The New Wave: Surge of Investment by Insurers Is Boosting the LIHTC Equity Market
By Caitlin Jones
2 min read
Tax Credit Advisor, October 2010: Much of the buzz in the low-income housing tax credit world this year has been about the increase in equity investment by insurance companies. This flow includes existing insurance company investors, insurance companies that dropped out of the market and have returned, and some that are brand new to housing credit investment.
But what kinds of insurers are investing? How much are they investing? Why are they investing? And will they keep investing as LIHTC yields drop?
In recent interviews and responses to written questions, syndicators, four insurance companies, and others provided some answers.
Busy Writing the Checks
Reznick Group’s Fred Copeman, whose clients include corporate investors, said that increased interest by insurance companies in LIHTC investments began in the fourth quarter of 2009, when yields on new LIHTC funds started to rise significantly – hitting and later exceeding 10% after-tax – and has picked up. “We are now past the point “˜we’re interested’ and “˜we need approval’ stage,” says Copeman. “We’re at the point where people are literally closing now and writing checks.”
Copeman says LIHTC investment commitments by insurance companies could easily top $1 billion in 2010, compared to 2009 volume that “might have been $100 million.” He estimated total LIHTC equity raised in 2010 could approach $8 billion, a huge jump from 2009.
Syndicators said they are seeing increased investment by a larger number of insurance companies this year. “We’ve seen several insurance companies that are relatively new to the business come in in 2010, given the attractive yields relative to the risk,” says Eric McClelland, of Cleveland, Ohio-based RED STONE Equity Partners, LLC. Ken Michel, of Boston-based Michel Associates, Ltd., noted four of five new investors his firm had direct contact with were insurance companies. Read More…
