It may come as a surprise to many in the commercial real estate business that the quiet life insurance companies are anything but that these days. Recently National Real Estate Investor held its second annual roundtable discussion in Chicago with the real estate heads of the nation's leading life insurance companies.
Our first installment was partnered with Steve Pumper and Robert Cohen of Barnes Morris Pardoe & Foster in 1997. For this year's event we again partnered with Mssrs. Pumper and Cohen through Insignia/Barnes Morris (Insignia/ESG acquired BMPF in 1997) and Insignia's Chicago office, headed by Harvey Camins.
Not surprisingly, the mood was both positive and upbeat. Despite increased competition from the REITs and Wall Street lenders, the life companies are quickly reaching the point where their years of paring down real estate assets is nearing an end as portfolios are more in balance. In fact, most firms are now looking for developmental strategies, including forwards and construction commitments, and the amount of "debt-talk" around the table was staggering. The majority of mutual companies are planning to go public later this year, as they continue to find ways of raising new capital.
Here is how the insurers' involvement is panning out: * Lincoln recently acquired CIGNA's insurance and annuity operations, but still hopes to invest some $700 million in real estate debt this year. On the equity side, Lincoln is geared toward producing about $200 million a year.
* Prudential clearly is still in a disposition mode of its real estate-owned assets.
* CIGNA wants to do more mortgages, with 1997 volume at $1.5 billion in new production and expecting to do $1.7 billion this year.
* Mass Mutual remains an active conduit originator for Wall Street, and is aggressively seeking hotel loans.
* John Hancock expects to close $900 million in loans for the life company in 1998, plus another $400 to $500 million for the securitization business it started a year ago. It did about $400 million in its first securitization deal last year.
* Teachers (TIAA/CREF) is still an active player in the real estate markets. Its separate account has grown from $100 million in 1995 to $900 million today with 90% in equities and 10% in REIT shares. Teachers expects to do $5 billion in 1998 as a follow-on to $5 billion in 1997.
* Mutual of New York (MONY) will demutualize in the second half of 1998. It returned to the debt market last year and began lending again in earnest. Later this year it will offer a construction/takeout program. Now MONY is selling $600 million in equities, with a bent to doing more development lending. Later this year, it will also create another real estate advisory firm.
* Principal is on target to do $3 billion to $3.5 billion a year in new mortgages. It deals in smaller to moderate-size transactions and continues to be an equity seller of $500 to $700 million a year, but plans to stabilize its portfolio at $3.5 billion. It expects to go public in June.
* Travelers is merging with Citicorp, so it's a brave new world for the firm. It will do $1 billion in debt and acquisitions in 1998 and will look to augment its $1 billion equity venture with Tishman Speyer with another $1 billion this year.
* Equitable is active in the CMBS market and will do below-investment grade product.
* Northwestern Mutual did $2.5 billion in new loans in 1997 and expects to do the same this year.
* MetLife did $2.5 billion of real estate lending and $800 million of securitized loans in 1997.