Headlines

“Commercial Mortgage-Backed Securities Widen Substantially Over Past Three Month”

If you want to understand why rates quoted by conduits have increased during the past few months, look no further than the trading spreads being quoted on the securities created by the pooling of commercial and multifamily mortgage loans (the trading spreads post the “slicing, dicing, and pricing) of cash flows from the underlying mortgages, as follows. If the buyer’s of the underlying securities are demanding higher yields, someone has to pay for it!

CMBS 2.0 Conduit Spreads as of August 31, 2011

Fixed Rate

Priced as Spread over

August 31

3 Months Earlier

6 Months Earlier

AAA (5 Year)

10-Year Swaps

186

122

112

AAA (10-Year)

10-Year Swaps

211

153

140

AA (10-Year)

10-Year Swaps

337

231

215

A (10 Year)

10-Year Swaps

419

280

258

BBB (10-Year)

10-Year Treasury

651

395

368

BBB- (10 Year)

10-Year Treasury

659

403

373

Benchmarks as of August 31st: 10-year Treasury Bonds = 2.232%; 10-year Interest Rate Swaps = 2.412%

Source: Trepp LLC.

Monday’s Numbers

The Trepp LLC survey will not be updated until after Labor Day.

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

8/12/11

Office

342

214

217

Retail

326

207

209

Multifamily

318

188

197

Industrial

333

201

206

Average Asking Spread

330

203

207

10-Year Treasury

3.83%

3.29%

2.25%

The Cushman & Wakefield Sonnenblick-Goldman Survey will be updated after the Labor Day holiday.

Property Type

Mid-Point of Fixed Rate Commercial Mortgage

Spreads For 5 Year Commercial Real Estate Mortgages

12/16/10

3/31/11

7/28/11

8/11/11

8/24/11

Multifamily – Non-Agency

+270

+245

+250

+255

+265

Multifamily – Agency

+280

+250

+240

+265

+250

Regional Mall

+280

+260

+280

+290

+290

Grocery Anchored

+280

+260

+270

+285

+285

Strip and Power Centers

 

 

+290

+300

+300

Multi-Tenant Industrial

+270

+265

+275

+295

+285

CBD Office

+280

+260

+275

+290

+290

Suburban Office

+300

+270

+295

+300

+300

Full-Service Hotel

+320

+300

+230

+320

+320

Limited-Service Hotel

+400

+325

+320

+340

+340

5-Year Treasury

2.60%

2.23%

1.49%

0.97%

0.96%

Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type

Mid-Point of Fixed Rate Commercial Mortgage

Spreads For 10 Year Commercial Real Estate Mortgages

12/1610

3/31/11

7/28/11

8/11/11

8/24/11

Multifamily – Non-Agency

+190

+180

+195

+240

+240

Multifamily – Agency

+200

+185

+190

+245

+230

Regional Mall

+175

+180

+205

+240

+255

Grocery Anchor

+190

+185

+195

+230

+250

Strip and Power Centers

 

 

+210

+250

+260

Multi-Tenant Industrial

+190

+190

+230

+240

+250

CBD Office

+180

+180

+225

+240

+255

Suburban Office

+190

+190

+235

+260

+260

Full-Service Hotel

+290

+230

+250

+275

+275

Limited-Service Hotel

+330

+260

+270

+295

+280

10-Year Treasury

3.47%

3.45%

2.97%

2.23%

2.16%

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

3/31/11

8/11/11

7/28/11

824/11

Multifamily – Non-Agency

+250-300

+225-325

+220-260

+200-250

+220-260

Multifamily- Agency

+300

+250-310

+230-270

+220-260

+230-270

Regional Mall

+275-300

+225-300

+220-270

+205-270

+220-270

Grocery Anchored

+275-300

+225-300

+210-275

+205-275

+210-275

Strip and Power Centers

 

 

+235-300

+225-300

+235-300

Multi-Tenant Industrial

+250-350

+250-350

+250-325

+230-325

+250-325

CBD Office

+225-300

+225-300

+235-300

+225-300

+235-300

Suburban Office

+250-350

+275-350

+265-325

+250-325

+265-325

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%

0.22%

0.21%

0.19%

0.22%

3-Month LIBOR

0.30%

0.28%

0.29%

0.25%

0.31%

* A dash (-) indicates a range.

Source: Cushman & Wakefield Sonnenblick Goldman.

Year-to-Date Public Equity Capital Markets

DJIA (1): -2.91%
S & P 500 (2):-6.65%
NASDAQ (3): -6.50%
Russell 2000 (4):-12/79%
MSCI U.S. REIT (5):-0.69%

 (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

9/2/2011

3-Month

0.12%

0.02%

6-Month

0.18%

0.05%

2 Year

0.59%

0.20%

5 Year

2.01%

0.86%

10 Year

3.29%

1.99%