Analysts: LifeCo Lending Likely to Rise
ORLANDO–Life company originations rose from $60 billion in 2014 to an estimated $77 billion last year–and that figure could increase in 2016, analysts say.
“We’ve seen a wave of submissions,” said Jeffrey Erxleben, Senior Vice President and Managing Director with NorthMarq Capital, Minneapolis, speaking here at the recent MBA Commercial Real Estate Finance/Multifamily Housing Convention & Expo. “From the borrowers’ perspective, life company loans are in favor and they want to get there while the getting is good.”
Anthony Frook, Senior Managing Director with Americo Financial Life and Annuity, Kansas City, Mo., noted that over the past 10 years, the second half of the year was far busier than the first half. “But that didn’t happen last year; everybody seemed to have a very aggressive appetite throughout the year,” he said. “I think that will happen this year, too.”
MetLife Real Estate Investors , New York, reached a record $14.3 billion in global mortgage production last year, up 18 percent from 2014’s previous record, said MetLife Managing Director and Head of Debt Strategies Gary Otten. “That was driven by relative value and opportunity out there rather just trying to increase portfolio,” he said.
Otten predicted more club deals involving several life insurance lenders this year. “Club transactions have always been there on very large deals,” he said. “We’ve co-lended with just about all of our major competitors. It can create a pricing challenge compared to a single-lender transaction, but there is definitely a market for it and I expect it will increase in 2016.”
Life companies will make loans to all five property sectors this year, analysts said, but Otten noted MetLife will watch the hotel sector fairly closely. “As American corporate profits plateau and the dollar strengthens, that could put the squeeze on hotel markets,” he said. “We’ve noted some oversupply in New York and some other markets. Apartments also have more supply growth than some other sectors–above historical levels, while retail remains well below historical averages.”
But Frook noted that insurance companies generally look at longer-term time horizons than other lenders, “so a property type that’s out of favor right now might be looking better in 10 or 15 years.”
