior vice president for Lincoln Financial Group’s mortgage and real estate operations in Greensboro, North Carolina. “In the life company space, there has been a little bit of windfall, or a positive carry cost, from the standpoint of risk-based capital. Risk-based capital that’s being held by life companies went down substantially in the last year.”

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This entry was posted in CMBS, Commercial Lending, Commercial Real Estate Loans, Fannie Mae, Freddie Mac, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress and tagged , , . Bookmark the permalink.

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