This may come as a surprise, but the largest private equity investor over the past five years is the Canadian Pension Plan Investment Board (CPPIB). According to a study conducted by Private Equity International, CPPIB has allocated 18 percent—or $26.2 billion—of its investable funds to private equity since 2009. In second place is AlpInvest, with $19.5 billion in investment is private equity investments.
In third place is Hamilton Lane, with $14.6 billion allocated to private equity investments, followed by HarbourVest Partners (fourth), Washington State Investment Board (fifth), Caisse de dépôt et placement du Québec (sixth), the California Public Employees Retirement System (seventh), Pathway Capital Management (eighth), the Teachers Retirement System of Texas (ninth), and the Oregon Public Employees Retirement System (tenth).
Norway’s Sovereign Wealth Fund Widens Its Net
Everyone recognizes that sovereign wealth funds are an important source of investment funds, providing a backstop to property prices in many gateway markets due to their desire to invest large amounts of capital in cities such as New York and San Francisco. Norges Bank Investment Management, an $890 billion sovereign wealth fund, recently announced plans to invest 1 percent of its assets in real estate in each of the next three years (or more than $26 billion in total). The fund’s announced focus will be Asia and cities outside the United States and Europe—markets in which they have a sizable presence already.
The Trepp survey for the week ending June 27, 2014, showed spreads coming in an astounding 10-plus basis points, implying ten-year commercial real estate mortgage rates for institutional properties at less than 4 percent. Spreads coming in this much this quickly can only signify a market overwhelmed by capital looking for the safety implied by an institutional-quality commercial real estate mortgage, or competition for business among capital sources being so cutthroat that lenders will sacrifice yield for quantity.
We really don’t care what the cause is. If you have been sitting on the fence wondering whether or not to refinance now, the answer has to be a resounding yes.
Asking Spreads over U.S. Ten-Year Treasury Bonds in Basis Points
The Cushman & Wakefield Equity, Debt, and Structured Finance Group’s monthly Capital Markets Update of commercial real estate mortgage spreads, dated June 5, 2014, showed spreads coming in 15 to as much as 20 basis points since the prior survey dated May 9 as lenders compete for business in a very competitive business environment. No one expects this to change in the near term.
Ten-Year Fixed-Rate Commercial Real Estate Mortgages (as of June 5, 2014)
|Property||Maximumloan-to-value||Class A||Class B|
|Multifamily (agency)||75–80%||T +170||T +170|
|Multifamily (nonagency)||70–75%||T +165||T +180|
|Anchored retail||70–75%||T +185||T +195|
|Strip center||65–70%||T +190||T +200|
|Distribution/warehouse||65–70%||T +180||T +200|
|R&D/flex/industrial||65–70%||T +190||T +210|
|Office||65–75%||T +185||T +195|
|Full-service hotel||55–65%||T +240||T +260|
|Debt-service-coverage ratio assumed to be greater than 1.35 to 1.|
Year-to-Date Public Equity Capital Markets
Dow Jones Industrial Average: +2.97 percent
Standard & Poor’s 500 Stock Index: +6.59 percent
NASD Composite Index (NASDAQ): +7.41 percent
Russell 2000: +3.83 percent
Morgan Stanley U.S. REIT Index: +12.26 percent
Year-to-Date Global CMBS Issuance
(in $ billions as of 7/3/14)
|Source: Commercial Mortgage Alert.|
Year-to-Date Public U.S. Treasury Yields
U.S. Treasury Yields