MetLife Inc., the largest U.S. life insurer, won a commitment of as much as $5 billion from SunTrust Banks Inc. for commercial mortgage loans.
The funds from Atlanta-based SunTrust will be provided over the next three years for loans originated by MetLife, the insurer said in a statement today. It’s the first commitment to the company’s new asset-management unit, John Calagna, a spokesman for New York-based MetLife, said in an e-mail.
MetLife started the unit in October for institutional investors as it seeks to add fee income that is less capital intensive than some of the coverage it issues. Insurers including Prudential Financial Inc. manage money for clients along with funds that back obligations to policyholders.
“They’re managing other folks’ money, so it’s a less asset intensive, fee-based revenue stream,” Ed Shields, an analyst at Sandler O’Neill & Partners LP, said in a phone interview. “The track record for the life insurance industry in the recent years has been very good.”
Steven Goulart, 55, oversees New York-based MetLife’s asset-management initiative, which is also targeting private-placement debt and real estate equity investment. The company has said it wants to be among the top five institutional real estate investment managers. The venture offers investors geographic diversity and access to high quality properties, said Robert Merck, head of MetLife Real Estate Investors.
“Our focus is your top-tier markets in the U.S.,” Merck said in a phone interview. “We cover the whole U.S. with our regional office network.”
MetLife is in talks with potential clients including pension funds, smaller insurers and banks to commit funds to the real estate unit, he said.
Demand for U.S. commercial real estate has climbed as the economy recovers and investors seek the higher yields from owning property compared with some fixed-income securities such as U.S. Treasuries. Through May, the Moody’s/Real Capital Analytics national all-property index had recovered 53 percent of its losses from the peak in December 2007 through its low in January 2010, according to a July 10 report from Moody’s Investors Service.
SunTrust, led by Chief Executive Officer William Rogers, has been seeking to add to property investments as the company’s portfolio recovers from the financial crisis. The bank, Georgia’s largest lender, said last month that second-quarter profit jumped as bad-loan provisions dropped.
“It gives them an opportunity to diversify the regional concentration that they have,” Marty Mosby, an analyst at Guggenheim Securities LLC, said in an interview. “It puts them in front of new customers and allows them to build a quality customer base without having to go in and develop the distribution channel.”
SunTrust will consider loans from all regions and typically invest in mortgages for properties on the U.S. East Coast, the bank said in an e-mailed statement.
MetLife originated more than $9.6 billion in commercial mortgages last year, and held $43.1 billion of the loans as of Dec. 31, according to the statement.
The SunTrust “partnership supports our larger strategy to provide innovative and reliable investment vehicles to our clients,” MetLife’s Goulart said in the statement.
SunTrust’s portfolio included $59.2 billion of commercial loans and $42.3 billion of residential loans as of March 31, according to a regulatory filing, which shows that the bank had $172.4 billion in total assets.
MetLife slipped 0.5 percent to $50.53 at 4:02 p.m. in New York. SunTrust lost 2 cents, or less than 0.1 percent, to $35.42.