Investors remain cautious in the first quarter of 2021

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Trepp, a leading provider of data, information and technology solutions to the structured finance, commercial real estate and banking markets, released the first quarter 2021 performance report for its lending index commercial mortgage life insurance. Instantly download the report here: https://www.trepp.com/instantly-access-q1-2021-returns-report-life-insurance-commercial-mortgage-index.

Commercial mortgage investments held by life insurance companies posted a negative total return of -0.80% in the first quarter of 2021, down 1.65% from the positive return of 1.22% achieved in the previous quarter. fourth quarter of 2020.

The negative total return is due to a decrease in the reported loan value of -1.77%. Income returns continue to be positive and contributed 0.97% in the first quarter of the year. Yields on treasury bills increased significantly in the last quarter, which contributed to the decline in loan values. The 10-year Treasury yield hit 174 basis points, a new high since the previous peak of 192 basis points in the fourth quarter of 2019.

“The market is increasingly worried about higher inflation in the near future,” said Tom Fink, senior vice president and general manager of Trepp. “The same concern could also increase borrower demand for loans from life insurance companies, as borrowers seek to take advantage of lower interest rates,” Fink said.

Credit concerns remain evident among lenders, but some measures of credit stress have eased from previous quarters: the overall default rate is unchanged from Q4 2020 at 0.04%; and lender deferrals and forbearances are down 12% quarter over quarter, with just $ 21 million in interest capitalized in the first quarter of 2021.

Cumulative write-offs on existing loans decreased by a net $ 15 million between Q4 2020 and Q1 2021, primarily due to a reversal of prior write-offs of office buildings. The quarter-over-quarter change in specific reserves decreased by a net amount of $ 17.7 million, resulting in a specific reserve balance of $ 131 million.

Over four rolling quarters (Q2 2020 to Q1 2021), revenue contributed 4.10%, while appreciation added 2.71% for a total return of 6.81%.

Among the top four property types, industrial properties performed the best over 12 months with a total return of 8.10%, followed by multi-family at 7.81%, office at 7.04% and retail. at 4.14%.

There are approximately 8,000 active loans in the LifeComps Index, with an aggregate principal balance of $ 152 billion. The weighted average duration is 5.19 years. To view the full report, click here: https://www.trepp.com/instantly-access-q1-2021-returns-report-life-insurance-commercial-mortgage-index.

For more information, contact Trepp at press@trepp.com or 212.754.1010. Visit http://www.Trepp.com for more information on LifeComps.

About LifeComps â„¢

The LifeComps â„¢ Commercial Mortgage Index is the only published benchmark for the private commercial mortgage market based on actual mortgage cash flows and performance data that has been collected quarterly from insurance companies. -participants since 1966. LifeComps provides a quantifiable investment performance index and serves as a benchmark for private commercial real estate mortgages.

About Trepp

Trepp, founded in 1979, is the leading provider of data, information and technology solutions to the structured finance, commercial real estate and banking markets. Trepp provides primary and secondary market participants with the solutions and analytics they need to increase operational efficiency, information transparency and investment performance. From its offices in New York, San Francisco and London, Trepp offers its clients products and services to support trading, research, risk management, oversight and portfolio management. Trepp’s subsidiary, Commercial Real Estate Direct, is a daily source of information covering the commercial real estate capital markets. Trepp is 100% owned by Daily Mail and General Trust (DMGT).

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