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.

Monday’s Numbers

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
(Ten-year commercial and multifamily mortgage loans
for properties with 50% to 59% loan-to-value ratios)

12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 6/27/14 Month earlier
 Office 342 214 210 210 162 139 146
 Retail 326 207 207 192 160 139 140
 Multifamily 318 188 202 182 157 123 131
 Industrial 333 201 205 191 159 123 135
 Averagespread 330 203 205 194 160 131 138
 10-yearTreasury 3.83% 3.29% 2.88% 1.64% 3.04% 2.54% 2.52%

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)

2014 2013
U.S. $40.6 $43.9
Non-U.S. 0.9 7.4
Total $41.5 $51.3
Source: Commercial Mortgage Alert.

 

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

 

U.S. Treasury Yields

12/31/12 12/31/13 7/3/14
 3-month 0.08% 0.07% 0.02%
 6-month 0.12% 0.10% 0.06%
 2-year 0.27% 0.38% 0.49%
 5-year 0.76% 1.75% 1.71%
 7-year 1.25% 2.45% 2.33%
 10-year 1.86% 3.04% 2.63%