Monday’s Numbers: February 13, 2012

While Prudential sees a 20 percent increase in commercial mortgage lending this year, this is not going to exactly move the needle for the average borrower as insurance companies by and large focus their general account’s attention on core properties, gateway cities, and “pristine” borrowers.

February 13, 2012

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“Pru[dential] Sees 20 Percent Increase in Commercial Mortgage Lending This Year”

While certainly a meaningful and substantial increase, this is not going to exactly move the needle for the average borrower as insurance companies by and large focus their general account’s attention on core properties, gateway cities, and “pristine” borrowers. Further, the $11.6 billion allocation is divided among a number of lending programs including: conduit lending - $750 million; agency and affordable housing - $3.1 billion; Prudential’s general account - $7.0 billion; and $750 million of miscellaneous.

Hopefully other insurance companies will follow suit and then conduit lenders will gain some traction and banks will finally be de-leveraged and voila, we will have a commercial and multifamily mortgage market again.

Monday’s Numbers

During the survey period, the Trepp LLC survey indicated spreads continued to widen five to 10 basis points.

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)
	12/31/09	12/31/10	12/31/11	2/3/12	Month Earlier
Office	342	214	210	219	213
Retail	326	207	207	214	207
Multifamily	318	188	198	206	199
Industrial	333	201	205	209	202

Average Spread	330	203	205	212	205

10-Year Treasury	3.83%	3.29%	1.88%	1.92%	1.97%

The Cushman & Wakefield Sonnenblick-Goldman Survey shows rates unchanged to down five basis points. Lenders seem to be going about their business, reacting to market events as necessary.

Property Type	Mid-Point of Fixed Rate Commercial Mortgage Spreads For 5 Year Commercial Real Estate Mortgages
	12/31/10	1/5/12	1/26/12
Multifamily - Non-Agency	+270	+245	+240
Multifamily – Agency	+280	+255	+245
Regional Mall	+280	+300	+300
Grocery Anchored	+280	+295	+295
Strip and Power Centers		+320	+320
Multi-Tenant Industrial	+270	+305	+310
CBD Office	+280	+310	+310
Suburban Office	+300	+320	+320
Full-Service Hotel	+320	+350	+350
Limited-Service Hotel	+400	+360	+360
5-Year Treasury	2.60%	0.89%	0.78%
Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type	Mid-Point of Fixed Rate Commercial Mortgage Spreads For 10 Year Commercial Real Estate Mortgages
	12/31/10	1/5/12	1/26/12
Multifamily - Non-Agency	+190	+205	+210
Multifamily – Agency	+200	+200	+205
Regional Mall	+175	+245	+245
Grocery Anchor	+190	+240	+240
Strip and Power Centers		+255	+255
Multi-Tenant Industrial	+190	+245	+255
CBD Office	+180	+250	+240
Suburban Office	+190	+265	+260
Full-Service Hotel	+290	+300	+290
Limited-Service Hotel	+330	+310	+315
10-Year Treasury	3.47%	2.00%	1.97%
Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type	Mid-Point of Floating-Rate Commercial Mortgage Spreads For 3 - 5 Commercial Real Estate Year Mortgages
	12/31/10	1/5/12	1/26/12
Multifamily – Non-Agency	+250-300	+200-250	+200-250
Multifamily- Agency	+300	+220-265	+220-265
Regional Mall	+275-300	+250-350	+210-265
Grocery Anchored	+275-300	+240-325	+200-275
Strip and Power Centers		+250-350	+225-300
Multi-Tenant Industrial	+250-350	+270-350	+225-305
CBD Office	+225-300	+275-350	+225-300
Suburban Office	+250-350	+300-350	+250-325
Full-Service Hotel	+300-450	+375-475	+350-425
Limited-Service Hotel	+450-600	+375-550	+400-500
1-Month LIBOR	0.26%	0.30%	0.27%
3-Month LIBOR	0.30%	0.58%	0.55%
* A dash (-) indicates a range.
Source: Cushman & Wakefield Sonnenblick Goldman.

Year-to-Date Public Equity Capital Markets

DJIA ⁽¹⁾: +4.78%
S & P 500^(2):+6.76%
NASDAQ⁽³⁾: +11.47%
Russell 2000 ⁽⁴⁾:+9.78%
Morgan Stanley U.S. REIT ⁽⁵⁾:+6.64%
_____
^{(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
	12/31/10	12/31/11	2/11/12
3-Month	0.12%	0.01%	.08%
6-Month	0.18%	0.06%	.12%
2 Year	0.59%	0.24%	.27%
5 Year	2.01%	0.83%	.82%
10 Year	3.29%	1.88%	1.99%

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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.