The Crittenden Report: Life Companies prepare for 2021
We find the following information from the latest issue of The Crittenden Report to be an accurate assessment of how Life Companies will be lending starting in 2021. Continue reading below to find out the details:
The life company lending market will be strong as these lenders look to put capital out and grab favorable yield in 2021. Many banks, CMBS, and debt funds have experienced disruptions in their pipelines, and life companies will step in to cherry pick the best deals next year. Production for 2020 is expected to be down anywhere from 20% to 50% because of the pandemic. Watch for an enhanced focus on durable cash flows and low capital expenditure properties. Life companies will prefer deals with 50% to 60% leverage, although multifamily and industrial will see leverage up to 65% to 75%.
High-quality loans with strong sponsors will see rates in the mid- to high 2% range, while most loans will be priced in the low to mid-3% range. Debt yield will be 8% to 9%+, while DSC will be 1.30x to 1.50x. Count on retail and office to be underwritten with shorter amortization schedules and lower leverage to ensure any further vacancies can be absorbed by in-place cash flow. Also, keep an eye out for more requests for credit enhancements such as recourse, master leases, or short amortizations to make a deal work.
Look for PGIM Real Estate, MetLife, New York Life, Pacific Life...
