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Lend Lease Report Sees Growing Institutional Investor Appetite For Commercial Mortgage-Backed Securities |
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Lend Lease Report Sees Growing Institutional Investor Appetite For Commercial Mortgage-Backed Securities |
NEW YORK, NY -- (August 1, 2001) -- A report issued today by Lend Lease Real Estate Investments says that the growth of commercial mortgage-backed securities (CMBS) has expanded the role of commercial mortgages in institutional fixed income portfolios. The report predicts that investor appetite for CMBS will continue to grow.
The report, "Fixed Income Portfolio Enhancers: Commercial Mortgages and CMBS," indicates that the commercial real estate mortgage market is now making the transition into the public securities markets much like the residential mortgage market did in the 1980s. The resultant structural changes have altered the risk/return profile of commercial mortgages and made the sector an attractive alternative to other fixed-income investments.
The report's authors note that investors in both traditional private commercial whole loan portfolios and broader fixed income portfolios can reduce portfolio risk and enhance returns through the addition of CMBS. CMBS can also be used to modify the portfolio's duration and convexity quickly, to move up and down the credit curve, to change the geographic and property level mix, and to take advantage of relative value opportunities between CMBS and commercial whole loans.
While insurance companies have been CMBS investors since the market's inception due to several factors, new investors such as banks, hedge funds, money managers and opportunity funds are now active. Pension plans' CMBS investment appetite has received a small initial boost from the late 2000 change in ERISA regulations enabling them to invest in AA- through BBB-rated securities in addition to AAA-rated issues. The report was authored by Jeffrey Williams, a vice president of Lend Lease Real Estate Investments in charge of portfolio surveillance and research for the company's CMBS Group and Clifford Lai, president and chief investment officer at Hyperion Capital Management.
Lend Lease Real Estate Investments is one of the largest real estate investment managers in the world and a leading U.S. real estate advisor to pension funds. The company has $35 billion in real estate and commercial mortgages under management for institutional and private clients in the U.S. Lend Lease Hyperion, Lend Lease's joint venture with Hyperion Capital Management, manages approximately $1 billion in CMBS assets using an integrated real estate and fixed-income management approach. On a worldwide basis the Lend Lease Group is an integrated real estate funds management and services business comprising funds management, project management and construction and property development. In real estate funds management, Lend Lease provides equity and debt origination and management, in public and private markets, and manages $48 billion on behalf of clients globally.
Lend Lease provides project management and construction services in almost 40 countries, usually on a fee for service basis, for a blue chip client base with a high level of repeat business. In property development, Lend Lease has expertise in commercial, retail and complex urban mixed use developments, with a strong retail focus, in Europe, Asia, Australia and the US, utilizing primarily third party capital.
Hyperion Capital Management, Inc. (Hyperion), the New York-based investment advisory firm, offers a wide array of investment management services to institutional investors. Included among these are various fixed income strategies, such as Core Fixed Income, Core MBS, Enhanced MBS, Indexed Equity, and CMBS. In addition, Hyperion has developed resources specifically dedicated to the investment needs of insurance company clients, including asset management, investment accounting and reporting, and risk management services. Hyperion also manages four closed-end fixed income mutual funds.