The Trepp survey for the week ending August 22 shows average spreads literally unchanged as the markets hoped that all would remain quiet in Gaza, the Ukraine, and Iraq, and that the U.S. economy would continue to improve. The last two weeks of August through the Labor Day holiday are consider prime vacation time on Wall Street, and this year is no exception. There was hardly anyone around to survey last week; they were all at the beach (as were we). Things will pick up rapidly beginning Tuesday as deal makers start to focus on closing deals by year-end.

The implied rate for ten-year, modestly leveraged commercial real estate mortgages remained at 373 basis points—81 basis points lower than at year-end 2013.

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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
(8/22/14)
Last week
(8/15/14)

Month
earlier

 Office 214 210 210 162 145 146 141
 Retail 207 207 192 160 138 138 135
 Multifamily 188 202 182 157 138 137 130
 Industrial 201 205 191 159 136 136 132
 Average spread 203 205 194 160 139 139 135
 10-year  Treasury 3.29% 2.88% 1.64% 3.04% 2.34% 2.34% 2.47%

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 Maximum
loan-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: +3.15 percent
Standard & Poor’s 500 Stock Index: +8.39 percent
NASD Composite Index (NASDAQ): +9.67 percent
Russell 2000: +0.92 percent
Morgan Stanley U.S. REIT Index: +15.56 percent

Year-to-Date Global CMBS Issuance

(in $ billions as of 8/22/14)

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

8/30/14

 3-month 0.08% 0.07% 0.03%
 6-month 0.12% 0.10% 0.05%
 2-year 0.27% 0.38% 0.50%
 5-year 0.76% 1.75% 1.63%
 7-year 1.25% 2.45% 2.05%
 10-year 1.86% 3.04% 2.34%