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Source: $125M in Q4 Life Placements for DC

Friday, January 22, 2010

BETHESDA, DC - Ever since last September, various brokers and capital providers in the DC area have reported that life insurance companies were back in the market. We can add another firm to that list--locally based Phillips Realty Capital, which has placed at least $125 million in life deals on DC-area commercial real estate since Q4.

The company is actively working on deals with a number of life firms, CEO and president Steve Shaw tells GlobeSt.com, including TIAA, ING, Lincoln Financial, Prudential, Guardian Life and Hancock. "Life insurance companies are absolutely coming back into the market--they need to deploy capital and DC is the best place for them to do so."

For the first half of 2009 life companies lent secured funds to the REIT markets, but when the unsecured markets came back in the second part of the year, that investment avenue closed to life companies.

Their terms are still quite conservative, with low LTVs at 65% and buildings that are well located with good sponsorships, low vacancies and a sustainable cash flow, Shaw says. "The real question is: When will life companies start taking on more risk so they can deploy their money?" he adds.

Eventually it will happen, Shaw predicts--as life companies and others begin to understand the new valuations in the market. Recent deals he has placed include $24 million to refinance an industrial building in Springfield, VA, by Lincoln, and a $25-million office refi in Georgetown, by Guardian Life. At the same time, the life money is prompting equity sitting on the sidelines to move in and support deleveraging deals and transactions. "There are mezz and preferred equity groups willing to fill in the gaps borrowers have," Shaw says. "But they, and the borrower, need debt as well." He adds that Phillips Realty Capital is building out this particular piece of its service portfolio. "We are focusing on our workout group in terms of deleveraging and restructuring. That is where the most questions are right now."