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PRIVATE MORTGAGE RETURNS TURN NEGATIVE IN THIRD QUARTER 2008

BOSTON, November 30, 2008 – Following positive gains of 0.26 percent in second quarter 2008 and 0.82 percent in first quarter 2008, private commercial mortgages held by life insurance companies posted a -2.08 percent total return for third quarter 2008, according to the LifeComps Commercial Mortgage Index.

Of total return in the third quarter, 1.61 percent was income return and -3.69 percent was price return. The negative price return resulted from higher mortgage spreads and lower valuations which overrode the positive effect from lower treasury yields.

For the twelve months ended September 30, 2008, total return was positive at 2.06 percent, of which 6.51 percent was income return and -4.45 percent was price return. The property type with the highest total return over the prior 12 months was office with a 2.34 percent return. Retail and apartment had the lowest total returns with 1.85% each, however retail fared slightly better than apartments on a quarterly and year-to-date basis.

 

Commercial Mortgage Loan
Total Return by Property Type as of 9/30/08
  Quarter YTD 12 Months
Apartment -2.22% -1.47% 1.85%
Office -1.90% -0.58% 2.34%
Retail -2.05% -1.15% 1.85%
Industrial -2.11% -0.94% 2.11%
Total -2.08% -1.01% 2.06%

 

The LifeComps Commercial Mortgage Index is the only published benchmark for the private commercial mortgage market based on actual cash flow data which has been collected quarterly from participating life insurance companies since 1996. Active loans in the LifeComps Index number 6,700 with an aggregate principal balance of approximately $86.3 billion and market value of $82.6 billion. The weighted average duration is 4.3 years, and average loan-to-value is 58.4 percent.

LifeComps originated following the real estate recession of the early 1990s when a group of major life insurer companies resolved to build the first database to capture commercial real estate whole loan performance over time. Participating life insurers include Allstate Life Insurance Company, CIGNA Investment Management, The Equitable, John Hancock, Nationwide, Northwestern Mutual, Principal Financial and Prudential Insurance Company of America.

Since its inception, the LifeComps database has tracked individual cash flows on more than 11,500 loans with principal balances totaling in excess of $155 billion. More than 4,600 loans totaling $61 billion have been tracked from origination to disposition.

The LifeComps Index is published quarterly, 60 days after the end of each quarter in compliance with antitrust guidelines determined by counsel. LifeComps participants receive detailed quarterly reports that provide commercial mortgage performance statistics including total return, cash yield, default, and basis point loss for their portfolio versus the LifeComps total portfolio as well as attribution analysis showing performance contribution by property type, region, loan size and origination year. For more information, visit www.lifecomps.com.