Life Cos. Are Making Up for Lost Time
“These lenders have been substantially more active in pursuing loans for multifamily and industrial assets than they have been historically,” says Gantry’s Robert Slatt.
Life companies are back in action, according to Robert Slatt, a principal with Gantry’s San Francisco office. This year, they have been actively pursuing commercial mortgages with an emphasis on multifamily and industrial deals, the two asset classes that performed well through the pandemic.
[Life Cos.] “have been substantially more active in pursuing loans for multifamily and industrial assets than they have been historically. They are competing aggressively for all qualified assets on rate and terms and remain a preferred provider for long-term loans,” Slatt tells GlobeSt.com. Life companies are also moving into the bridge lending space. Slatt says that this is particularly true on acquisition deals with new equity sources. “In this climate, bridge loans are attractive because you are not taking on risk like you would for new development, but you are achieving a similarly higher yield for taking on shorter term risk with an accelerated return over 24 to 36 months,” he says. “Bridge loans for acquisitions are particularly attractive to these lenders when a property is not yet stabilized but new equity has achievable performance goals and the right LTV.”
After a strong start, life companies took a step back after the pandemic hit in 2020. Many started to renter the market in the second half of 2020. “Almost all our life company correspondents had plans for significant allocations to commercial mortgage in 2020 and started that year with an aggressive optimism,” says Slatt. “However, COVID changed everything (an understatement indeed!) and sidelined most lenders in the second and third quarter, forcing them to try to make up time at the close of 2020.”
The activity spilled into 2021, and kept pace through the year. Slatt expects the same momentum to carry into next year. “[Life Cos.] couldn’t meet their own demand, but that momentum carried forward into 2021 as it continues to grow in terms of available allocations. Historically, many of these lenders would slow down their originations during the fourth quarter, but this year we expect to see aggressive pursuit of loans up into the end of the year with the pace remaining strong and continuing to increase into 2022.”