Private commercial mortgage loans held by life insurance posted a 1.56 percent total return in second quarter 2012. The gain matched the performance achieved in first quarter, resulting in a 3.14 percent total return over the first six months of 2012, according to the LifeComps Commercial Mortgage Performance Index.
Income and price returns of 1.38 percent and 0.18 percent, respectively, equaled first quarter's returns despite treasury yields and mortgage spreads moving in opposite directions in the two quarters.
The 10-year treasury yield declined to 1.67 percent from 2.23 percent in the second quarter after beginning the first quarter at 1.89 percent. Conversely, mortgage spread movement widened in second quarter after narrowing in first quarter, offsetting the effect of treasury movement in both periods.
The annual return for the LifeComps portfolio was 8.41 percent. Income contributed 5.77 percent and appreciation 2.64 percent with performance benefitting primarily from lower treasury yields. Treasury yields for 10-year maturities declined 151 basis points from 3.18 percent over the 12-month period.
Of the four major property types, retail performed best over 12 months with a total return of 8.89 percent compared to 8.64 percent for apartments, 7.82 percent for office, and 7.66 percent for industrial.
Commercial Mortgage Loan Total Return by Property Type as of 6/30/2012
Property Type Quarter 12 months
------------- ------- ---------
Apartments 1.59% 8.64%
Office 1.54% 7.82%
Retail 1.70% 8.89%
Industrial 1.19% 7.66%
All* 1.56% 8.41%
--- ---- ----
*Includes hotel, mixed use, and other commercial
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OCTOBER 31, 2014
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