Commercial Mortgage Returns Rebound in Third Quarter 2015

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Jan 15, 2016, 10:00 ET

BOSTON, Jan. 15, 2016 /PRNewswire/ -- Commercial mortgage loans held by life insurance companies posted a 1.62 percent total return in third quarter 2015, bouncing back from second quarter's negative 1.23 percent performance, according to the LifeComps Commercial Mortgage Loan Index.

Income return was 1.21 percent while price added 0.41 percent in third quarter. The value increase resulted from lower yields on Treasuries with terms over 2 years, more than compensating for the negative effect of wider mortgage spreads. The yield on the 10-year Treasury declined 29 basis points over third quarter.

The twelve-month total return rose to 4.23 percent from 3.28 percent last quarter. Annual income of 4.98 percent was offset by a price loss of 0.75 percent, attributable to wider credit spreads that drove values down despite lower yields on longer term Treasuries. The 10-year Treasury yield ended the period 46 basis points lower.

Of the four major property types, office performed best over the quarter and year with total returns of 1.80 percent and 4.47 percent, respectively.

Commercial Mortgage Loan Total Return by Property Type as of September 30, 2015
Property	Quarter	12 months
Apartments	1.64%	4.10%
Industrial	1.14%	3.96%
Office	1.80%	4.47%
Retail	1.70%	4.01%
All*	1.62%	4.23%
*Includes hotel, mixed use, and other commercial

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 1996. Active loans in the LifeComps Index number approximately 4,500 with an aggregate principal balance of $103.7 billion and market value of $108.9 billion. The weighted average duration is 5.2 years and average reported loan-to-value is 50 percent.

Since its inception, the LifeComps database has tracked individual cash flows on more than 21,000 loans with principal balances totaling in excess of $280 billion. More than 6,500 loans totaling $100 billion have been tracked from origination to disposition.

Participating life insurers include Allstate Life Insurance Company, CIGNA Investment Management, AXA Equitable, John Hancock, Northwestern Mutual, Principal Financial, Prudential Insurance Company of America, and TIAA-CREF. For more information, visit www.lifecomps.com.

SOURCE Northwestern Mutual