Monday’s Numbers: December 10, 2012

Miss the presentation in Denver or at your district council of the results of the U.S. edition of Emerging Trends in Real Estate for 2013? Would you like to be the first on your block to know what 2013’s emerging trends for the Asia Pacific region are?

If so, both publications are available online at no cost: Emerging Trends: U.S. | Emerging Trends: Asia Pacific

Capital Policy

At last week’s Real Estate Roundtable Real Estate Capital Policy Advisory Committee meeting, here are some of the issues affecting the real estate industry that were discussed:

• Fiscal Cliff: Atmosphere in Washington remains opaque as discussions continue with the objective of completing some form of agreement before year-end. Everything (such as long-term capital gains, carried interests, FIRPTA [affecting offshore investors], GSE reform, etc. remains on the table. Bottom line: as of December 10^th, there are 21 days remaining until the automatic tax increases and sequestration take effect.
• Economy: Recession renews if we do not avoid the cliff; if we do, moderate job growth (150,000+/-) continues (with still a long way to go); GDP growth projected at 2.0 percent per annum; problems in global economy are slowing down recovery of U.S. economy; U.S. corporations are showing record profits, but little inclination to invest; household metrics are improving.
• Real Estate Capital Markets: REITs are likely to outperform the S&P 500 index again; CMBS floor pricing has declined from high fours in July to high threes today; numerous regulatory issues remain on the table (Basel III, Solvency II, the Volker Rule, CMBS risk retention, etc.); wall of refinancing remains to be dealt with between 2013 and 2020; domestic banks profit and overall health improving.

Inside the Market

In a report published last week, Cushman & Wakefield Equity, Debt & Structured Finance provided a useful current matrix for 10-year, fixed-rate commercial mortgage loans by property sector, as follows:

REITs Did Not Have Much to Say for Themselves in November

According to the FTSE NAREIT Equity REIT Index, equity REITs showed total returns of -0.27 percent for the month of November after showing total returns equal to -0.84 percent in October.

Timber, for the fourth consecutive quarter, followed by healthcare, were the best performing sectors, up 2.14 percent and 2.03 percent, respectively.

The worst performing sectors were diversified and manufactured homes, down 4.06 percent and 2.96 percent, respectively.

Monday’s Numbers

According to the most recent Trepp survey, spreads widened as much as 15 basis points, marking the end—for the moment—of the “incredible shrinking” cost of securitized mortgage debt as compared to rates quoted by commercial banks and insurance companies.

The Cushman & Wakefield Equity, Debt, and Structured Finance Commercial Mortgage Spread monthly survey of commercial mortgage spreads showed spreads for 10-year, fixed rate mortgages, coming in approximately 10 to 15 basis points across all property sectors over the past 30 days.

Year-to-Date Public Equity Capital Markets

DJIA ⁽¹⁾: +7.67%
S & P 500 ^(2): +12.76%
NASDAQ ⁽³⁾: +14.31%
Russell 2000 ⁽⁴⁾:+10.99%
Morgan Stanley U.S. REIT ⁽⁵⁾:+11.71%

^{(1) Dow Jones Industrial Average. (2) Standard & Poor’s 500 Stock Index. (3) NASD Composite Index.
(4) Small Capitalization segment of U.S. equity universe. (5) Morgan Stanley REIT Index.}