Headlines

“[CMBS] Delinquencies Bounce Up In December”

According to Trepp LLC, commercial mortgage-backed securities delinquency rates increased 7 basis points (0.07%), to 9.58 percent, in December. Trepp predicts delinquencies rates could increase 75 basis points over the next six-to-12 months as the bulk of the five-year mortgages originated in 2007 mature and will require refinancing.

Simply put: the Class of 2007 were the last aggressively underwritten first mortgage loans before the market shut down in August 2007 (and commercial property values declined 44+/- percent and net operating incomes dropped like a rock). It is likely that a serious amount of maturing loans will not have NOIs sufficient to support refinancing and will require restructuring of some sort.

Therefore, opportunity knocks for those who have access to, or can mobilize, “Rescue Capital” which they can invest in exchange for a preferred interest in the property.

Monday’s Numbers

“And there off (to the races)!” The Trepp LLC survey, back from an extended holiday, shows little change from pre-yearend levels as lenders re-group and set their strategies for 2012. The only thing we’re are sure of [at this moment] is that underwriting will remain “strict and stringent” and that debt capital will be husbanded by lenders and used cautiously and carefully.


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

 

Month Earlier

Office

342

214

210

 

210

Retail

326

207

207

 

206

Multifamily

318

188

198

 

200

Industrial

333

201

205

 

205

 

 

 

 

 

 

Average Spread

330

203

205

 

205

 

 

 

 

 

 

10-Year Treasury

3.83%

3.29%

1.88%

 

2.06%

The Cushman & Wakefield Sonnenblick-Goldman Survey shows rates “coming in” maybe five basis points. 

 

Property Type

Mid-Point of Fixed Rate Commercial Mortgage

Spreads For 5 Year Commercial Real Estate Mortgages

 

12/31/10

1/5/12

 

 

 

Multifamily – Non-Agency

+270

+245

 

 

 

Multifamily – Agency

+280

+255

 

 

 

Regional Mall

+280

+300

 

 

 

Grocery Anchored

+280

+295

 

 

 

Strip and Power Centers

 

+320

 

 

 

Multi-Tenant Industrial

+270

+305

 

 

 

CBD Office

+280

+310

 

 

 

Suburban Office

+300

+320

 

 

 

Full-Service Hotel

+320

+350

 

 

 

Limited-Service Hotel

+400

+360

 

 

 

5-Year Treasury

2.60%

0.89%

 

 

 

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

 

 

 

Multifamily – Non-Agency

+190

+205

 

 

 

Multifamily – Agency

+200

+200

 

 

 

Regional Mall

+175

+245

 

 

 

Grocery Anchor

+190

+240

 

 

 

Strip and Power Centers

 

+255

 

 

 

Multi-Tenant Industrial

+190

+245

 

 

 

CBD Office

+180

+250

 

 

 

Suburban Office

+190

+265

 

 

 

Full-Service Hotel

+290

+300

 

 

 

Limited-Service Hotel

+330

+310

 

 

 

10-Year Treasury

3.47%

2.00%

 

 

 

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

 

 

 

Multifamily – Non-Agency

+250-300

+200-250

 

 

 

Multifamily- Agency

+300

+220-265

 

 

 

Regional Mall

+275-300

+250-350

 

 

 

Grocery Anchored

+275-300

+240-325

 

 

 

Strip and Power Centers

 

+250-350

 

 

 

Multi-Tenant Industrial

+250-350

+270-350

 

 

 

CBD Office

+225-300

+275-350

 

 

 

Suburban Office

+250-350

+300-350

 

 

 

Full-Service Hotel

+300-450

+375-475

 

 

 

Limited-Service Hotel

+450-600

+375-550

 

 

 

1-Month LIBOR

0.26%

0.30%

 

 

 

3-Month LIBOR

0.30%

0.58%

 

 

 

* A dash (-) indicates a range.

Source: Cushman & Wakefield Sonnenblick Goldman.

 Year-to-Date Public Equity Capital Markets

 

DJIA (1): +1.17%
S & P 500 (2): +1.61%
NASDAQ (3): -2.65%
Russell 2000 (4):+1.25%
Morgan Stanley U.S. REIT (5):-0.30%
_____
 (1) Dow JonesIndustrial Average. (2) Standard & Poor’s 500 Stock Index. (3) NASDComposite Index.
(4) SmallCapitalization segment of U.S.equity universe. (5) Morgan Stanley REIT Index.

U.S. Treasury Yields

 

12/31/10

12/31/11

3-Month

0.12%

0.01%

6-Month

0.18%

0.06%

2 Year

0.59%

0.24%

5 Year

2.01%

0.83%

10 Year

3.29%

1.88%