Connecticut Ave at Dupont Circle

WARRENTON, VA-MAC Realty Advisors recently placed a long-term $10 million life insurance loan for Warrenton Village, a 120,000-square foot grocery-anchored center here. The 10-year fixed rate beat out other banks and conduits. MAC Realty’s Andrew McAllister, Bruce Levin, and Caren Garfield arranged the financing.

It is unusual to see life and conduits compete for an asset in a B market so far out from the Beltway – in this case, the life insurance company had a long-standing relationship with the sponsor, which is a very strong company, explains Andrew McAllister, executive director at MAC. “If it had been a lesser sponsorship they probably wouldn’t have been interested.”

That said, life insurance companies are stretching out of their comfort zone as they invest in the DC area, McAllister and others say. “They are aggressively investing not only in apartments but also retail. They are competing with Fannie Mae and Freddie Mac more strenuously than ever before. They are getting very aggressive with ten, 15-year money.”

This, of course, has been a long-brewing trend, but market observers say life companies are starting to push the envelop a little further. Phil Mudd of Cassidy Turley tells that life companies are developing an appetite for all property types including industrial. They are also showing interest in funding multifamilies that are in the lease up stage, he says—new properties in other words. “I am seeing deals in which the life insurance company is willing to fund the transaction at a certain occupancy rate and provide the balance over a period of time,” Mudd says.

The market might see further accommodations by the industry as the year unfolds. In general, life companies have more money to invest, a trend that will likely continue with the fiscal cliff resolution at the start of the year. Briefly, the tax and estate changes make life insurance policies more attractive for high-net worth individuals in some scenarios. “In addition to their asset base growing, they are also getting more premiums from policy holders,” McAllister says. “They have more money to put out as a result.”