Blog

What is a Commercial Mortgage from A Life Insurance Company?

Many life insurance companies invest in real estate and offer commercial real estate (CRE) loans, which differ from other CRE mortgages. While most banks tend to favor shorter term loans, concentrating more on immediate returns, life insurance companies issue long-term policies to their customers, so take a longer-term view of their investments, and are therefore able to offer loan terms between 10 and 30 years.

With a commercial mortgage from a life insurance company, commercial real estate owners can take advantage of terms that may not be available from other lenders. However, borrowers are unlikely to deal directly with the insurer so will need an intermediary that has a relationship with the company. Here’s what you can expect if you consider this option:

Underwriting

Life insurance companies underwrite more conservatively than some other lenders, typically wanting leverage around 65% or below.  However, some insurers may go as high as 75% to borrowers with a good credit history in commercial real estate, and high quality properties.

Underwriting will focus on the debt service coverage ratio (DSCR) which measures the cash flow available to pay debt obligations. This is calculated based on current income from the property, not potential future income. Life insurance companies would expect DSCR to be at least 1.25.

Loan Features

Prepayment Premium

Prepayments premiums vary between companies, but a borrower can typically expect to pay either a yield maintenance fee or a fixed premium on a commercial mortgage from a life insurance company. The yield maintenance fee is usually calculated as the present value of remaining loan payments, multiplied by the difference between the loan interest rate and the rate on a US Treasury bond of the same duration. A good rule of thumb is that if rates go up, you’ll pay less of a yield maintenance fee.

Fixed premium or “step-down” premium is a simple formula that represents a percentage of the then-existing loan balance at the time the loan is prepaid. For example, a typical 5,4,3,2,1 step-down imposes a 5% premium in year one, 4% in year two, 3% in year three and so on until the prepayment premium is eliminated near the end of the term.

For more on prepayment premiums and why they are used by lenders on CRE loans, read our article on prepayment premiums.

Property Types

Life insurance companies will generally lend across any commercial property type, as long as the property meets their standards, which are typically higher than those of other lenders. Some companies focus mainly on trophy assets.

Key Benefits of a Commercial Mortgage from a Life Insurance Company

For borrowers and properties that qualify for a commercial mortgage from a life insurance company, the biggest advantages are the long-term, fixed-rate options. A borrower can lock in a loan for 20 to 30 years, keeping repayments consistent, and avoiding changes in interest rates. This is particularly advantageous at a time of low interest rates, or if the borrower plans to own the property long-term. Should interest rates fall however, the borrower will be locked into a higher interest rate.

As most life company mortgages are assumable, they give the borrower the flexibility to sell their property during the life of the loan while avoiding prepayment costs.  The loan may also have more favorable terms than are available elsewhere at the time of the sale, making the property more attractive to a potential buyer.

Plum can work with you to arrange a loan with certain life insurance companies. Contact us today to discuss loan options, or if you would like help evaluating your current financing situation.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Ownership of real estate contains unique risks, such as changes in real estate values and property taxes, interest rates, cash flow of underlying real estate assets, supply and demand, and the management skill and credit worthiness of the issuer. Diversification and asset allocation strategies do not ensure a profit and cannot protect against losses in a declining market. This article is not intended to replace competent legal, tax, investment or financial planning advice. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. Please contact your investment, tax and legal advisors for professional advice that is consistent with your personal situation. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve. Historical performance is not a reliable indicator of current or future performance.

Related

Actions By The Fed Do not Singularly Determine Commercial Real Estate Interest Rates

While the Fed is an important driver in the economy, it isn’t the only factor that shapes long-term interest rates for commercial real estate.  We saw interest rates move independently of the Fed’s actions in the year 2000.  At that time, the Fed had abandoned their two year fight against inflation and turned on its…

We all could use an extra $800,000

Santa came early for some commercial real estate owners who locked a rate in the past week.   The 10YR US Treasury yields dipped then rallied last week, declining to 4.11% before bouncing back to current levels near 4.25%.  Is this dip and then increase back to the prior week’s levels a sign of a…

CRE Owners Catch a Break

CRE Owners Catch a Break   This past week, commercial real estate owners caught a huge break.  The 10YR treasury yields fell almost 0.30% throughout the week, and are 0.80% lower than their high of ~5.00% in mid October. Not even Friday’s comments by Fed Chair Powell that “rate cuts are premature” stopped yields from…

Market Spotlight Portland, OR

  Portland, OR is a PLUM market due to its sustainability initiatives, diversified job market, and relative affordability compared to other west coast cities. The industrial market in Portland has been the city’s top-performing sector over the past three years, with asking rents up approximately 25% from pre-COVID levels. Click Here to Download Full Market…

Market Spotlight Pittsburgh, PA

  Pittsburgh, PA, is a PLUM SELECT 80 market due to its storied industrial history. Pittsburgh is widely known as Steel City, due to the long-standing presence and history of steel manufacturers, with US Steel still headquartered in the city. Forbes recently named it the best housing market for Baby Boomers. In addition, Pittsburgh has a long…

Tel: (415) 651 7583

Lending Programs Our Specialists CRE Insights

Who We Are Careers

PLUM Loan Explorer PLUM Loan Request Energy Score Prepayment Penalty Secure File Upload CRE Lexicon

© 2019 PLUM Lending. All Rights Reserved. | Terms of Service | Privacy | Plum, Inc. dba Plum and/or Plum Lending

Chief Funding Officer: Kevin Miller

As Chief Funding Officer, Kevin Miller oversees all credit and underwriting functions for the firm. Mr. Miller has created multiple underwriting platforms for leading third party asset management and servicing companies. He joined PLUM Lending from Trimont Real Estate Advisors where he advised leading private equity firms, life insurance correspondents, CMBS lenders, warehouse lenders in evaluating positions throughout the capital stack including liquid and non-liquid debt instruments. Mr. Miller also has an extensive background and working with private equity investors in evaluating community and regional banks in helping the investors understand loan portfolios within these financial institutions. In addition to his background in CRE credit, Mr. Miller was a member of Trimont’s Global Advisory Council and Cohen Financial’s senior management team. Mr. Miller has a Bachelor of Business Administration from Texas A&M University with a major in finance. He has also been an instructor with the Mortgage Bankers Association.

Commercial Real Estate Finance Associate 

John assists commercial real estate investors with underwriting, debt, and equity structuring for acquisitions and refinances across all CRE asset classes. Prior to joining PLUM, John worked for the last 10+ years in commercial lending and wealth management, providing loans and financial advisory services on behalf of several large banks & brokerage firms. When he’s not underwriting, he’s enjoying the beach in sunny South Florida with his wife and three kids.

E: john.lewis@plumlending.com P: 415-357-7168

President and COO: Manny Brown

Manny’s central role in providing the leadership, strategic vision, and tactical execution as Plum increases its scope and scale, providing users of capital with amazing products and services in their local markets.

Before joining Plum, he spent 13 years repositioning and growing Cohen Financial/Pillar Financial as a premier nationwide Commercial Real Estate Mortgage Banker, Agency Lender, and Servicer. Selling the business to SunTrust in 2016 and remaining on through the merger with BB&T that created the new Truist Financial.

Prior to that, Manny successfully led the rapid growth and repositioning of companies within small private companies, larger public corporations, all within the Specialty Retail, the Sporting, the Healthcare, and the Specialty Chemicals industries.

Manny has an M.B.A from the University of Chicago Booth School and a B.A. from Lake Forest College. His family is his greatest enjoyment, his canine buddies are his walking partners, and golf is his way to enjoy friendly competition.

E: manny.brown@plumlending.com

Loan Originator: Mike Trehey

mike.trehey@plumlending.com (608) 286 – 3817

Mike has been with PLUM for over four years. He is an experienced financial services professional with an established track record in commercial real estate finance, including private placements, loan origination, underwriting, debt/equity structuring, loan syndication, capital markets, and loan sale advisory. Previously, he worked in the investment banking arm for a national accounting firm, originated debt and equity transactions for a boutique mortgage banking firm, and was a top producer for a national commercial finance company. Mike has directly originated over $3 billion of commercial real estate debt and equity throughout his career through various platforms.

In his spare time, Mike enjoys numerous outdoor pursuits around his home near Madison, reading, and spending time with his family.

Loan Originator: Torsten Galley

torsten@plumlending.com (415) 914 – 8243 Region: Nationwide

Torsten has been with PLUM for over seven years and holds the prestigious achievement of closing the most loans at PLUM. In addition, Torsten has over two decades of CRE lending experience with more than $5 billion in closed loans.

After graduating in his native Germany, he held various managerial and producer positions for major banks in Germany, covering markets across Europe and the U.S. After moving to San Francisco, Torsten joined Wells Fargo’s real estate group in 2007 as Senior Relationship Manager. He originated and underwrote loans for major REITs, developers, and real estate investors.

When he’s not helping CRE owners, you may find him scaling a rock climbing wall, hiking, or traveling with his wife and two kids.

Marketing Manager : Louis W. Cardello

At Plum, we provide commercial real estate owners with the next generation of lending by leveraging data to drive a modern investment strategy to find capital and industry-leading insights in underserved local markets. My primary focus is providing Marketing and Branding by leveraging our data-driven models to assist commercial property owners source capital, which in the past might have been a challenge. Additionally, I help to create marketing strategy and planning focused around a digital toolset that includes Salesforce, Pardot, Web, LinkedIn, Facebook, and Twitter. We are daily to help leverage our data to give commercial property owners a well-deserved holistic lending experience.

E: louis.cardello@plumlending.com P: 415-914-8244

Director of Client Development : Sara Hanstad

Sara manages the ongoing client development for Plum Lending. She has had 10 years of experience developing a wide variety of Commercial Real Estate deals for Wells Fargo Bank, UMB Bank, Heartland Financial, and others. Sara has an MBA in International Business and Global Markets and a Juris Doctorate in Corporate Law. When Sara isn’t working, she volunteers at the local dog rescues and travels. Her community involvement over the years, in both a personal and professional capacity, has been extensive and continues to be something she enjoys.

E: sara.hanstad@plumlending.com P: 813-694-3048

National Originator: Ginn W. Downing

Ginn is an experienced commercial real estate professional with a demonstrated history of working in Structured Finance, Financial Structuring, Asset Management, Dispositions, and Business Development. She has served as a fund manager, credit committee member, Advisor and originator of debt, mezzanine and preferred equity. She has personally completed direct asset closings of over $5.5 Billion while working within funds, CDOs and balance sheets. Her experience includes underwriting portfolios for various institutions for top tier capital investment, M&A and over $26 Billion of NPLs.

E: Ginn.Downing@plumlending.com P: 510-207-0705

Transaction Manager

Hudson manages the deal evaluation and underwriting process at PLUM from the moment financials are received to loan closing. Prior to joining PLUM, Hudson specialized in placing life company debt across all property types for a mortgage banking firm in Texas. Hudson has a Bachelor of Business Administration from the University of Texas at San Antonio. When he isn’t underwriting deals or talking to clients, you can find him snowboarding, cooking, or watching sports.

E: hudson.weston@plumlending.com P: 415-914-8256

Senior Advisor: Legal: John (J.R.) Garibaldi

J.R. oversees all legal and regulatory matters. Prior to joining PLUM, J.R. was an attorney at Nixon Peabody LLP where he advised companies on a wide range of finance, corporate and commercial real estate transactions, including representing financial institutions and borrowers on over $3 billion in debt transactions. J.R. holds a J.D. from UC Hastings, College of Law, a B.A. from UCLA and is a licensed attorney and real estate broker in the state of California.

CEO & Founder: Bill Fisher

Bill is the visionary and leader of the company. Earlier in his career, Bill worked as an Executive Vice President with Wells Fargo Bank, where he had responsibility for small business, retail and wealth management segments, including the $12 billion Northern California division. Subsequently, Bill was the founder and CEO of GetSmart.com, which was purchased by Barry Diller’s Interactive Corp. Bill is also the co-founder and long-time partner of the Tiburon family of international seed funds, with 22 successful exits, including Trivago, Xing, Cadooz, and Localisten.de. In his spare time, Bill is an avid fly fisherman, traveling to epic lakes and streams to cast, catch and release.

Chief Administrative Officer: Paige Brooks

Paige oversees strategic and cross-functional goals within the company, operations, policies and compliance, and human resources. She brings over 18 years of senior-level HR management experience. Paige has managed HR globally for several multinational companies, the HR aspects of an IPO, and worked for Sony as their HR generalist for several incubated companies in the last tech boom. Paige is originally from Atlanta, GA, and graduated with a BA in Psychology from the University of Texas at Austin. In her spare time, she enjoys racing sailboats, hiking, photography, and good wine.

Senior Advisor: Finance: Michael Tannenbaum

Michael Tannenbaum is the Chief Financial Officer and Chief Business Officer at Brex Inc. Prior to Brex, he was the VP of Finance and oversaw $1.3B of equity capital raising at SoFi. Michael was previously at private equity firm, Hellman & Friedman, and in investment banking at J.P. Morgan.

Chief Data Scientist: Ajay Mangalam

Ajay manages the data science team which uses big data and artificial intelligence to gain valuable insights into the CRE market. Ajay has over 13 years of experience in the tech industry with a focus on big data analytics and building scalable, highly concurrent and fault tolerant systems. Prior to PLUM, Ajay was part of the Text Analytics Platform at Thomson Reuters building the Search and Answer system. Ajay holds MS & BS degrees in Computer Science from the University of Florida and a Certificate in Quantitative Finance provided by FitchLearning. Ajay enjoys time with his family, running, scuba diving and reading.

Manager of Partner and Client Relations: Eric Weiss

eric@plumlending.com (415) 914 – 8226 Region: Nationwide

Eric has more than 20 years of sales, marketing and business development experience. He has worked with startups, large corporations and government agencies. He has served as associate publisher for a national magazine and was Partnership Manager at eBay. Eric is a graduate of San Francisco State University and in his spare time he teaches English and communication skills to new immigrants. Eric enjoys swimming, playing tennis and is a die-hard fan of the San Francisco Giants.