Life Insurance Commercial Mortgage Index Steeply Drops in Fourth Quarter

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Trepp, a leading provider of information analytics and technology to the structured finance, commercial real estate, and banking markets has released the fourth quarter 2019 returns for its life insurance commercial mortgage index showing a steep decrease from previous quarters.

Treasury yields – which move inversely with prices – reversed their downward course slightly in the fourth quarter to generate negative price performance. The yield on the 10-year Treasury had climbed up 24 basis points over the quarter.

Trepp, a leading provider of information analytics and technology to the structured finance, commercial real estate, and banking markets has released the fourth quarter 2019 returns for its life insurance commercial mortgage index showing a steep decrease from previous quarters.

The LifeComps™ Index, which benchmarks commercial mortgage investments held by life insurance companies, posted a 0.55 % total return in fourth quarter 2019. This number reflects a significant drop from a third-quarter reading of 2.20 %. The reading was 3.11 % in the second quarter, and 3.15 % in the first quarter. For the full year of 2019, the total return was 1.73%.

Multifamily properties performed best among the four major commercial property types with a total return of 9.81 % over 12 months. The other property types of industrial, office and retail followed. The total returns were 9.34 %, 9.08 %, and 8.79 %, respectively.

Income contributed 1.10 % and price subtracted 0.55 % in the fourth quarter, which was the first quarter of negative price movement since the third quarter of 2018.

“Treasury yields – which move inversely with prices – reversed their downward course slightly in the fourth quarter to generate negative price performance, said Russell Hughes, head of data consortia initiatives at Trepp. “The yield on the 10-year Treasury had climbed up 24 basis points over the quarter,” Hughes said.

“Conversely, in the first quarter of 2020, we see that the coronavirus fears are sending the Treasury headed towards zero. If that steep decline continues, there will be a profound swing back in the Q1 results,” Hughes said.

For 2019, income contributed 4.45 % while price added 4.84 %. Declining Treasury yields over the 12-month period drove the price gain; the yield on the 10-year Treasury ended the period 77 basis points lower.

There are approximately 7,500 active loans in the LifeComps Index with an aggregate principal balance of $147 billion, which represents about a third of the life insurance commercial mortgage market. The weighted average duration is 5.5 years and average reported loan-to-value is 52 %.

For more information, contact Trepp at press@trepp.com or 212.754.1010. Visit http://www.Trepp.com for more information on LifeComps or download our brochure here.

About LifeComps™
The LifeComps™ Commercial Mortgage Loan Index is the only published benchmark for the private commercial mortgage market based on actual mortgage loan cash flow and performance data which has been collected quarterly from participating life insurance companies since 1966. LifeComps provides a quantifiable investment performance index and serves as a benchmark for privately held commercial real estate mortgages.

Trepp
Trepp, founded in 1979, is a leading provider of data, analytics, and technology solutions to the global securities and investment management industries. Trepp specifically serves three key sectors: structured finance, commercial real estate, and banking to help market participants meet their objectives for surveillance, credit risk management, and investment performance. Trusted by the industry for the accuracy of its proprietary data, Trepp provides clients with sophisticated, comprehensive models and analytics. Trepp is wholly owned by Daily Mail and General Trust (DMGT).

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Russell Hughes
@TreppWire
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