The Trepp survey for the week ending June 20, 2014, continued the trend of spreads implying ten-year commercial real estate mortgage rates for institutional properties at +/–4 percent. We expect the capital markets to remain relatively quiet, with many planning long Fourth of July 4 holiday weekends or even longer vacations. Anecdotally, we’ve heard of loans priced as low as 3.5 percent; we’re seeking confirmation.

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 6/20/14 Month earlier
 Office 342 214 210 210 162 148 149
 Retail 326 207 207 192 160 138 144
 Multifamily 318 188 202 182 157 135 139
 Industrial 333 201 205 191 159 136 141
 Averagespread 330 203 205 194 160 139 143
 10-yearTreasury 3.83% 3.29% 2.88% 1.64% 3.04% 2.61% 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

Maximum

 loan-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: +1.66 percent

Standard & Poor’s 500 Stock Index: +6.09 percent

NASD Composite Index (NASDAQ): +5.30 percent

Russell 2000: +2.22 percent

Morgan Stanley U.S. REIT Index: +12.79 percent

 

Year-to-Date Global CMBS Issuance

(in $ billions as of 6/27/14)

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 6/27/14
 3-month 0.08% 0.07% 0.03%
 6-month 0.12% 0.10% 0.07%
 2-year 0.27% 0.38% 0.47%
 5-year 0.76% 1.75% 1.64%
 7-year 1.25% 2.45% 2.09%
 10-year 1.86% 3.04% 2.54%