Slicing and Dicing…the Parts Are Sometimes Worth More than the Whole
Real estate entrepreneurs are inherently clever…and sometimes incredibly clever. Take the John Hancock Center in Chicago. A foreign bank and a U.S. opportunity fund?) gained control of the property by acquiring all three pieces of the junior debt encumbering the property after the fee title owner defaulted on the debt.
They then divided the property into several slices, three of which have been sold and two of which are being marketed, as follows:
- The retail and restaurant was acquired by an institutional real estate investment manager;
- The observation deck was acquired by a European tourism operator; and
- The building’s broadcast tower was sold to a company with experience in broadcast transactions;
- The office (856,000 square feet) and garage (733 parking spaces) portions are currently being marketed.
Interesting and instructive!
CMBS Issuance Could Reach $45 Billion in 2012
With a number of single-borrower as well as multi-borrower deals in the queue, sales of commercial mortgage-backed securities could reach $45 billion in 2012, a 40 percent increase over the 2011 total. While that is only a fraction of the historical high-water mark in 2007, it represents significant progress in the rehabilitation process and argues for a pickup in buy-sell transaction velocity in 2013.
REITs at the Three-Quarter Mark
Through September 30h, equity REITs produced total returns of 15.09 percent and are well on their way to “four-peating” (if there is such a word).
September did not have much good to say for itself. According to the FTSE NAREIT Equity REIT Index, equity REITs showed total returns of -1.78 percent for the period.
The best performing sectors during September were timber (+4.58 percent) and industrial (+4.54 percent); the worst performing sectors were regional malls (-3.96 percent) and multifamily (-3.81 percent).
Monday’s Numbers
The Trepp, LLC survey showed commercial mortgage spreads coming unchanged during the survey period. While it’s hard to see rates coming in very much, nothing would be surprising this year.
As we said last week: QUICK! Drop whatever you are doing and go refinance something; how can it get any better than this?
NOTE: The Next Issue of Monday’s Numbers Will be Published on October 22
Asking Spreads over U.S. Treasury Bonds in Basis Points | ||||||
12/31/09 | 12/31/10 | 12/31/11 | 9/28 | Week Earlier | Month Earlier | |
Office | 342 | 214 | 210 | 225 | 223 | 233 |
Retail | 326 | 207 | 207 | 215 | 215 | 221 |
Multifamily | 318 | 188 | 202 | 201 | 210 | 214 |
Industrial | 333 | 201 | 205 | 216 | 222 | 223 |
Average Spread | 330 | 203 | 205 | 214 | 218 | 223 |
10-Year Treasury | 3.83% | 3.29% | 1.88% | 1.74% | 1.63% | 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 Markets
DJIA (1): +11.40%
S & P 500 (2): +16.17%
NASDAQ (3): +20.38%
Russell 2000 (4):+13.77%
Morgan Stanley U.S. REIT (5):+12.17%
(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 | 10/6/12 | |
3-Month | 0.12% | 0.01% | 0.10% |
6-Month | 0.18% | 0.06% | 0.14% |
2 Year | 0.59% | 0.24% | 0.26% |
5 Year | 2.01% | 0.83% | 0.67% |
7 Year |
|
| 1.13% |
10 Year | 3.29% | 1.88% | 1.74% |
Key Rates (in Percentages) | |||||
| Current | 1 Mo. Prior | 3 Mo. Prior | 6 Mo. Prior | 1 Yr. Prior |
Fed Funds Rate | 0.17 | 0.17 | 0.18 | 0.17 | 0.08 |
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 | 7.80 | 8.10 | 8.20 | 8.20 | 9.00 |
1-Month Libor | 0.22 | 0.23 | 0.25 | 0.24 | 0.24 |
3-Month Libor | 0.35 | 0.41 | 0.46 | 0.47 | 0.38 |
