Monday’s Numbers: December 20, 2010

The Commercial Mortgage Alert Trepp weekly survey of 15 active portfolio lenders widened slightly during the most recent survey period. It’s year-end, and lender’s are starting to focus on next year’s allocations. If it’s a typical start, rates will be up slightly as lenders test the waters as to what spreads will work and what borrowers” will accept. We’ll see if the current glass ceiling of 5.0 percent holds or if it’s off to the races in 2011.

December 20, 2010

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Headlines are normally self-explanatory—we hope the ones we publish will convey a sense of the terms and conditions present in the real estate capital markets. Given that, this week’s “Monday’s Numbers” should be subtitled: $13 Billion of CMBS Deals Already in 1Q Pipeline.

The Commercial Mortgage Alert Trepp weekly survey (below) of 15 active portfolio lenders widened slightly during the most recent survey period. It’s year-end, and lenders are starting to focus on next year’s allocations. If it’s a typical start, rates will be up slightly as lenders test the waters as to what spreads will work and what borrowers’ will accept. We’ll see if the current glass ceiling of 5.0 percent holds or if it’s off to the races in 2011.

Asking Spreads over U.S. Treasury Bonds in Basis Points (10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value ratios)
	12/31	11/5	11/12	11/26	12/3	12/10
Office	342	228	221	222	220	221
Retail	326	213	209	208	206	209
Multifamily	318	198	195	195	192	195
Industrial	333	211	206	208	202	206

Average Asking Spread	330	213	208	208	205	208

10-Year Treasury	3.83%	2.53%	2.79%	2.72%	2.72%	2.98%
Source: Commercial Mortgage Alert; Trepp.

Changes in spreads in the December 3 Cushman & Wakefield Sonnenblick-Goldman fixed and floating mortgage rate survey (below) were basically nil, continuing to support our 10-year term, 5.0 percent, glass ceiling thesis.

Property Type	Mid-Point of Fixed Rate Commercial Mortgage Spreads For 5 Year Commercial Real Estate Mortgages
	1/6/10	10/27/10	11/11/10	12/3/10	12/16/10
Multifamily - Non-Agency	+360	+280	+280	+280	+270
Multifamily – Agency	+220	+250	+280	+280	+280
Regional Mall	+450	+290	+305	+290	+280
Strip/Power Center	+460	+295	+280	+300	+280
Multi-Tenant Industrial	+435	+275	+280	+280	+270
CBD Office	+435	+270	+280	+280	+280
Suburban Office	+465	+300	+300	+300	+300
Full-Service Hotel	+500	+375	+350	+350	+320
Limited-Service Hotel	+500	+450	+425	+380	+400
5-Year Treasury	2.60%	1.14%	1.11%	1.66%	2.12%
Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type	Mid-Point of Fixed Rate Commercial Mortgage Spreads For 10 Year Commercial Real Estate Mortgages
	1/6/10	10/27/10	11/11/10	12/3/10	12/1610
Multifamily - Non-Agency	+300	+180	+180	+190	+190
Multifamily – Agency	+220	+190	+190	+200	+200
Regional Mall	+350	+200	+215	+175	+175
Strip/Power Center	+350	+205	+220	+190	+190
Multi-Tenant Industrial	+420	+190	+190	+190	+190
CBD Office	+330	+190	+190	+190	+180
Suburban Office	+355	+220	+200	+190	+190
Full-Service Hotel	+550	+340	+335	+300	+290
Limited-Service Hotel	+575	+380	+350	+350	+330
10-Year Treasury	3.85%	2.71%	2.72%	2.98%	3.47%
Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type	Mid-Point of Floating-Rate Commercial Mortgage Spreads For 3 - 5 Commercial Real Estate Year Mortgages
	1/6/10	10/27/10	11/11/10	12/3/10	12/1610
Multifamily – Non-Agency	+300 – 400	+275-325	+250-300	+250-300	+250-300
Multifamily- Agency	NA	NA	+300	+300	+300
Regional Mall	+475 – 600	+275-350	+275-350	+275-325	+275-300
Strip/Power Center	+450 – 650	+275-350	+275-350	+275-325	+275-300
Multi-Tenant Industrial	+400 – 500	+250-350	+250-350	+250-350	+250-350
CBD Office	+425	+225-300	+225-300	+225-300	+225-300
Suburban Office	+425	+250-350	+250-350	+250-350	+250-350
Full-Service Hotel	+600	+375-500	+375-500	+300-450	+300-450
Limited-Service Hotel	+750	+450-600	+450-600	+450-600	+450-600
1-Month LIBOR	0.23%	0.26%	0.25%	0.26%	0.26%
3-Month LIBOR	0.25%	0.29%	0.29%	0.30%	0.30%
* A dash (-) indicates a range.
Source: Cushman & Wakefield Sonnenblick Goldman.

Year-to-Date Public Equity Capital Markets

DJIA ⁽¹⁾: +10.20%
S & P 500⁽²⁾:+11.55%
NASDAQ⁽³⁾: +16.47%
Russell 2000 ⁽⁴⁾: +22.92%
MSCI U.S. REIT ⁽⁵⁾:+18.54%

^{(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.}

U.S. Treasury Yields
	1/6/10	4/9/10	9/30/10	12/18/10
3-Month	.016%	0.15%	0.15%	0.10%
6-Month	0.25%	0.23%	0.19%	0.17%
2 Year	0.99%	1.06%	0.41%	0.61%
5 Year	2.60%	2.62%	1.26%	1.95%
10 Year	3.85%	3.88%	2.51%	3.33%
Source: Bloomberg LLP.

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Stephen Blank

Stephen R. Blank joined ULI in December 1998 as Senior Fellow, Finance. His primary responsibilities include: expanding ULI’s real estate capital markets information and education programs; authoring real estate capital market commentary; participating as a principal researcher and adviser for the Emerging Trends in Real Estate series of publications; organizing and participating in real estate capital markets programs at ULI events worldwide; and participating in industry meetings, seminars, and conferences. Prior to joining ULI, Blank served from December 1993 to November 1998 as Managing Director, Real Estate Investment Banking of Oppenheimer & Co., Inc. His responsibilities included: structuring, underwriting, and executing corporate financings including initial public offerings of common and preferred shares, unsecured debentures, and convertible bonds; property acquisitions, dispositions, and financing; and financial advisory services including mergers and acquisitions, corporate restructurings, and recapitalizations.