Securitized Lenders Compete on Proceeds, Amortization Periods…and RATE!
Yes, we said rate and we meant it. The recent rally in the Super Senior CMBS tranches, the most creditworthy part of the securitized capital stack, has allowed securitized originators to compete for loans by aggressively lowering interest rates. Securitized lenders now offer more than just higher loan-to-value ratios (more money), lower debt coverage ratios (more net operating income available for debt service), and modest (two year) interest-only periods; they are marketing loans with interest rates as low as 4.0 percent, narrowing the competitive band between conventional and securitized lenders.
NCREIF Property Index Continues to Amaze
The National Council of Real Estate Investment Fiduciaries National Property Index, comprised of 7,299 properties having an estimated market value of $311 billion, continued to show solid rates of return for the trailing 12-month period ending June 30. Total returns, (income plus appreciation) equaled 12 percent for the period, compared to 13.4 percent for the trailing 12-months that ended March 31.
This chart tracks the performance of the various property type sub-indexes during the first and second quarters of 2012 as well as on a trailing 12-month period ending June 30, basis:
1st Quarter 2012 (%) | 2nd Quarter 2012 (%) | Trailing 12-Months (%) | ||
Multifamily | Income | 1.31 | 1.32 | 5.4 |
Appreciation | 1.48 | 1.44 | 7.6 | |
Total Return | 2.79 | 2.77 | 13.2 | |
Industrial | Income | 1.55 | 1.56 | 6.4 |
Appreciation | 1.15 | 1.35 | 5.6 | |
Total Return | 2.70 | 2.92 | 12.2 | |
Office | Income | 1.41 | 1.42 | 5.8 |
Appreciation | 0.93 | 0.92 | 4.6 | |
Total Return | 2.34 | 2.34 | 10.5 | |
Retail | Income | 1.55 | 1.51 | 6.4 |
Appreciation | 1.26 | 1.54 | 6.7 | |
Total Return | 2.81 | 30.4 | 13.4 | |
Total Index | Income | 6.4 | 5.8 | 5.9 |
Appreciation | 6.7 | 4.6 | 5.9 | |
Total Return | 13.4 | 10.5 | 12.0 |
Monday’s Numbers
Quick! Drop whatever you are doing and go refinance something; how can it be any better than this?
The Trepp, LLC survey showed commercial mortgage spreads coming between 7 and 13 basis points during the survey period as securitized lenders reduced spreads to borrowers (reflecting the benefit of the recent rally in the most creditworthy CMBS bonds). The playing field is relatively level, with both insurance companies and conduits quoting loans at costs within striking distance (4+/- percent) of each other.
Asking Spreads over U.S. Treasury Bonds in Basis Points | ||||||
12/31/09 | 12/31/10 | 12/31/11 | 9/21 | Week Earlier | Month Earlier | |
Office | 342 | 214 | 210 | 223 | 230 | 234 |
Retail | 326 | 207 | 207 | 215 | 223 | 223 |
Multifamily | 318 | 188 | 198 | 201 | 214 | 214 |
Industrial | 333 | 201 | 205 | 215 | 221 | 223 |
Average Spread | 330 | 203 | 205 | 214 | 223 | 224 |
10-Year Treasury | 3.83% | 3.29% | 1.88% | 1.63% | 1.64% | 1.65% |
The Cushman & Wakefield Equity, Debt, and Structured Finance Commercial Mortgage Spread monthly survey of commercial mortgage spreads showed spreads for 10-year, fixed rate mortgages, coming in a uniform 5 basis points across all property sectors and terms over the past 30 days.
Property Type | Mid-Point of Fixed Rate Commercial Mortgage | ||||
12/31/10 | 6/28/12 | 7/26/12 | 9/3/12 | 9/27/12 | |
Multifamily - Non-Agency | +270 | +245 | +245 | +240 | +235 |
Multifamily – Agency | +280 | +225 | +225 | +225 | +210 |
Regional Mall | +280 | +300 | +295 | +290 | +285 |
Grocery Anchored | +280 | +295 | +290 | +285 | +280 |
Strip and Power Centers |
| +320 | +315 | +310 | +305 |
Multi-Tenant Industrial | +270 | +305 | +300 | +295 | +290 |
CBD Office | +280 | +300 | +295 | +285 | +280 |
Suburban Office | +300 | +315 | +315 | +305 | +300 |
Full-Service Hotel | +320 | +360 | +360 | +360 | +355 |
Limited-Service Hotel | +400 | +370 | +370 | +370 | +365 |
5-Year Treasury | 2.60% | 0.69% | 0.57% | 0.68% | 0.64% |
Source: Cushman & Wakefield Equity, Debt, and Structured Finance. | |||||
Property Type | Mid-Point of Fixed Rate Commercial Mortgage | ||||
12/31/10 | 6/28/12 | 7/26/12 | 9/3/12 | 9/27/12 | |
Multifamily - Non-Agency | +190 | +220 | +220 | +210 | +205 |
Multifamily – Agency | +200 | +200 | +210 | +210 | +195 |
Regional Mall | +175 | +245 | +235 | +230 | +225 |
Grocery Anchor | +190 | +235 | +230 | +225 | +220 |
Strip and Power Centers |
| +255 | +250 | +245 | +240 |
Multi-Tenant Industrial | +190 | +260 | +255 | +250 | +245 |
CBD Office | +180 | +250 | +245 | +235 | +230 |
Suburban Office | +190 | +265 | +265 | +260 | +255 |
Full-Service Hotel | +290 | +290 | +290 | +290 | +285 |
Limited-Service Hotel | +330 | +310 | +310 | +310 | +305 |
10-Year Treasury | 3.47% | 1.58% | 1.42% | 1.64% | 1.64% |
Source: Cushman & Wakefield Equity, Debt, and Structured Finance. | |||||
Property Type | Mid-Point of Floating-Rate Commercial Mortgage | ||||
12/31/10 | 6/28/12 | 7/26/12 | 9/3/12 | 9/27/12 | |
Multifamily – Non-Agency | +250-300 | +200-260 | +200-260 | +200-260 | +200-260 |
Multifamily- Agency | +300 | +220-265 | +220-265 | +220-265 | +220-265 |
Regional Mall | +275-300 | +210-275 | +210-275 | +210-275 | +210-275 |
Grocery Anchored | +275-300 | +210-275 | +210-275 | +210-275 | +210-275 |
Strip and Power Centers |
| +225-300 | +225-300 | +225-300 | +225-300 |
Multi-Tenant Industrial | +250-350 | +235-305 | +230-305 | +230-305 | +230-305 |
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 | +275-400 | +275-400 |
Limited-Service Hotel | +450-600 | +325-450 | +325-450 | +325-450 | +325-450 |
1-Month LIBOR | 0.26% | 0.24% | 0.24% | 0.24% | 0.24% |
3-Month LIBOR | 0.30% | 0.47% | 0.46% | 0.43% | 0.43% |
* A dash (-) indicates a range. | |||||
Source: Cushman & Wakefield Equity, Debt, and Structured Finance. | |||||
Year-to-Date Public Equity Capital Market
DJIA (1): +9.98%
S & P 500 (2): +14.56%
NASDAQ (3): +19.62%
Russell 2000 (4):+13.04%
Morgan Stanley U.S. REIT (5):+11.91%
(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 | 9/28/12 | |
3-Month | 0.12% | 0.01% | 0.09% |
6-Month | 0.18% | 0.06% | 0.13% |
2 Year | 0.59% | 0.24% | 0.23% |
5 Year | 2.01% | 0.83% | 0.63% |
7 Year |
|
| 1.05% |
10 Year | 3.29% | 1.88% | 1.63% |
Key Rates (in Percentages) | |||||
| Current | 1 Mo. Prior | 3 Mo. Prior | 6 Mo. Prior | 1 Yr. Prior |
Fed Funds Rate | 0.08 | 0.13 | 0.17 | 0.15 | 0.10 |
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 | 8.10 | 8.30 | 8.20 | 8.30 | 9.10 |
1-Month Libor | 0.21 | 0.23 | 0.25 | 0.24 | 0.24 |
3-Month Libor | 0.36 | 0.42 | 0.46 | 0.47 | 0.37 |
