Life Firms' Private Commercial Mortgage Returns Improve

Private commercial mortgages held by life companies gave them a 2.25% total return for the second quarter of 2009, the best performance since the fourth quarter of 2007, according to the LifeComps Commercial Mortgage Index. This makes two consecutive quarters of positive returns for these loans. In the first quarter of this year, life insurers got a 1.63% return. In the fourth quarter of last year, these loans had a loss of 3.16%, and in the third quarter, they had a loss of 2.08%. Of the total return for the most recent period, 1.68% was from income and 0.57% was from price. LifeComps said this was the first price gain since the fourth quarter of 2007. Over a 12-month period, however, private commercial mortgages had a loss of 1.46%. The income return was 6.74% but the price loss was 8.2%. By property type, for the second quarter, mortgages secured by office buildings had a 2.67% return, apartment building mortgages had a 2.47% return, industrial property loans had a 1.81% return and retail property loans had a 1.75% return. There are 6,400 active loans in the LifeComps database with an aggregate principal balance of approximately $85 billion.