MetLife Sees ‘Positive Rebound’ in CRE Investments Article originally posted on Globe St. on November 4, 2024 Commercial real estate has been on a “positive rebound” for MetLife, said executive VP, chief financial officer, and head of investment management John McCallion on an earnings call. Real estate investments provided an important anchor in MetLife’s third quarter. “The private equity portfolio, which had over $14 billion in VII assets as of September 30 had a positive 0.6% return in the quarter,” McCallion said. “This compared to a 1.4% return in Q3 of ’23. While PE returns were below recent trends, our real estate-related and other funds of roughly $4.5 billion continued to improve with a 1.1% return in the quarter. As a reminder, PE, real estate-related and other funds are reported on a one-quarter lag and accounted for on a mark-to-market basis.” The sequential improvement of “real estate and other funds” continued a trend the company saw this year. Conditions have been good, with inflation now under control, unemployment at historically low levels, and a positive slope finally on the yield curve beyond two years. A JPMorgan analyst noted that “most of the metrics on your commercial real estate portfolio seems fairly stable with where they’ve been,” then asking what they were seeing “overall in the market.” The question specifically addressed two thorny areas of CRE: whether office might be close to bottoming, as well as the future of single-asset, single-borrower type CMBS loans. “There’s been continued economic growth has been healthy, that has been good news for fundamentals of real estate,” McCallion said. “There’s some modest trend towards in-office or even office has some kind of backdrop momentum here.” “Outside of office, we probably feel like we’ve kind of hit the trough, and we’ve probably seen a positive outlook,” he added. “There’s healthy fundamentals overall now for the economy. You have at least some expectation of declining interest rates. Even steepening of the curve, I think, would be a positive here.” “I think we had 5 sales of real estate properties for a gain, about $120 million, $150 million of gain in the quarter,” McCallion said. “So again, we’re just starting to see more liquidity come back into the market. Overall, there is a positive backdrop that’s starting to emerge. I don’t think we’re out of it. We’re not going to see kind of a V-shape recovery per se, but it certainly is setting up for a more positive 2025 environment.” Regarding single-asset, single-borrower CMBS, McCallion said that he didn’t have exact numbers, but that SASB exposure was “relatively small.”