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Life Insurance Firms Still Fill the Lending Breach

Brokers report that life insurance companies are still very active in real estate lending, albeit only at favorably priced and leveraged deals.

By Erika Morphy | Updated on February 10, 2008

WASHINGTON, DC-Life insurance companies, along with other balance sheet lenders and alternative forms of capital, have been stepping into the breach created by the CMBS markets’ seizure last year. For the most part they have managed to keep most low-levered projects going and, increasingly in some cases, provide funds to new developments that had been in the pipeline. But as events continue to unfold in the economy and capital markets, some in the industry are beginning to wonder how long life insurance companies will continue to lend out the commercial whole loans that are fueling so many projects.

Allstate, to give one example, is not a happy indicator of future behavior. While the firm will not provide specifics about its allocations, Sam Davis, senior managing director and head of real estate for Allstate’s commercial real estate investment activities, tells GlobeSt.com that this year the firm will surely lend less than last year’s record of $2.9 billion.

Michael Yavinsky, SVP with Washington, DC-based Walker & Dunlop, tells GlobeSt.com that a few life insurance companies are sitting on the sidelines of the real estate investment community, in contrast to the stepped-up activity of other investors. “Some aren’t selling their life insurance products that create investable cash, some see relative value in other sectors, some prefer to be in cash — there are a variety of reasons why this is so right now,” he says.

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