Headlines

Headlines and quotes we publish are intended to convey a sense of the terms and conditions present in the real estate capital markets: “Bank Regulators Propose Risk-Retention Rules for Securitized Assets, Including Commercial Mortgages”

The food fight regarding risk-retention is underway. And why not when there are six potential ways a lender can satisfy the requirements, including:

  1. Avoid retention completely if loans meet underwriting requirements established by the regulators.
  2. Retain a “vertical slice” meaning 5 percent of each part of the security.
  3. Retain a “horizontal slice” comprised of 5 percent of the riskiest tranche.
  4. A combination of 2 and 3 above.
  5. A “representative sample” (totaling 5 percent) of loans in the pool.
  6. Establishment of a cash reserve equal to 5 percent of the entire securitization.

Monday’s Numbers

The Commercial Mortgage Alert Trepp weekly survey (below) of 15 active portfolio lenders widened slightly as a result of a widening in spreads for 10-year U.S. Treasury bonds. Average rates closed the reporting period at 5.24%.

Due to the Good Friday holiday closing of the financial markets the weekly Trepp survey was not updated this week.

Asking Spreads over U.S. Treasury Bonds in Basis Points

(10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value Ratios)

12/31/09

12/31/10

4/8/11

Office

342

214

178

Retail

326

207

169

Multifamily

318

188

150

Industrial

333

201

165

Average Asking Spread

330

203

166

10-Year Treasury

3.83%

3.29%

3.58%

The Cushman & Wakefield Sonnenblick-Goldman survey ended March where it started with spreads in the 250 basis point range (for 5-year loans) and 185 basis point range (for 10-year loans).

Property Type

Mid-Point of Fixed Rate Commercial Mortgage

Spreads For 5 Year Commercial Real Estate Mortgages

12/16/10

2/15/11

3/2/11

3/31/11

4/12/11

Multifamily – Non-Agency

+270

+250

+245

+245

+245

Multifamily – Agency

+280

+255

+250

+250

+240

Regional Mall

+280

+260

+260

+260

+260

Grocery Anchored

+280

+260

+260

+260

+260

Multi-Tenant Industrial

+270

+270

+265

+265

+265

CBD Office

+280

+260

+260

+260

+260

Suburban Office

+300

+270

+270

+270

+270

Full-Service Hotel

+320

+300

+300

+300

+290

Limited-Service Hotel

+400

+330

+325

+325

+320

5-Year Treasury

2.60%

2.36%

2.17%

2.23%

2.23%

Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type

Mid-Point of Fixed Rate Commercial Mortgage

Spreads For 10 Year Commercial Real Estate Mortgages

12/1610

2/15/11

3/2/11

3/31/11

4/12/11

Multifamily – Non-Agency

+190

+180

+180

+180

+180

Multifamily – Agency

+200

+190

+185

+185

+185

Regional Mall

+175

+180

+180

+180

+180

Grocery Anchor

+190

+185

+185

+185

+181

Multi-Tenant Industrial

+190

+190

+190

+190

+190

CBD Office

+180

+180

+180

+180

+180

Suburban Office

+190

+190

+190

+190

+190

Full-Service Hotel

+290

+240

+230

+230

+2320

Limited-Service Hotel

+330

+260

+260

+260

+240

10-Year Treasury

3.47%

3.63%

3.47%

3.45%

3.51%

Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type

Mid-Point of Floating-Rate Commercial Mortgage

Spreads For 3 – 5 Commercial Real Estate Year Mortgages

12/16/10

2/15/11

3/2/11

3/31/11

4/12/11

Multifamily – Non-Agency

+250-300

+225-300

+225-300

+225-300

+225-325

Multifamily- Agency

+300

+250-300

+250-300

+250-300

+250-310

Regional Mall

+275-300

+250-275

+225-275

+225-300

+225-300

Grocery Anchored

+275-300

+250-300

+225-275

+225-300

+225-300

Multi-Tenant Industrial

+250-350

+250-300

+250-350

+250-350

+250-350

CBD Office

+225-300

+250-300

+225-300

+225-300

+225-300

Suburban Office

+250-350

+275-350

+275-350

+275-350

+275-350

Full-Service Hotel

+300-450

+350-450

+350-450

+350-450

+350-450

Limited-Service Hotel

+450-600

+400-500

+400-500

+400-500

+400-500

1-Month LIBOR

0.26%

0.26%

0.26%

0.24%

0.22%

3-Month LIBOR

0.30%

0.31%

0.31%

0.30%

0.28%

* A dash (-) indicates a range.

Source: Cushman & Wakefield Sonnenblick Goldman.

Year-to-Date Public Equity Capital Markets

DJIA (1): +8.02%
S & P 500 (2):+6.34%
NASDAQ (3): +6.31%
Russell 2000 (4):+7.91%
MSCI U.S. REIT (5):+8.19%
_____
 (1) Dow Jones Industrial Average. (2) Standard & Poor’s 500 Stock Index. (3) NASD Composite Index. (4) Small Capitalization segment of U.S. equity universe. (5) Morgan Stanley REIT Index.

U.S. Treasury Yields

12/31/10

4/24/2011

3-Month

0.12%

0.05%

6-Month

0.18%

0.10%

2 Year

0.59%

0.65%

5 Year

2.01%

2.11%

10 Year

3.29%

3.39%