Commercial Mortgage-Backed Securities Delinquencies Break 10%
Trepp’s 30+-day delinquency rate increased 24 basis points in May, ending the month at 10.4 percent, a whopping 50 basis points higher than year-end 2011.
While the CMBS world is not going to collapse, both underwriters of the securities and investors therein are going to see this (combined with the never ending Euro-crises) as a signal to shift toward a more conservative position. And, regardless of where benchmark U.S. Treasury bonds trade, spreads are going to widen as lenders hit their lending floors.
As the Trepp LLC weekly and Cushman & Wakefield Sonnenblick-Goldman monthly surveys (below) show, spreads have widened 20+ basis points over the past month, partially to accommodate perceived increases in risk and partially to absorb the incredible decline in Treasury yields.
Monday’s Numbers
The Trepp LLC survey was unchanged over the survey period.
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 | 6/25/12 | Month Earlier | |
Office | 342 | 214 | 210 | 224 | 205 |
Retail | 326 | 207 | 207 | 218 | 198 |
Multifamily | 318 | 188 | 198 | 210 | 186 |
Industrial | 333 | 201 | 205 | 212 | 190 |
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Average Spread | 330 | 203 | 205 | 216 | 195 |
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10-Year Treasury | 3.83% | 3.29% | 1.88% | 1.72% | 1.95% |
The Cushman & Wakefield Sonnenblick-Goldman Commercial Mortgage Spread survey showed spreads for 10-year fixed rate mortgages widening 20 to 25 basis points during the survey period.
Property Type | Mid-Point of Fixed Rate Commercial Mortgage Spreads For 5 Year Commercial Real Estate Mortgages | ||||
12/31/10 | 2/28/12 | 3/28/12 | 4/27/12 | 5/30/12 | |
Multifamily - Non-Agency | +270 | +240 | +230 | +240 | +250 |
Multifamily – Agency | +280 | +210 | +195 | +200 | +210 |
Regional Mall | +280 | +300 | +275 | +275 | +300 |
Grocery Anchored | +280 | +290 | +270 | +270 | +295 |
Strip and Power Centers |
| +315 | +295 | +295 | +320 |
Multi-Tenant Industrial | +270 | +310 | +310 | +285 | +305 |
CBD Office | +280 | +310 | +295 | +270 | +295 |
Suburban Office | +300 | +320 | +310 | +290 | +315 |
Full-Service Hotel | +320 | +350 | +350 | +340 | +360 |
Limited-Service Hotel | +400 | +360 | +360 | +350 | +370 |
5-Year Treasury | 2.60% | 0.78% | 0.83% | 0.83% | 0.69% |
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 | 2/28/12 | 3/28/12 | 4/27/12 | 5/30/12 | |
Multifamily - Non-Agency | +190 | +210 | +200 | +210 | +220 |
Multifamily – Agency | +200 | +180 | +165 | +170 | +190 |
Regional Mall | +175 | +235 | +275 | +220 | +245 |
Grocery Anchor | +190 | +230 | +270 | +200 | +230 |
Strip and Power Centers |
| +250 | +290 | +235 | +260 |
Multi-Tenant Industrial | +190 | +250 | +280 | +240 | +260 |
CBD Office | +180 | +320 | +270 | +220 | +250 |
Suburban Office | +190 | +250 | +290 | +245 | +270 |
Full-Service Hotel | +290 | +290 | +325 | +260 | +295 |
Limited-Service Hotel | +330 | +315 | +345 | +290 | +320 |
10-Year Treasury | 3.47% | 1.90% | 2.21% | 1.95% | 1.62% |
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 | 2/28/12 | 3/28/12 | 4/27/12 | 5/30/12 | |
Multifamily – Non-Agency | +250-300 | +200-250 | +200-250 | +200-250 | +200-250 |
Multifamily- Agency | +300 | +220-265 | +220-265 | +220-265 | +220-265 |
Regional Mall | +275-300 | +200-265 | +200-265 | +200-265 | +210-275 |
Grocery Anchored | +275-300 | +200-275 | +200-275 | +200-275 | +205-275 |
Strip and Power Centers |
| +225-300 | +225-300 | +225-300 | +225-300 |
Multi-Tenant Industrial | +250-350 | +225-305 | +225-305 | +225-305 | +235-305 |
CBD Office | +225-300 | +225-300 | +225-300 | +225-300 | +225-300 |
Suburban Office | +250-350 | +250-325 | +250-325 | +250-325 | +250-325 |
Full-Service Hotel | +300-450 | +275-400 | +275-400 | +250-400 | +275-400 |
Limited-Service Hotel | +450-600 | +350-550 | +325-450 | +325-450 | +325-450 |
1-Month LIBOR | 0.26% | 0.24% | 0.24% | 0.24% | 0.24% |
3-Month LIBOR | 0.30% | 0.49% | 0.47% | 0.47% | 0.47% |
* A dash (-) indicates a range. | |||||
Source: Cushman & Wakefield Sonnenblick Goldman. | |||||
Year-to-Date Public Equity Capital Markets
DJIA (1): -0.81%
S & P 500 (2): +1.63%
NASDAQ (3): +5.46%
Russell 2000 (4):-0.47%
Morgan Stanley U.S. REIT (5):+4.64%
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(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 | 6/2/2012 | |
3-Month | 0.12% | 0.01% | 0.07% |
6-Month | 0.18% | 0.06% | 0.11% |
2 Year | 0.59% | 0.24% | 0.25% |
5 Year | 2.01% | 0.83% | 0.62% |
7 Year |
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| 0.93% |
10 Year | 3.29% | 1.88% | 1.45% |
Key Rates (in Percentages) | |||||
| Current | 1 Mo. Prior | 3 Mo. Prior | 6 Mo. Prior | 1 Yr. Prior |
Fed Funds Rate | 0.17 | 0.16 | 0.12 | 0.08 | .011 |
Federal Reserve Target Rate | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 |
Prime Rate | 3.25 | 3.25 | 3.25 | 3.25 | 3.25 |
US Unemployment Rate | 8.20 | 8.10 | 8.30 | 8.70 | 9.00 |
1-Month Libor | 0.24 | 0.24 | 0.24 | 0.27 | 0.19 |
3-Month Libor | 0.47 | 0.47 | 0.48 | 0.53 | 0.25 |
