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Trepp Life Insurance Commercial Mortgage Return Index: Investors Continue with Caution in Q1 2021

·3 min read

Trepp released the latest LifeComps™ returns report, revealing that commercial mortgage investments held by life insurance companies posted a negative total return of 0.80% in the first quarter of 2021, a 1.65% decrease from the positive 1.22% return realized in the fourth quarter of 2020.

NEW YORK, May 20, 2021 /PRNewswire-PRWeb/ -- Trepp, a leading provider of data, insights, and technology solutions to the structured finance, commercial real estate, and banking markets has released the first quarter 2021 returns report for its life insurance commercial mortgage index. Instantly download the report here: https://www.trepp.com/instantly-access-q1-2021-returns-report-life-insurance-commercial-mortgage-index.

Commercial mortgage investments held by life insurance companies posted a negative total return of -0.80% in the first quarter of 2021, a 1.65% decrease from the positive 1.22% return realized in the fourth quarter of 2020.

The negative total return is attributable to a decline in reported loan values of -1.77%. Income returns continue to be positive and contributed 0.97% in the first quarter of the year. Treasury yields have significantly increased this past quarter which contributed to the decline in loan values. The yield on the 10-year Treasury rose to 174 basis points, a new high since the prior peak of 192 basis points in Q4 2019.

"There is a growing market concern for higher inflation in the near future," said Tom Fink, Trepp Senior Vice President and Managing Director. "The same concern could also increase borrower demand for life insurance company loans as borrowers look to take advantage of lower interest rates," Fink said.

Credit concerns remain evident among lenders, but some measures of credit stress have come down from previous quarters: the overall delinquency rate is unchanged from Q4 2020 at 0.04%; and lender deferrals and forbearance are down 12% quarter over quarter, with only $21 million in interest capitalized in Q1 2021.

Cumulative charge-offs on existing loans decreased by a net of $15 million from Q4 2020 to Q1 2021, primarily from a reversal of prior office property charge-offs. The quarter-over-quarter change in specific reserves decreased by a net of $17.7 million resulting in a $131million specific reserve balance.

On a rolling four-quarter basis (Q2 2020 through Q1 2021), income contributed 4.10%, while appreciation added 2.71% for a total return of 6.81%.

Of the four major property types, industrial properties performed best over 12 months with a total return of 8.10%, followed by multifamily at 7.81%, office at 7.04%, and retail at 4.14%.

There are approximately 8,000 active loans in the LifeComps Index, with an aggregate principal balance of $152 billion. The weighted average duration is 5.19 years. To see the full report, click here: https://www.trepp.com/instantly-access-q1-2021-returns-report-life-insurance-commercial-mortgage-index.

For more information, contact Trepp at press@trepp.com or 212.754.1010. Visit http://www.Trepp.com for more information on LifeComps.

About LifeComps™
The LifeComps™ Commercial Mortgage Loan Index is the only published benchmark for the private commercial mortgage market based on actual mortgage loan cash flow and performance data which has been collected quarterly from participating life insurance companies since 1966. LifeComps provides a quantifiable investment performance index and serves as a benchmark for privately held commercial real estate mortgages.

About Trepp
Trepp, founded in 1979, is the leading provider of data, insights, and technology solutions to the structured finance, commercial real estate, and banking markets. Trepp provides primary and secondary market participants with the solutions and analytics they need to increase operational efficiencies, information transparency, and investment performance. From its offices in New York, San Francisco, and London, Trepp serves its clients with products and services to support trading, research, risk management, surveillance, and portfolio management. Trepp subsidiary, Commercial Real Estate Direct, is a daily news source covering the commercial real estate capital markets. Trepp is wholly owned by Daily Mail and General Trust (DMGT).

Media Contact

Hayley Keen, Trepp, 2127541010, press@trepp.com

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