Commercial real estate (CRE) loans--both large and small--remain a strong investment compared with corporate bonds and other alternative investments.
Life companies saw near-record commercial real estate loan production last year and more firms have started to explore small-balance CRE lending recently, analysts reported at the Mortgage Bankers Association's (MBA's) Commercial Real Estate Finance/Multifamily Housing Convention & Expo last month in Orlando, Florida.
"We thought 2011 and 2012 might be records that might not be breached [for life company lending], but 2013 proved us wrong, with an estimate of more than $60 billion originated in the life company arena," said Robert Stout, president and chief executive officer of Q10 Capital LLC, Nashville, Tennessee.
Tony Premer, senior managing director of real estate investments at Pacific Life Insurance Co., Newport Beach, California, added that "[for most life companies], if they didn't have a record year in 2013, they had something close to it."
Still, other capital sources can and do challenge life companies, Stout said. "Banks have come back in a significant way, Fannie Mae and Freddie Mac, FHA (the Federal Housing Administration]--all are back in the saddle." He added that commercial mortgage-backed securities (CMBS) originations have also made a significant comeback in recent years.
Looking ahead, "on the higher end there is sufficient liquidity, but when you get to lower-quality assets it could become an issue," said Patrick Hackett, vice president with Lincoln National Life Insurance Co., Winston-Salem, North Carolina.
Last year also saw the highest volume of small-balance commercial real estate lending since 2007, said Elizabeth Braman...