Life Companies’ CRE Mortgage Returns Stagnated in Q3
The investments posted a total return of 0.63% in the period.
Commercial mortgage investments held by life insurance companies stagnated in the third quarter, according to the Trepp LifeComps Commercial Mortgage Loan Index.
The investments posted a total return of 0.63% in the period, which Trepp attributed to a decline in reported loan values of -0.37%.
Retail properties fared a little better than the CRE mortgage investments as a whole with a growth in returns of 0.98% that were helped by robust consumer spending from pent up demand.
Consumer purchases, the report said, continued to exceed expectations in the third quarter as booster shots of the Covid-19 vaccines are rolling out and travel is gaining momentum, with the number of COVID-19 cases dropping.
Growing demand for industrial properties led only to a lackluster performance in the quarter with a return of just 0.66% while the return reached 4.09% for the 12 months.
Multifamily was a bright spot in the insurers’ mortgage loan holdings with a 12-month return at 7.81%.
The uptick in office charge-offs throughout the pandemic has signaled changes in the office sector, Trepp pointed out: “Although many workers are heading back to their in-person offices, and the booster vaccine rollout continued at the end of Q3, office occupancy has still seen downsizing headlines.”
Approximately 8,000 active loans are in the LifeComps Mortgage Loan Index, with an aggregate principal balance of $157 billion and valued at $166 billion. The weighted average duration is 5.23 years
The quarter’s results were an about face from second quarter performance, when CRE mortgages posted a 4.58% return, according to Trepp.
“While the surge in returns was not necessarily unexpected, the magnitude of the recovery was a bit surprising,” Russell Hughes, head of data consortia initiatives at Trepp, said in prepared remarks at the time.
The second quarter return had been a “major reversal” from the negative 1% in the previous quarter and made for the second biggest swing in the past 94 quarters, according to Trepp’s August LifeComps Commercial Mortgage Index.