AIG Bets on Apartments as Benmosche Sees Shift to Rentals
American International Group Inc. (AIG) is increasing investments in commercial real estate, with a focus on apartment buildings as U.S. rental demand climbs, Chief Executive Officer Robert Benmosche said in an interview.
“We think the home-purchase pattern will change somewhat because of this crisis,” Benmosche, 68, told Bloomberg Television’s Betty Liu on the “In the Loop” program. “It will be a long-term trend, where you’ll see a lot more renters. And therefore we’re investing in properties where we can start getting into the apartment-rental business.”
Demand for rental homes is rising among Americans who can’t qualify for a mortgage or don’t want to own property after the worst housing crash since the Great Depression. The U.S. homeownership rate fell to 65 percent in the first quarter, the lowest since 1995, the Census Bureau reported this week. The rate peaked at 69.2 percent in June 2004.
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AIG is working to boost income from its portfolio of more than $360 billion as bond yields near record lows pressure profits. The company increased investment real estate holdings by 15 percent last year to $3.2 billion, according to a regulatory filing, while it held $13.8 billion of commercial mortgages.
AIG also held $12.4 billion of bonds backed by commercial mortgages and $36.1 billion of residential-mortgage-backed securities as of Dec. 31. Benmosche said today the insurer is considering lending more for commercial real estate projects.
“We’re looking at making loans in a big amount, rather than relying on the securitized market,” he said.
Benmosche, who took over as CEO in 2009, has said AIG needs to boost direct investment in real estate to reduce its reliance on the Wall Street firms that package mortgage loans. The insurer said earlier this year it’s beginning a program to buy individual home loans.
The residential-mortgage purchases may focus on so-called jumbo loans, or those too big for government programs, Benmosche said today.
AIG’s investments have included providing equity to a 510- unit rental project in Williamsburg, Brooklyn, on the waterfront overlooking the East River across from Manhattan, where developers broke ground in August.
Benmosche also said today that AIG is planning to move some of its New York staff into its building at 175 Water St. in lower Manhattan after the lease at its 180 Maiden Lane headquarters ends. The Maiden Lane property was meant to be a “temporary” lease after the company sold its previous headquarters at 70 Pine St. in 2009, he said.
AIG received a U.S. bailout in 2008 after bets on housing soured amid the financial crisis. Benmosche repaid the rescue, which swelled to as much as $182.3 billion, in December. The stock has climbed 26 percent this year, beating the 13 percent advance of the Standard & Poor’s 500 index.