Life company industrial properties double the size of CMBS collateral

Life company industrial properties have a median size of 250,000 square feet, more than twice the 112,482-square-foot median for properties backing CMBS and CRE CLO loans, according to Trepp research published Nov. 10.

The life company figure rests on 533 single-property loans with a reported building size, drawn from 1,648 industrial loans totaling $34.92 billion in Trepp's LifeComps Index. The securitized side covers 5,462 properties across $71.77 billion of CMBS and CRE CLO industrial debt. Small buildings dominate that pool: properties under 300,000 square feet are 83% of the count but 55% of the loan balance, the 300,000-to-1-million-square-foot band is 15% and 35%, and properties of 1 million square feet or more are 2% of the count and 10% of the balance.

The two pools are different building populations rather than two prices for the same risk. Underwriting tracks the difference: life company industrial loans carry a 2.47x debt-service coverage ratio and a 15.7% debt yield, against 1.51x and 10.2% for CMBS and CRE CLO loans, and properties receiving life company financing average $13.47 of net operating income per square foot versus $6.66 for properties backing securitized loans. For an allocator weighing a life company separate account against CMBS exposure, the 2x size gap means coverage and yield figures are not directly comparable.

Trepp said the differences could reflect how each group lends. Life companies hold loans on their own balance sheets, which may make them more inclined to finance larger, well-leased properties with stable income streams and conservative leverage they can carry through the loan term, the firm said.

The size bands give allocators a rough marker: a 300,000-square-foot building sits above the life company median and inside the 17% of securitized properties at or above that threshold, computed from Trepp's 15% and 2% bands.