Life, Liquidity and Labor Day

This is something we have not heard from insurance companies for well over a year in commercial real estate circles. This is not just good news—it's great news. Increased liquidity, with the life companies re-entering the market and filling a huge void, will provide much-needed assistance in the challenging market ahead.

Over the past 12 months, those life lenders who have remained in the market have been quoting rates in the 7% to 8.5% range on low loan-to-value product. This has driven deals smaller than $20 million to regional bank recourse lenders. With the CMBS market crippled, borrowers with financing needs in excess of $20 million to $30 million were left to pay coupon rates greater than 7.0%+ to obtain low loan-to-value conservative loans.

We're at the end of summer, and now several large life companies are back on the scene. The lenders have announced plans to ramp up their efforts and cut rates on conservative loans (below 65% based on realistic capitalization rates) to the 6% to 6.75% range on five-, seven- and 10-year non-recourse, fixed-rate loans. One of NorthMarq's exclusive correspondent lenders just locked a grocery-anchored 50% LTV 10/30 loan at 5.85% on a 10/25 basis.

The life lenders who have reduced their rates want to pick the best deals. They are seeking the cream of the crop before their competitors return to the market. Several large insurers are still out of the market, seeking direction and trying to rebalance their portfolios and reduce their real estate exposure. At NorthMarq, we maintain a live feed of real-time information nationwide to deliver current information on all of our more than 40 insurance company correspondents. Stay tuned and strap in.

Mark Scott is senior vice president and managing director of NorthMarq Capital in Parsippany. He can be reached at mscott@northmarq.com. The views expressed here are the author's own.