MetLife 2000 Annual Report Download - page 27

guaranty. Supply and demand risks include the supply and demand for the commodities produced on the specific property and the related price for
those commodities. Financial risks include the overall level of debt on the property and the amount of principal repaid during the loan term. Capital market
risks include the general level of interest rates, the liquidity for these securities in the marketplace and the capital available for loan refinancing.
Equity Real Estate and Real Estate Joint Ventures
The Company’s equity real estate and real estate joint venture investments consist of commercial and agricultural properties located throughout the
U.S. and Canada. The Company manages these investments through a network of regional offices overseen by its investment department. At
December 31, 2000 and 1999, the carrying value of the Company’s equity real estate and real estate joint ventures was $5,504 million and $5,649
million, respectively, or 3.4% and 4.1%, respectively, of total cash and invested assets. The carrying value of equity real estate was stated at depreciated
cost net of impairments and valuation allowances. The carrying value of real estate joint ventures was stated at the Company’s equity in the real estate
joint ventures net of impairments and valuation allowances. These holdings consist of equity real estate, interests in real estate joint ventures and real
estate acquired upon foreclosure of commercial and agricultural mortgage loans. The following table presents the carrying value of the Company’s equity
real estate and real estate joint ventures at December 31, 2000 and 1999:
At December 31,
2000 1999
Carrying % of Carrying % of
Value Total Value Total
(Dollars in millions)
Type
Equity real estate ******************************************************************* $5,069 92.1% $5,271 93.3%
Real estate joint ventures ************************************************************ 369 6.7 331 5.9
Subtotal ****************************************************************** 5,438 98.8 5,602 99.2
Foreclosed real estate*************************************************************** 66 1.2 47 0.8
Total ********************************************************************* $5,504 100.0% $5,649 100.0%
Office properties representing 66.1% and 68.1% of the Company’s equity real estate and real estate joint venture holdings at December 31, 2000
and 1999, respectively, are well diversified geographically, principally within the United States. The average occupancy level of office properties was 94%
and 92% at December 31, 2000 and 1999, respectively.
The Company classifies equity real estate and real estate joint ventures as held-for-investment or held-for-sale. The carrying value of equity real estate and
real estate joint ventures held-for-investment was $5,223 million and $5,151 million at December 31, 2000 and 1999, respectively. The carrying value of equity
real estate and real estate joint ventures held-for-sale was $281 million and $498 million at December 31, 2000 and 1999, respectively.
Ongoing management of these investments includes quarterly appraisals as well as an annual market update and review of each property’s budget,
financial returns, lease rollover status and the Company’s exit strategy. In addition to individual property reviews, the Company employs an overall strategy
of selective dispositions and acquisitions as market opportunities arise.
The Company adjusts the carrying value of equity real estate and real estate joint ventures held for investment for impairments whenever events or
changes in circumstances indicate that the carrying value of the property may not be recoverable. The Company writes down impaired real estate to
estimated fair value, which it generally computes using the present value of future cash flows from the property, discounted at a rate commensurate with
the underlying risks. The Company records write-downs as investment losses through earnings and reduces the cost basis of the properties accordingly.
The Company does not change the new cost basis for subsequent recoveries in value.
The Company records real estate acquired upon foreclosure of commercial and agricultural mortgage loans at the lower of estimated fair value or the
carrying value of the mortgage loan at the date of foreclosure.
Once the Company identifies a property to be sold and commences a firm plan for marketing the property, the Company establishes and
periodically revises, if necessary, a valuation allowance to adjust the carrying value of the property to its expected sales value, less associated selling
costs, if it is lower than the property’s carrying value. The Company records allowances as investment losses and includes them in earnings. The
Company records subsequent adjustments to allowances as investment gains or losses and includes them in earnings.
The Company’s carrying value of equity real estate and real estate joint ventures held-for-sale, including real estate acquired upon foreclosure of
commercial and agricultural mortgage loans, in the amounts of $281 million and $498 million at December 31, 2000 and 1999, respectively, are net of
impairments of $97 million and $187 million and net of valuation allowances of $39 million and $34 million, respectively.
Equity Securities and Other Limited Partnership Interests
The Company’s carrying value of equity securities, which primarily consists of investments in common stocks, was $2,193 million and $2,006 million
at December 31, 2000 and 1999, respectively. Substantially all of the common stock is publicly traded on major securities exchanges. The carrying value
of the other limited partnership interests which primarily represent ownership interests in pooled investment funds that make private equity investments in
companies in the U.S. and overseas was $1,652 million and $1,331 million at December 31, 2000 and 1999, respectively. The Company classifies its
investments in common stocks as available-for-sale and marks them to market except for non-marketable private equities which are generally carried at
cost. The Company accounts for its investments in limited partnership interests in which it does not have a controlling interest in accordance with the
equity method of accounting. The Company’s investments in equity securities represented 1.4% and 1.5% of cash and invested assets at December 31,
2000 and 1999, respectively.
Equity securities include, at December 31, 2000 and 1999, $577 million and $237 million, respectively, of private equity securities. The Company
may not freely trade its private equity securities because of restrictions imposed by federal and state securities laws and illiquid trading markets.
At December 31, 2000 and 1999, approximately $313 million and $380 million, respectively, of the Company’s equity securities holdings were
effectively fixed at a minimum value of $257 million and $355 million in these respective periods, primarily through the use of exchangeable securities and
other derivatives. The exchangeable debt securities issued by the Company mature through 2002 and the Company may repurchase them earlier at its
discretion. In 2000, one exchangeable debt security was repurchased resulting in a gross investment loss of $9 million on the note and a gross
investment gain of $77 million on the equity exchanged in satisfaction of the note.
The Company makes commitments to fund partnership investments in the normal course of business. The amounts of these unfunded commit-
ments were $1,311 million and $1,131 million at December 31, 2000 and 1999, respectively. The Company anticipates that these amounts will be
invested in the partnerships over the next three to five years.
MetLife, Inc.
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