Monday’s Numbers: January 17, 2010

While transaction volume is still “meager” when compared to the heady days of 2007, it represents an inflection point; whether it will be defined as the “beginning of the end” or the “end of the beginning” is immaterial. Read about what is material and review this week’s numbers round-up.

January 17, 2011

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Commercial Real Estate Transaction Volume Doubles in 2010

While transaction volume is still “meager” when compared to the heady days of 2007, it represents an inflection point; whether it will be defined as the “beginning of the end” or the “end of the beginning” is immaterial. What counts is increasing sequential growth on a trailing 12-month basis, which is what the numbers show.

Monday’s Numbers

The Commercial Mortgage Alert Trepp weekly survey (below) of 15 active portfolio lenders remained unchanged as lenders start to process 2011 business. We expect little evidence of change in rates until the first round of 2011 deals receive rate quotes in the next two weeks or so.

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

1/7/11

Office

342

214

200

Retail

326

207

193

Multifamily

318

188

176

Industrial

333

201

188

Average Asking Spread

330

203

189

10-Year Treasury

3.83%

3.29%

3.38%

Source: Commercial Mortgage Alert; Trepp.

The Cushman & Wakefield Sonnenblick-Goldman fixed and floating mortgage rate survey (below) came in a little at year-end, strengthening our conviction that lender’s are becoming more comfortable with the (real estate) world around them. That said, lender’s will continue to be cautious and vigilant and underwriting standards will remain stringent.

Property Type

Mid-Point of Fixed Rate Commercial Mortgage

Spreads For 5 Year Commercial Real Estate Mortgages

12/16/10

1/6/11

Multifamily - Non-Agency

+270

+250

Multifamily – Agency

+280

+260

Regional Mall

+280

+260

Strip/Power Center

+280

+265

Multi-Tenant Industrial

+270

CBD Office

+280

+270

Suburban Office

+300

Full-Service Hotel

+320

Limited-Service Hotel

+400

+375

5-Year Treasury

2.60%

2.07%

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

Multifamily - Non-Agency

+190

Multifamily – Agency

+200

+195

Regional Mall

+175

+180

Strip/Power Center

+190

+185

Multi-Tenant Industrial

+190

CBD Office

+180

Suburban Office

+190

Full-Service Hotel

+290

+270

Limited-Service Hotel

+330

+310

10-Year Treasury

3.47%

3.38%

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

Multifamily – Non-Agency

+250-300

+225-300

Multifamily- Agency

+300

+275-300

Regional Mall

+275-300

+250-275

Strip/Power Center

+275-300

Multi-Tenant Industrial

+250-350

CBD Office

+225-300

Suburban Office

+250-350

+250-300

Full-Service Hotel

+300-450

+350-450

Limited-Service Hotel

+450-600

+400-500

1-Month LIBOR

0.26%

3-Month LIBOR

0.30%

* A dash (-) indicates a range.

Source: Cushman & Wakefield Sonnenblick Goldman.

Year-to-Date Public Equity Capital Markets

DJIA ⁽¹⁾: +1.82%
S & P 500⁽²⁾:+2.74%
NASDAQ⁽³⁾: +3.78%
Russell 2000 ⁽⁴⁾: +2.35%
MSCI U.S. REIT ⁽⁵⁾:+0.13%

(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

1/8/11

1/15/11

3-Month

0.12%

0.13%

0.15%

6-Month

0.18%

0.17%

2 Year

0.59%

0.57%

5 Year

2.01%

1.96%

1.92%

10 Year

3.29%

3.32%

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.