Berkadia's Moczul: Life Cos. Poised for Big Year

Tucker, Michael

March 24, 2016

Life companies originated a record $18.79 billion in commercial mortgages in the fourthquarter--and they could beat that pace this year, said Al Moczul, Senior Managing Director and Regional Director with Berkadia, New York. 

"All indications are that this year will be at least at 2015 levels and potentially slightly higher," Moczul said. "Most life companies had similar or slightly greater targets for 2016. With the current dynamics of the market and the commercial mortgage-backed securities market dislocated and anemic, nothing tells me life companies won't meet all their goals this year."

More life company lending would benefit commercial real estate, Moczul said. "It's a two-fold benefit, actually. It keeps liquidity in the system, which is important because we have a lot of debt maturities still happening." In addition, many 2006-vintage commercial mortgage-backed securities originations will mature in 2016, "and right now the CMBS market is in a really difficult time. It's trying to adjust to new Dodd-Frank and other regulatory requirements that make it hard for CMBS issuers, so that market's been totally erratic."

Moczul said life companies and the government-sponsored enterprises and to a lesser extent banks have been "steady" capital providers as CMBS issuance slows. Multifamily remains life company lenders' preferred asset class, Moczul said: "They'll compete with the agencies to get their fair share of that. Life companies also like grocery-anchored retail. Industrial is generally a preferred product type for them, but it's hard to find it in the quantity many life companies need."

"The only property type I've heard life company lenders feeling a little anxious about is hospitality," Moczul said. "It's been on a long run and it's late into the cycle in some folks' view, so they're being more careful. They're still lending, but they're watching that that a little more closely."

Moczul noted that CRE is deep into an expansionary cycle, a time when lenders sometimes stretch to find yield. "Secondary and tertiary markets are where a lot of transactions are happening, but lifeco lenders are looking carefully at those. They can get overbuilt or out of balance much more quickly than larger markets."

"It's business as usual so far into 2016," Moczul said. "Life company lenders feel good about where we are and good about where they are in the capital stack and they are going to stay there."

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