CREFC New York: insurance company lenders may eclipse CMBS in 2016

This year could mark the first year since the advent of commercial mortgage-backed securities that insurance company lenders take the upper hand in originations volume, delegates heard at the annual CREFC conference in Manhattan this week.

This year could mark the first year since the advent of commercial mortgage-backed securities that insurance company lenders take the upper hand in originations volume, delegates heard at the annual CREFC conference in Manhattan this week.

Originations estimates cited at the event hovered around the $70 billion range for insurance companies, while CMBS, with just $28 billion in issuance so far this year, is likely to peak at least several billion dollars below that.

images (2)Both insurance companies and banks have captured significant market share from CMBS conduit lenders, whose originations stalled significantly in Q1 2016 (but show signs of some new momentum).

A CREFC/Trepp survey released during the conference supported the increased role of the insurance companies, who reported ongoing strong performance and increased allocations to commercial mortgages during the second half of 2015.

Commercial mortgage holdings averaged 11.08 percent of total invested assets for survey participants, representing 25 insurance companies with a combined $204 billion in loan exposure, marking a 40 basis point increase from year-end 2014 and indicating increasing allocations to commercial mortgages by insurance companies.

Survey participants also added $44.7 billion of new mortgages in 2015, a more than $7 billion increase over the prior year. Notably, roughly 90 percent of the new originations came from “New Business/Financing,” which could include refinancing of maturing loans from elsewhere.

Research from Keefe, Bruyette & Woods, citing Federal Reserve data, shows that the insurance companies have never had more market share than CMBS, even when there was virtually no CMBS issuance in 2009 following the recession, when CMBS still took 13 percent of the market compared to just 6 percent for the insurance companies.

The banks are perhaps the greatest benefactor, however, having increased their footprint so much so that one banker at the CREFC event noted that the FED has “come out to us and said, ‘don’t put any more real estate exposure on your portfolios.'”

Banks accounted for 43 percent of non-agency CRE loan origination in Q1, upping their market share from 28 percent in Q1 2015, showed a CBRE report released just before the conference.

CMBS conduits meanwhile accounted for only slightly more than 10 percent of loan deal volume, way below the level of 18 percent Q1 last year — and one of the lowest quarterly market shares in several years.

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