Power Finance 2022: More Life Insurance Company Dollars Flowing Into CRE Lending

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Life insurance companies were alive with commercial real estate lending during the past year and are poised for further growth.

Active commercial real estate origination activity was evident at established insurance companies PGIM, MetLife and New York Life while newer players, namely KKR and Apollo, also joined the party with the addition of life company dollars. 

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PGIM upped its U.S. debt origination to $17 billion in 2021 compared to $16.2 billion the previous year. Its dealbook was diverse, comprising $7.4 billion within its portfolio and core business, $2.2 billion within core-plus and high yield along with $7.3 billion of agency debt.

One of PGIM’s notable deals involved $101 million floating-rate bridge financing to Asana Partners for the acquisition and lease-up of a four-property, 168,206-square-foot retail and office portfolio in the Fulton Market neighborhood of Chicago. The deal demonstrated PGIM’s versatility to execute a core-plus transaction that aims for larger yields. 

MetLife Investment Management also had a big 2021 with its commercial mortgage team originating a company-record 235 transactions last year totaling more than $15.3 billion across traditional as well as alternative property types. These included life sciences, self-storage and student housing. MetLife also launched a closed-end hotel debt fund.

Overall, MetLife recorded $18.6 billion of new commercial real estate debt and equity transactions and achieved a company high of $109.8 billion in gross commercial real estate assets under management. 

New York Life Real Estate Investors proved nimble in 2021 with $12.6 billion of transaction volume from core, bridge, construction and mezzanine debt. It exceeded pre-pandemic levels in commercial real estate mortgages with $9.9 billion. Commercial mortgage-backed securities purchases totalled $1.8 billion, and New York Life closed $923 million of equity.

Looking to expand from its transitional lending roots, KKR added insurance capital in February 2021 with the acquisition of life and annuity company Global Atlantic. The move arms KKR with more bandwidth to underwrite longer-term floating-rate and fixed-rate loans in addition to bridge debt. 

Acquiring Global Atlantic paid early dividends for Manhattan-based KKR with the firm quintupling its previous lending record, set in 2019, with $14.5 billion in loans from 120 deals. The company expanded the scope of its lending with 60 new institutional borrowers. Around half of its transaction activity last year was dedicated to the multifamily sector while also allocating a sizable amount to industrial deals. 

Commercial real estate lending momentum at the life insurance level was also evident at Apollo. The firm closed $14.1 billion of originations last year with $8 billion of that total deriving from its insurance company platform. 

As Apollo and KKR further grow their insurance arms in 2022, the insurance company industry presence within commercial real estate lending will only widen.