Monday’s Numbers: February 28, 2011

The Commercial Mortgage Alert Trepp weekly survey of 15 active portfolio lenders remained unchanged; financing appears available at attractive rates (5.25% - 5.50%). Absent a severe “shock to the system”, rates seem likely to fluctuate within this narrow band for the foreseeable future.

February 28, 2011

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Headlines

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.

“Defaults on Commercial Real Estate Mortgages Held by Banks Decline in 4Q 2010”

Comment: First drop in number of defaults since the first quarter of 2006; finally…

“NCREIF National Property Index Up 13.1% for 2010”

Comment: The NCREIF (National Council of Real Estate Investment Fiduciaries) National Property Index is comprised of 6,175 properties valued at $247.1 billion. The Index turned positive at the end of the 3^rd quarter of 2010 after seven sequentially trailing 12-month periods, indicating that we have “turned the corner” in terms of fundamentals and property performance (and therefore property value).

In our next posting we will publish the returns by region and property type for the 4^th quarter 2010 as well as the trailing 12-month period ending December 31, 2010.

Monday’s Numbers

The Commercial Mortgage Alert Trepp weekly survey (below) of 15 active portfolio lenders remained unchanged; financing appears available at attractive rates (5.25% - 5.50%). Absent a severe “shock to the system”, rates seem likely to fluctuate within this narrow band for the foreseeable future.

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	1/28/2011	2/7/2011	2/14/2011	2/21/2011
Office	342	214	202	199	189	191
Retail	326	207	191	188	181	179
Multifamily	318	188	174	173	162	163
Industrial	333	201	186	184	178	175

Average Asking Spread	330	203	188	186	178	177

10-Year Treasury	3.83%	3.29%	3.50%	3.64%	3.63%	3.58%
Source: Commercial Mortgage Alert; Trepp.

The Cushman & Wakefield Sonnenblick-Goldman Survey showed little, if any, change over the past two weeks as all-in costs remain “attractive and acceptable” to lender and borrower alike.

Property Type	Mid-Point of Fixed Rate Commercial Mortgage Spreads For 5 Year Commercial Real Estate Mortgages
	12/16/10	1/6/11	1/20/11	2/3/11	2/15/11
Multifamily - Non-Agency	+270	+250	+250	+250	+250
Multifamily – Agency	+280	+260	+260	+255	+255
Regional Mall	+280	+260	+260	+260	+260
Grocery Anchored	+280	+265	+265	+265	+260
Multi-Tenant Industrial	+270	+270	+270	+270	+270
CBD Office	+280	+270	+260	+260	+260
Suburban Office	+300	+300	+270	+270	+270
Full-Service Hotel	+320	+320	+300	+300	+300
Limited-Service Hotel	+400	+375	+350	+330	+330
5-Year Treasury	2.60%	2.07%	2.05%	2.06%	2.36%
Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type	Mid-Point of Fixed Rate Commercial Mortgage Spreads For 10 Year Commercial Real Estate Mortgages
	12/1610	1/6/11	1/20/11	2/3/11	2/15/11
Multifamily - Non-Agency	+190	+190	+190	+190	+180
Multifamily – Agency	+200	+195	+195	+200	+190
Regional Mall	+175	+180	+180	+180	+180
Grocery Anchor	+190	+185	+185	+185	+185
Multi-Tenant Industrial	+190	+190	+190	+190	+190
CBD Office	+180	+180	+180	+180	+180
Suburban Office	+190	+190	+190	+190	+190
Full-Service Hotel	+290	+270	+250	+250	+240
Limited-Service Hotel	+330	+310	+280	+260	+260
10-Year Treasury	3.47%	3.38%	3.45%	3.46%	3.63%
Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type	Mid-Point of Floating-Rate Commercial Mortgage Spreads For 3 - 5 Commercial Real Estate Year Mortgages
	12/1610	1/6/11	1/20/11	2/3/11	2/15/11
Multifamily – Non-Agency	+250-300	+225-300	+225-300	+225-300	+225-300
Multifamily- Agency	+300	+275-300	+250-300	+250-300	+250-300
Regional Mall	+275-300	+250-275	+250-275	+250-275	+250-275
Grocery Anchored	+275-300	+275-300	+275-300	+250-300	+250-300
Multi-Tenant Industrial	+250-350	+250-350	+250-350	+250-350	+250-300
CBD Office	+225-300	+225-300	+250-300	+250-300	+250-300
Suburban Office	+250-350	+250-300	+275-350	+275-350	+275-350
Full-Service Hotel	+300-450	+350-450	+350-450	+350-400	+350-450
Limited-Service Hotel	+450-600	+400-500	+400-500	+400-500	+400-500
1-Month LIBOR	0.26%	0.26%	0.26%	0.26%	0.26%
3-Month LIBOR	0.30%	0.30%	0.30%	0.31%	0.31%
* A dash (-) indicates a range.
Source: Cushman & Wakefield Sonnenblick Goldman.

Year-to-Date Public Equity Capital Markets

DJIA ⁽¹⁾: +4.79%
S & P 500⁽²⁾:+4.86%
NASDAQ⁽³⁾: +4.75%
Russell 2000 ⁽⁴⁾:+4.14%
MSCI U.S. REIT ⁽⁵⁾:+4.74%

^{(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	2/12/2011	2/18/2011	2/26/2011
3-Month	0.12%	0.11%	0.09%	0.12%
6-Month	0.18%	0.15%	0.14%	0.15%
2 Year	0.59%	0.83%	0.75%	0.71%
5 Year	2.01%	2.36%	2.27%	2.16%
10 Year	3.29%	3.63%	3.58%	3.48%
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.