Headlines

“You Can Take Interest Rates Out of the Equation for a While…a Long While”

Based on the Federal Reserve’s pronouncement this week that it would be keeping short-term interest rates at the current historical low through 2014, we should expect rates to remain at today’s levels for the next three years, baring a global financial crises. Imagine that: pro-forma financing statements with an imputed borrowing cost of five percent or  even less.

Monday’s Numbers

During the survey period, the Trepp LLC survey remained at current levels, unchanged by a little as a basis point; we suspect the markets’ are holding their collective breaths, waiting for this week’s installment of Greece’s financial saga.

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

1/20/12

Month Earlier

Office

342

214

210

215

210

Retail

326

207

207

211

207

Multifamily

318

188

198

206

198

Industrial

333

201

205

207

205

Average Spread

330

203

205

210

205

10-Year Treasury

3.83%

3.29%

1.88%

2.02

2.05

The Cushman & Wakefield Sonnenblick-Goldman Survey shows rates unchanged to down five basis points. Lenders seem to be going about their business, reacting to market events as necessary.

Property Type

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

12/31/10

1/5/12

1/26/12

Multifamily – Non-Agency

+270

+245

+240

Multifamily – Agency

+280

+255

+245

Regional Mall

+280

+300

+300

Grocery Anchored

+280

+295

+295

Strip and Power Centers

 

+320

+320

Multi-Tenant Industrial

+270

+305

+310

CBD Office

+280

+310

+310

Suburban Office

+300

+320

+320

Full-Service Hotel

+320

+350

+350

Limited-Service Hotel

+400

+360

+360

5-Year Treasury

2.60%

0.89%

0.78%

Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type

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

12/31/10

1/5/12

1/26/12

Multifamily – Non-Agency

+190

+205

+210

Multifamily – Agency

+200

+200

+205

Regional Mall

+175

+245

+245

Grocery Anchor

+190

+240

+240

Strip and Power Centers

 

+255

+255

Multi-Tenant Industrial

+190

+245

+255

CBD Office

+180

+250

+240

Suburban Office

+190

+265

+260

Full-Service Hotel

+290

+300

+290

Limited-Service Hotel

+330

+310

+315

10-Year Treasury

3.47%

2.00%

1.97%

Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type

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

12/31/10

1/5/12

1/26/12

Multifamily – Non-Agency

+250-300

+200-250

+200-250

Multifamily- Agency

+300

+220-265

+220-265

Regional Mall

+275-300

+250-350

+210-265

Grocery Anchored

+275-300

+240-325

+200-275

Strip and Power Centers

 

+250-350

+225-300

Multi-Tenant Industrial

+250-350

+270-350

+225-305

CBD Office

+225-300

+275-350

+225-300

Suburban Office

+250-350

+300-350

+250-325

Full-Service Hotel

+300-450

+375-475

+350-425

Limited-Service Hotel

+450-600

+375-550

+400-500

1-Month LIBOR

0.26%

0.30%

0.27%

3-Month LIBOR

0.30%

0.58%

0.55%

* A dash (-) indicates a range.

Source: Cushman & Wakefield Sonnenblick Goldman.

Year-to-Date Public Equity Capital Markets

DJIA (1): +3.63%
S & P 500 (2): +4.67%
NASDAQ (3): +8.11%
Russell 2000 (4):+7.77%
Morgan Stanley U.S. REIT (5):+6.72%
_____
 (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

1/29/12

3-Month

0.12%

0.01%

.05%

6-Month

0.18%

0.06%

.07%

2 Year

0.59%

0.24%

.21%

5 Year

2.01%

0.83%

.74%

10 Year

3.29%

1.88%

1.89%