2011 Insurer Loan Originations Up 55% from 2010

Insurance companies have once again grown their commercial lending operations, this time almost back to pre-crisis levels. Results for 2011 are out (See Figure 1), and show that $51.7 billion of originations were completed by the top 30 companies, up 55% from the 2010 figure of $33.3 billion. At the height of the lending boom in 2007, insurers peaked at $56.6 billion. The surge in lending in the last two years has been instigated by the ability of insurers to offer more secure and competitive interest rates to borrowers compared to CMBS shops. Furthermore, Metlife’s Mark Wilsmann indicated that from a relative-value perspective commercial properties are currently seen as a more attractive investment for them compared to other fixed-income opportunities of the same risk.

Figure 1. Origination Amounts by Top 30 Insurers ($Billions). Source: CMAlert

Maiden Lane III Sale Puts Pressure on the CMBS Market

On April 23, Deutsche Bank and Barclays agreed to buy the $7.5 billion of CDO bonds being marketed by the Federal Reserve Bank of New York (FRBNY). As has happened in the past with other Maiden investment vehicles, these Maiden Lane III bonds are being auctioned off to re-coup an investment made by the FRBNY when it seized assets from AIG in return for a bailout in 2008. It is speculated that the consortium paid between 66 and 68 cents on the dollar for the pool while the second place group bid 65 cents. Barclays and Deutsche had a pricing edge going into bidding because their group already owned the subordinate classes and had an interest-rate swap counterparty position on the CDOs, meaning it would be easier and cheaper for them to deconstruct the CDOs, and sell off the underlying CMBS bonds to the market.

When news first broke of the Maiden Lane III offering, consisting mostly of AM and AJ bonds, pricing slumped and many traders headed to the sidelines to wait out this unusual glut of supply being dumped on the market. Things have returned to normal after the sale, but some volatility may still persist as the winning group sells off small pieces of the deal it did not pre-sell to large investment groups.

Big REITs, Little Stores

Llenrock posted an interesting snippet about the changing tenant dynamics in the retail space, here's an even shorter excerpt...

Despite popular opinion, many local businesses and neighborhood stores, either due to the nature of their products and services or by the sheer convenience of being “right down the street,” are not significantly affected by online retailers like Amazon. As Kimco’s CEO explained to Jim Cramer a while back, local businesses such as dry cleaners and convenience stores offer increased income while filling the small vacancies in REIT-operated shopping centers. Finally, the big guys and the little guys are teaming up.