CRE Bank Lending vs Life Co Lending

I'm currently a 2nd/3rd year analyst (soon to be associate this summer) at a bank in CRE Lending (major metro). I've been looking/interviewing over the past few months to move to the equity side, however I've been getting frequently contacted by recruiters regarding associate positions at Life Cos (in debt not their equity groups).

Does anyone have any input on Banking vs Life Co CRE lending? Not compensation but deal types, career progression, etc or which one you would prefer?

The roles seem pretty much identical, so I'm really just wondering why someone would wish to move over? Thanks!

 

I dont work at a lifeco, but since we are often competing with them on the large loan side, ill give you my perspective.

Life Cos like to lend on nice/safe assets at lower leverage points (think around 50%ish, maybe a tad higher depending on the asset class). I work at a CMBS shop and I can tell you from experience whenever we see a low leveraged/high DY loan request on a trophy asset, it likely goes to lifecos unless theres something weird going on.

That's not to say nice assets don't go to other markets, lifecos are known to be slower at closing and brwrs sometimes want quick execution. Additionally, when the loan amounts reach the billions, life cos generally don't go to that loan amount (there are exceptions though, Metlife has made some very big loans).

Not sure what your specific focus is right now but there are some life cos doing sub-debt as well - think that would be a very neat space to be in right now.

 

I think it is important to understand the current investment program of the lifeco (or any investment shop for that matter). For example, my team (lifeco) firmly believes that rates are going to be rising in the short term and we have very high floor rates so we are currently doing a lot of bridge loans (non-recourse) in the $5-$20m range so we compete with a lot of debt funds and banks doing the loan on recourse - often times we are the only lifeco in the matrix. We also do move surprisingly fast (can get a loan from underwriting to closed in 10 days if needed) so we win a lot of business just from ease of execution.

However if you do end up at a 'more interesting' lifeco shop, do know that many in the industry share the same perception as the Som1 stated, so it is tough to shake that stigma when looking for exit ops - something that I am struggling with right now...

 

I can confirm the quick closings with Life Cos. My firm has routinely closed in 30-45 days with certain companies and this included capped lender legal fees with a free rate lock. I can say, without a doubt, that we have never closed a CMBS loan this fast, the lender legal fees are simply astronomical and there is interest rate risk as you cannot lock rate until a day or two before closing.

Most large BS lenders we have worked with are kind of a mix of Life Co. and CMBS execution, although some banks are fantastic. I would say that working at one of the large Life Co.'s, especially on an equity team or mezz. team, would be very rewarding and could give you excellent exit opportunities. However, working at one of the smaller shops ($30 million in originations) could be considered a waste of time.

 

I work at one of the large life cos and spent 4 years on the debt side (PM/AM, not originations). Life cos have a reputation for only doing low leverage trophy assets, but like everyone else right now, in a quest for yield, they have broken out of their shells and started to go after other stuff.

Cornerstone does a lot of large spec construction lending and places a bunch of third party money. TIAA has a mezz/b note program and a pretty active CTL lending desk. MetLife has an agriculture lending program as well as an "enchanted agency gateway" lending program where they make a bridge loan so you can fix/upgrade your MF property and then help you secure an agency loan when everything is complete.

The sweet spot is generally loans under 300 million for single lender execution, but just like CMBS, life cos will partner up to execute large deals. LTVs go as high at 70%, but lower is better.

My advice is to really get to know the various lending programs of the life company you are looking at. If there is something interesting (an international lending program, mezz fund, construction lending, etc.), then seriously consider if that is something that interests you (assuming you have a choice and can get into one of the cool groups).

As far as career progression, life companies tend to be a bit bureaucratic, but they tend to be much flatter structurally than banks. That can be good because you usually have free access to higher ups, but also can suck because you might not get promotions as fast as you want. Also, mortgage tends to be a fairly big deals at life cos. On a risk adjusted basis, it is a very attractive asset class for the long term liabilities that most life companies have. As such, usually around 10% of their assets will be invested in mortgages. Take a look at the company's current portfolio allocation as well as their new program asset allocations. It will give you some idea of how they view the area.

If you are already working on large deals and would just be moving to he same large deals at a life co, moving probably wouldn't be with it. But to move for a cool, interesting program or to move up in asset class, that makes sense to me.

 
Best Response

At my company (I'm at a big 5): Analysts are 80K base +25% target bonus Associates are 95K + 35% target bonus Senior associate are 130K + 60% target bonus Directors are 200K + 85% target bonus

Bonuses are generally a bit higher than target in "good" years and at target in "bad" years.

There are a lot of people that stay a long time at life companies so getting in can be difficult because there isn't a whole lot of turnover. However most of the large ones have campus recruiting programs for analysts and associates. For higher levels, my advice is to start looking in the spring as a lot of reviews/bonuses are in Jan/Feb and after that is when you will see the most postings either because people have moved on or the group is expanding.

 

are most in roles at community banks lenders for life or are there possible exit ops to an investor/operator? I know the debt guys at your big guns (JP, WF, BofA) are viewed highly to equity guys.

 

The majority of CRE deals in market are portfolio loans made by community and regional savings banks. The Loan Officers typically start out as credit analysts where they underwrite loans. Eventually some of them will get promoted to LO where they will be responsible for business development. They spend a lot of their time doing your typical B2B sales activity (phone calls, going to industry and chamber events). They also have an amount they are authorized to sign off on without going to their superior or loan committee. These guys are paid salaries and performance related bonuses, but not "commissions" as they are making portfolio loans so they can't be incentivized to take crazy risk.

In other markets most lending is done through originators. They essentially act as brokers. They have clients who are constantly looking for debt financing, and they match the borrower with a lender like a lifeco or debt fund based on the lender's parameters. The originator gets paid a commission as an percentage of the loan amount based on their agreement with the lender.

 

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