Life Companies’ CRE Loan Portfolios Post Negative Returns
Commercial mortgage investments held by life insurance companies posted a -1.00% total return in the first quarter, which is down significantly from the reading of 0.55% in Q4 2019. Declining interest rates were unable to offset growing credit concerns.
The reading was 2.2% in Q3 2019, and 3.11% in Q2 of last year, according to the Trepp LifeComps™ Commercial Mortgage Index, which benchmarks commercial mortgage investments held by life insurance companies.
Of the four major property types, multifamily properties performed best over 12 months with a total return of 5.1%, followed by office at 4.9%, and both retail and industrial at 4.57%.
Income contributed 1.03% and price subtracted 2.04% in Q1, with the negative price appreciation primarily being driven by credit risk.
“Despite the significant drop in treasury yields, credit concerns materially pushed down the value of the loan portfolios,” said Russell Hughes, head of data consortia initiatives at Trepp.
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