“Everything You Ever Wanted to Know About Real Estate Investment Trusts”

Barclays Capital, Inc.’s Real Estate Investment Trust Research Department annually publishes “A Primer for REITs” and has graciously granted us permission to post it on the ULI website so that our readers can download it. The Primer, which the BarCap team updates annually, provides an overview of the industry including history and performance, fundamental and property sector drivers, and access to their real estate stock valuation framework.

Wave of Maturities Looms

According to Trepp, approximately $1.725 trillion of commercial real estate mortgages will mature between 2012 and 2016 of which approximately 65 percent have loan-to-value ratios exceeding 100 percent.

Commercial Mortgage Maturities 2012 -2016

Maturity Year

Total Amount Maturing($ billion)

Maturities with Current LTV
Greater than 100

2012

$362

63%

2013

$371

60%

2014

$345

54%

2015

$339

74%

2016

$308

73%

Source: Trepp.

Now what? As lenders seem less and less interested in kicking the can down the road, borrowers will need to show up with additional funds to repay a portion of the maturing loan or to restructure the loan in some way. Many feel we are near the long expected “hammer time,”when lenders are financially sound enough to force the issue.

Monday’s Numbers

The Trepp, LLC survey showed commercial mortgage spreads widening about 5 basis points during the survey period as the markets head for a time out until after Labor Day. Floor pricing remains in the 4 percent to 5 percent range.

While few talk about it in public, the commercial real estate mortgage market’s dirty little secret is that some lenders may start to exhaust their 2012 allocations and have to ration remaining funds or sit on the sidelines for most of the remaining balance of the year, creating an inadvertent liquidity event.

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

12/31/11

8/10/12

Week Earlier

Month Earlier

Office

342

214

210

240

245

244

Retail

326

207

207

229

232

230

Multifamily

318

188

198

221

225

222

Industrial

333

201

205

228

233

229

Average Spread

330

203

205

230

234

231

10-Year Treasury

3.83%

3.29%

1.88%

1.%

1.66%

1.75%

The Cushman & Wakefield Equity, Debt, and Structured Finance Commercial Mortgage Spread monthly survey of commercial mortgage spreads showed spreads for 10-year, fixed rate mortgages, coming in 5 basis points, reinforcing our comments above regarding floor pricing by lenders.

Property Type

Mid-Point of Fixed Rate Commercial Mortgage
Spreads For 5 Year Commercial Real Estate Mortgages

12/31/10

4/27/12

5/30/12

6/28/12

2/26/12

Multifamily – Non-Agency

+270

+240

+250

+245

+245

Multifamily – Agency

+280

+200

+210

+225

+225

Regional Mall

+280

+275

+300

+300

+295

Grocery Anchored

+280

+270

+295

+295

+290

Strip and Power Centers

+295

+320

+320

+315

Multi-Tenant Industrial

+270

+285

+305

+305

+300

CBD Office

+280

+270

+295

+300

+295

Suburban Office

+300

+290

+315

+315

+315

Full-Service Hotel

+320

+340

+360

+360

+360

Limited-Service Hotel

+400

+350

+370

+370

+370

5-Year Treasury

2.60%

0.83%

0.69%

0.69%

0.57%

Source: Cushman & Wakefield Equity, Debt, and Structured Finance.
Property Type

Mid-Point of Fixed Rate Commercial Mortgage
Spreads For 10 Year Commercial Real Estate Mortgages

12/31/10

4/27/12

5/30/12

6/28/12

7/26/12

Multifamily – Non-Agency

+190

+210

+220

+220

+220

Multifamily – Agency

+200

+170

+190

+200

+210

Regional Mall

+175

+220

+245

+245

+235

Grocery Anchor

+190

+200

+230

+235

+230

Strip and Power Centers

+235

+260

+255

+250

Multi-Tenant Industrial

+190

+240

+260

+260

+255

CBD Office

+180

+220

+250

+250

+245

Suburban Office

+190

+245

+270

+265

+265

Full-Service Hotel

+290

+260

+295

+290

+290

Limited-Service Hotel

+330

+290

+320

+310

+310

10-Year Treasury

3.47%

1.95%

1.62%

1.58%

1.42%

Source: Cushman & Wakefield Equity, Debt, and Structured Finance.
Property Type

Mid-Point of Floating-Rate Commercial Mortgage
Spreads For 3 – 5 Commercial Real Estate Year Mortgages

12/31/10

4/27/12

5/30/12

6/28/12

7/26/12

Multifamily – Non-Agency

+250-300

+200-250

+200-250

+200-260

+200-260

Multifamily- Agency

+300

+220-265

+220-265

+220-265

+220-265

Regional Mall

+275-300

+200-265

+210-275

+210-275

+210-275

Grocery Anchored

+275-300

+200-275

+205-275

+210-275

+210-275

Strip and Power Centers

+225-300

+225-300

+225-300

+225-300

Multi-Tenant Industrial

+250-350

+225-305

+235-305

+235-305

+230-305

CBD Office

+225-300

+225-300

+225-300

+225-300

+225-300

Suburban Office

+250-350

+250-325

+250-325

+250-325

+250-325

Full-Service Hotel

+300-450

+250-400

+275-400

+275-400

+275-400

Limited-Service Hotel

+450-600

+325-450

+325-450

+325-450

+325-450

1-Month LIBOR

0.26%

0.24%

0.24%

0.24%

0.24%

3-Month LIBOR

0.30%

0.47%

0.47%

0.47%

0.46%

* A dash (-) indicates a range.
Source: Cushman & Wakefield Equity, Debt, and Structured Finance.

Year-to-Date Public Equity Capital Markets

DJIA (1): +8.66%
S & P 500 (2): +12.77%
NASDAQ (3): +18.10%
Russell 2000 (4):+10.66%
Morgan Stanley U.S. REIT (5):+13.92%

 (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

12/31/11

8/17/12

3-Month

0.12%

0.01%

0.07%

6-Month

0.18%

0.06%

0.14%

2 Year

0.59%

0.24%

0.28%

5 Year

2.01%

0.83%

0.80%

7 Year

1.25%

10 Year

3.29%

1.88%

1.86%

Key Rates (in Percentages)

Current

1 Mo. Prior

3 Mo. Prior

6 Mo. Prior

1 Yr. Prior

Fed Funds Rate

0.12

0.10

0.17

0.11

0.12

Federal Reserve Target Rate

0.25

0.25

0.25

0.25

0.25

Prime Rate

3.25

3.25

3.25

3.25

3.25

US Unemployment Rate

8.30

8.20

8.10

8.30

9.10

1-Month Libor

0.24

0.25

0.24

0.25

0.21

3-Month Libor

0.43

0.46

0.47

0.49

0.30

The next issue of Monday’s Numbers will be published on Monday, September 10.