Investment banking leader John B. Levy & Co. has unveiled a new version of the Giliberto-Levy Commercial Mortgage Performance Index (G-L Index). The G-L 2, or Giliberto-Levy High-Yield Real Estate Debt Index, is the first third-party measure available to monitor high-yield commercial mortgage debt performance.
The G-L 2 provides invaluable insight into the rates of returns from high-yield commercial real estate debt such as second mortgages, mezzanine loans and preferred equity. It complements the highly regarded G-L Index, which has provided a quarterly performance benchmark for investments in private-market first mortgage real estate debt since 1993. Such loans are made by and held in the investment portfolios of institutional lenders such as life insurance companies and pension funds.
G-L Indices were co-created by John Levy, president of John B. Levy & Co., and investment manager Michael Giliberto.
"Investors in high-yield real estate have long wanted to compare their returns and performance against an industry standard benchmark," said Levy. "Our G-L 2 carefully crunches the numbers and variables within financing packages, giving high-yield investors the deep insight that was previously only available to holders of senior loans."
The G-L 2 tracks the performance of $6.9 billion in high-yield loans dating back to January, 2010, representing a mix of property types. G-L 2 debt racked up a 7.6 percent average annual return from 2010 through December of 2016, dramatically eclipsing the 5.3 percent return achieved by the firm's senior-loan (G-L 1) index over that same timeframe.
Multiple categories of mortgages make up the G-L 2 index, with mezzanine loans (53 percent) and senior-B notes (32 percent) representing the largest two components. Others include second mortgages and preferred equity, with 62 percent subject to adjustable or floating interest rates.
For 2016, investments tracked in the G-L 2 produced a 9.4 percent return. For mezzanine loans specifically, the return was 10.4 percent.
The G-L 2 is available on a subscription basis, and subscribers can customize report components to align with their given investment profiles. The G-L 2 results will be published quarterly, starting with 2017 results.
"Industry experts worldwide have come to rely upon the G-L Indices," said Giliberto. "By providing total rate of return data that tracks income, price movements and credit effects, the G-L Indices offer valuable insight into important market dynamics."