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PRIVATE MORTGAGE RETURNS REBOUND IN FIRST QUARTER 2009

Annual returns negative for second consecutive quarter

 

BOSTON, June 30, 2009 – Returns on private commercial mortgages held by life insurance companies rebounded into positive territory in first quarter 2009 after two consecutive quarters of negative returns, according to the LifeComps Commercial Mortgage Index. First quarter’s positive return of 1.63 percent followed returns of -3.16 percent in fourth quarter and -2.08 percent in third quarter 2008.

Of total return in the first quarter, 1.69 percent was income return and -0.05 percent was price return. The price loss was driven by higher treasury yields which slightly outweighed the positive effect from improved valuations.

For the twelve months ended March 31 2009, total return remained negative with a -3.37 percent total return compared to -4.14 percent last quarter. These are the only two quarters in LifeComps’ history with negative annual total returns. Income return for first quarter was 6.57 percent and price return was -9.94 percent.

Apartments produced the highest return in first quarter with a 3.49% total return followed by retail at 1.25%, office at 1.23% and industrial at 0.85%. Over 12 months, retail fared the best with a total return of -2.94% compared to -3.10% for office, -3.25% for apartments and -3.51% for industrial.

 

Commercial Mortgage Loan
Total Return by Property Type as of 3/31/09
  Quarter 12 Months
Apartment 3.49% -3.25%
Office 1.23% -3.10%
Retail 1.25% -2.94%
Industrial 0.85% -3.51%
Total 1.63% -3.37%

 

About LifeComps

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 6,500 with an aggregate principal balance of approximately $85.0 billion and market value of $77.4 billion. The weighted average duration is 4.0 years, and average loan-to-value is 66.5 percent.

Since its inception, the LifeComps database has tracked individual cash flows on more than 18,000 loans with principal balances totaling in excess of $221 billion. More than 3,800 loans totaling $54 billion have been tracked from origination to disposition.

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. For more information, visit www.lifecomps.com.