A luxury apartment complex in Boston’s upscale South End neighborhood. Amazon’s midtown Manhattan headquarters and distribution center across from the Empire State Building. A thirty story class A office tower at 123 North Wacker Dr. in Chicago’s West Loop. What these commercial properties have in common is that all were financed within the past two years – not by banks, but by insurance companies or pensions.
An Axa SA sign outside one of the company’s branches in Paris, France. Photographer: Antoine Antoniol/Bloomberg
So which pension and insurance providers are using their capital to finance commercial properties in New York City,Boston and Chicago? CrediFi examined six such companies – five based in the U.S. and one in France – that have been particularly prominent backers of commercial real estate in these three cities.
In Q4 2016, AIG issued between $600 million and $700 million in commercial real estate loans in New York City, giving it a market share of 4%. It was a top 10 NYC commercial real estate lender in 2015.
Most of the 2016 financing was for the new American Copper Buildings at 626 First Avenue, which last year began a soft launch to kick off luxury apartment rentals. AIG issued a 500 mm loan to JDS Development Group and Largo Investments for the angled pair of towers covered in copper panels and connected by a sky bridge.
The focus on a single property is consistent with the pattern shown by insurance and pension companies that finance real estate. These providers typically seek stable, large, often high-profile properties rather than issuing many smaller loans for a larger number of buildings, as some lenders do.
French insurance provider AXA was a top 10 commercial real estate lender in Chicago in the first quarter of this year, when it issued over $90 million in Chicago CRE financing, as well as in Q4 2016.
AXA was also the No. 3 commercial real estate lender in New York City in Q4 2016, when it had a market share of 5% due to its nearly $1 billion in CRE financing in the Big Apple. AXA was behind the financing of one of New York City’s biggest CRE loans of the quarter, the $850 million ($481 per square foot) financing of the 45-story office tower at 1301 Avenue of the Americas. AXA originated the loan along with fellow insurance companies MetLife and New York Life. The Paramount Group-owned property has retail space on the bottom and provides in-building access to Rockefeller Center.
Chicago’s largest non-bank commercial real estate lender in the first quarter of this year was MetLife, which originated between $200 million and $300 million in the quarter, almost as much as it originated in the Windy City in all of 2016.
In New York City, MetLife was a top 10 commercial real estate lender in the second and third quarters of 2016, financing properties including Amazon’s Vornado-owned Manhattan headquarters at 7 W. 34th St., for which MetLife originated a $300 million loan.
New York Life Insurance
You might have thought that an insurance company with New York in its name would be most prominent in, well, New York. Not so at the moment. Yet, while New York Life Insurance has not been a top 10 commercial real estate lender in the Big Apple over the past year-and-a-half, it was a top 10 lender in Chicago in Q1 of this year.
In January, the insurance company issued a $109 million loan for the acquisition, repositioning and leasing of an office tower at 123 North Wacker Dr. that had been in financial distress for more than six years. The building was recently acquired by a LaSalle Investment Management fund.
New York State Teachers Retirement System, Hartford Fire Insurance Company, Manulife Financial
This pension fund and two insurance companies have been leading Boston lenders recently, with the New York State Teachers Retirement System featuring more prominently in the first half of 2016 and Hartford Fire Insurance and Manulife in the first half of this year.
Prudential was a top 10 lender in New York City in the second quarter of 2016, when it issued more than $500 million in commercial real estate loans. That financing gave Prudential a 2.7% share of the CRE market in NYC in that quarter.
Prudential-financed properties include an office building at 35 Madison Ave. in Manhattan’s Flatiron district, for which the insurance company issued a $76 million loan in Q2 2016. Among top 10 NYC lenders in that quarter, Prudential had the highest jump in year-over-year loan origination.
The Teachers Insurance and Annuity Association of America is the pension giant behind the $135 million financing in June of this year for the luxury apartment complex (with retail space) in Boston’s South End, the Troy Boston at 55 Traveler St. (also known as 275 Albany St.).
New York-based TIAA (until recently known as TIAA-CREF) was one of the biggest commercial real estate lenders in Boston in the first half of 2017.
In 2016, it was also one of the biggest lenders in Chicago, financing an $800 million loan (a high $960 per square foot) for 101 N. Canal St., a class A office building with retail potential on the ground floor.
So, while many people tend to associate banks with the big loans that finance prominent properties in major cities such as New York, Boston and Chicago, insurance companies and pension providers, whether based in the U.S. or abroad, can be big commercial real estate players, too. That’s a claim we expect insurance companies will gladly accept.