Monday’s Numbers: November 15, 2010

The Commercial Mortgage Alert Trepp weekly survey of 15 active portfolio lenders narrowed significantly (17 basis points on average) with multifamily spreads breaking the 200 basis point barrier between sanity and complete madness. Less than 200 over the 10-year curve seems a little too low a spread to compensate for the risks associated with making a loan secured by an operating business. During the period, 10-year Treasury bond yields were flat, with average all-in cost equal to 4.66 percent.

The Commercial Mortgage Alert Trepp weekly survey (below) of 15 active portfolio lenders narrowed significantly (17 basis points on average) with multifamily spreads breaking the 200 basis point barrier between sanity and complete madness. Less than 200 over the 10-year curve seems a little too low a spread to compensate for the risks associated with making a loan secured by an operating business. During the period, 10-year Treasury bond yields were flat, with average all-in cost equal to 4.66 percent.

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

10/8

10/15

10/22

10/29

11/5

Office

342

240

248

244

253

228

Retail

326

224

233

230

234

213

Multifamily

318

208

207

212

205

198

Industrial

333

221

231

229

226

211

Average Asking Spread

330

224

231

229

230

213

10-Year Treasury

3.83%

2.56%

2.55%

2.60%

2.53%

2.53%

Source: Commercial Mortgage Alert; Trepp.

Spreads in the October 13th Cushman & Wakefield Sonnenblick-Goldman fixed and floating mortgage rate survey (below) remained basically unchanged from the prior survey period as lenders appear content to write loans in the high 4.00 to low 5.00 percent range, a trading range most likely to be vogue for the balance of 2010.

Property Type

Mid-Point of Fixed Rate Commercial Mortgage

Spreads For 5 Year Commercial Real Estate Mortgages

1/6/10

8/31/10

9/16/10

10/13/10

10/27/10

Multifamily - Non-Agency

+360

+300

+280

+280

+280

Multifamily – Agency

+220

+240

+240

+240

+250

Regional Mall

+450

+290

+290

+280

+290

Strip/Power Center

+460

+300

+300

+285

+295

Multi-Tenant Industrial

+435

+280

+280

+275

+275

CBD Office

+435

+270

+270

+270

+270

Suburban Office

+465

300

+300

+300

+300

Full-Service Hotel

+500

+400

+400

+375

+375

Limited-Service Hotel

+500

+450

+450

+450

+450

5-Year Treasury

2.60%

1.41%

1.51%

1.17%

1.14%

Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type

Mid-Point of Fixed Rate Commercial Mortgage

Spreads For 10 Year Commercial Real Estate Mortgages

1/6/10

8/31/10

9/16/10

10/13/10

10/27/10

Multifamily - Non-Agency

+300

+180

+180

+180

+180

Multifamily – Agency

+220

+190

+190

+190

+190

Regional Mall

+350

+200

+200

+200

+200

Strip/Power Center

+350

+210

+200

+200

+205

Multi-Tenant Industrial

+420

+205

+200

+190

+190

CBD Office

+330

+225

+190

+190

+190

Suburban Office

+355

+225

+220

+220

+220

Full-Service Hotel

+550

+350

+350

+340

+340

Limited-Service Hotel

+575

+380

+380

+380

+380

10-Year Treasury

3.85%

2.61%

2.76%

2.45%

2.71%

Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type

Mid-Point of Floating-Rate Commercial Mortgage

Spreads For 3 - 5 Commercial Real Estate Year Mortgages

1/6/10

8/31/10

9/16/10

10/13/10

10/27/10

Multifamily – Non-Agency

+300 – 400

+275-300

+275-325

+250-300

+275-325

Multifamily- Agency

NA

NA

NA

NA

NA

Regional Mall

+475 – 600

+275-350

+275-350

+275-350

+275-350

Strip/Power Center

+450 – 650

+275-350

+275-350

+275-350

+275-350

Multi-Tenant Industrial

+400 – 500

+250-350

+250-350

+250-350

+250-350

CBD Office

+425

+225-300

+225-300

+225-300

+225-300

Suburban Office

+425

+250-350

+250-350

+250-350

+250-350

Full-Service Hotel

+600

+375-550

+375-500

+375-500

+375-500

Limited-Service Hotel

+750

+450-600

+450-550

+450-600

+450-600

1-Month LIBOR

0.23%

0.26%

0.26%

0.26%

0.26%

3-Month LIBOR

0.25%

0.31%

0.31%

0.29%

0.29%

* A dash (-) indicates a range.

Source: Cushman & Wakefield Sonnenblick Goldman.

Year-to-Date Public Equity Capital Markets

DJIA (1): +7.33%
S & P 500 (2):+7.54%
NASDAQ (3): +10.98%
Russell 2000 (4): +13.44%
MSCI U.S. REIT (5):+20.61%

(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

1/6/10

4/9/10

9/30/10

11/12/10

3-Month

.016%

0.15%

0.15%

0.12%

6-Month

0.25%

0.23%

0.19%

0.16%

2 Year

0.99%

1.06%

0.41%

0.50%

5 Year

2.60%

2.62%

1.26%

1.36%

10 Year

3.85%

3.88%

2.51%

2.79%

Source: Bloomberg LLP.

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.
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