The Trepp survey for the week ending August 15, 2014, showed average spreads coming in an average of 2 basis points. The market spent the first part of the week worrying about the Fed meeting in Jackson Hole, Wyoming, and then spent the rest of the week trying to parse what they heard. The consensus seems to be that rate increases will begin by the end of the first quarter. That said, the Fed appears to have left plenty of wiggle room in case things do not play out as planned. The implied rate for ten-year, modestly leveraged commercial real estate mortgages decreased to 373 basis points on the back of a 10-basis-point decrease in ten-year Treasuries.

Asking Spreads over U.S. Ten-Year Treasury Bonds in Basis Points
(Ten-year commercial and multifamily mortgage loans
for properties with 50 to 59 percent loan-to-value ratios)

12/31/10 12/31/11 12/31/12 12/31/13 This week(8/15/14) Last week(8/8/14)

Month earlier

 Office 214 210 210 162 146 148 141
 Retail 207 207 192 160 138 140 135
 Multifamily 188 202 182 157 137 138 130
 Industrial 201 205 191 159 136 138 132
 Averagespread 203 205 194 160 139 141 135
 10-yearTreasury 3.29% 2.88% 1.64% 3.04% 2.34% 2.44% 2.65%

 

The Cushman & Wakefield Equity, Debt, and Structured Finance Group’s monthly Capital Markets Update of commercial real estate mortgage spreads, dated August 7, showed spreads coming in approximately 5 basis points as compared with the prior survey (dated June 10) as lenders continue to compete for business; implied all-in cost ranges from 4.25 to 4.50 percent.

 

Ten-Year Fixed-Rate Commercial Real Estate Mortgages (as of August 7, 2014)
Property Maximumloan-to-value Class A

Class B/C

 Multifamily (agency) 75–80% T +160 T +170
 Multifamily (nonagency) 70–75% T +155 T +160
 Anchored retail 70–75% T +175 T +185
 Strip center 65–70% T +175 T +185
 Distribution/warehouse 65–70% T +175 T +185
 R&D/flex/industrial 65–70% T +185 T +190
 Office 65–75% T +175 T +185
 Full-service hotel 55–65% T +235 T +255
 Debt-service-coverage ratio assumed to be greater than 1.35 to 1.

 

Year-to-Date Public Equity Capital Markets

Dow Jones Industrial Average: +0.56 percent

Standard & Poor’s 500 Stock Index: +7.58 percent

NASD Composite Index (NASDAQ): +8.67 percent

Russell 2000: –0.28 percent

Morgan Stanley U.S. REIT Index: +14.86 percent

 

Year-to-Date Global CMBS Issuance

(in $ billions as of 8/15/14)

2014 2013
U.S. $54.9 $56.4
Non-U.S. 1.9 7.8
Total $56.8 $64.2
Source: Commercial Mortgage Alert.

 

Year-to-Date Public U.S. Treasury Yields

 

U.S. Treasury Yields

12/31/12 12/31/13

8/22/14

 3-month 0.08% 0.07% 0.02%
 6-month 0.12% 0.10% 0.05%
 2-year 0.27% 0.38% 0.47%
 5-year 0.76% 1.75% 1.63%
 7-year 1.25% 2.45% 2.11%
 10-year 1.86% 3.04% 2.41%