Monday’s Numbers: December 3, 2012

The Federal Reserve Beige Book Economic Survey covering the period from the beginning of October through mid-November noted the pace of economic activity increasing from “measured” to “modest” across the various Federal Reserve Districts. Results were impacted in certain districts by Hurricane Sandy as well as corporate reticence to spend or invest until issues relating to the fiscal cliff are resolved.

From a real estate perspective, the survey noted improved home sales (obviously with the exception of the Northeast) as well as stronger results in the areas of commercial property and construction.

CMBS Delinquencies Decline

Standard & Poor’s Rating Services reported that CMBS delinquencies declined to their lowest level in 30 months, ending October at 9.66 percent, down from 9.77 percent in September. Importantly, the principal amount of loans liquidated, restructured, or modified so that they could return to current status exceeded the amount of delinquencies offerings.

The following chart details delinquency rates by property sector:

NCREIF Property Index Posts 11^th Quarter of Positive Returns

The National Council of Real Estate Investment Fiduciaries (NCREIF) Property Index (NPI), which is comprised of 7,276 properties valued at in excess of $315 billion, posted strong returns—up 11.0 percent—for the trailing 12-months ended September 30^th, reflecting continued strengthening in fundamentals in the property markets.

Highlights of the reported included the following:

• The retail sector outperformed the NPI during the past 12 months, showing returns of 12.1 percent comprised of: community centers (10.8 percent); neighborhood centers (11.0 percent); power centers (10.3 percent); regional malls (11.9 percent); and super regional malls (15.0 percent).
• The multifamily sector, on the strength of strong growth in net operating income, continued to outperform, yielding returns of 12.0 percent for the trailing 12-months.
• Industrial properties, the perennial favorite of institutional investors, outperformed the NPI during the trailing 12-months, producing returns of 11.1 percent. Warehouse and R & D properties outperformed the Index while flex properties underperformed.
• The office and hotel sectors underperformed the Index, with CBD office properties outperforming the suburban property sub-sector.

Monday’s Numbers

According to the most recent Trepp survey, spreads came in 10 to 15 basis points, making securitized financing both extremely attractive to borrowers as well as highly competitive with sources such as 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⁾: +6.61%
S & P 500 ^(2): +12.61%
NASDAQ ⁽³⁾: +115.55%
Russell 2000 ⁽⁴⁾:+10.93%
Morgan Stanley U.S. REIT ⁽⁵⁾:+9.26%

<sup>(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.</sup>