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Life Companies’ CRE Returns Slide in Q4
Trepp’s LifeComps Index, which benchmarks commercial mortgage investments held by life insurance companies, posted a 0.55% total return in the fourth quarter of 2019. This number reflects a significant drop from a Q3 reading of 2.20% and was also well off the return for the full year.
The reading was 3.11 % in Q2 of last year, and 3.15 % in Q1. For the full year of 2019, the total return was 1.73%.
Multifamily properties performed best among the four major commercial property types, with a total return of 9.81 % over 12 months. The other property types of industrial, office and retail followed. The total returns for these sectors were 9.34 %, 9.08 % and 8.79 %, respectively.
Income contributed 1.10 % and price subtracted 0.55 % in Q4, Trepp says. That was the first quarter of negative price movement since Q3 2018.
“Treasury yields—which move inversely with prices—reversed their downward course slightly in Q4 to generate negative price performance,” said Russell Hughes, head of data consortia initiatives at Trepp. “The yield on the 10-year Treasury had climbed up 24 basis points over the quarter.”
Conversely, Hughes continued, “In the first quarter of 2020, we see that the coronavirus fears are sending the Treasury headed towards zero. If that steep decline continues, there will be a profound swing back in the Q1 results.”
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