Monday’s Numbers: August 25, 2014

The Trepp survey for the week ending August 15, 2014, showed average spreads coming in an average of 2 basis points. The implied rate for ten-year, modestly leveraged commercial real estate mortgages decreased to 373 basis points on the back of a 10-basis-point decrease in ten-year Treasuries.

August 25, 2014

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The Trepp survey for the week ending August 15, 2014, showed average spreads coming in an average of 2 basis points. The market spent the first part of the week worrying about the Fed meeting in Jackson Hole, Wyoming, and then spent the rest of the week trying to parse what they heard. The consensus seems to be that rate increases will begin by the end of the first quarter. That said, the Fed appears to have left plenty of wiggle room in case things do not play out as planned. The implied rate for ten-year, modestly leveraged commercial real estate mortgages decreased to 373 basis points on the back of a 10-basis-point decrease in ten-year Treasuries.

Asking Spreads over U.S. Ten-Year Treasury Bonds in Basis Points (Ten-year commercial and multifamily mortgage loans for properties with 50 to 59 percent loan-to-value ratios)
	12/31/10	12/31/11	12/31/12	12/31/13	This week(8/15/14)	Last week(8/8/14)	Month earlier
Office	214	210	210	162	146	148	141
Retail	207	207	192	160	138	140	135
Multifamily	188	202	182	157	137	138	130
Industrial	201	205	191	159	136	138	132
Averagespread	203	205	194	160	139	141	135
10-yearTreasury	3.29%	2.88%	1.64%	3.04%	2.34%	2.44%	2.65%

The Cushman & Wakefield Equity, Debt, and Structured Finance Group’s monthly Capital Markets Update of commercial real estate mortgage spreads, dated August 7, showed spreads coming in approximately 5 basis points as compared with the prior survey (dated June 10) as lenders continue to compete for business; implied all-in cost ranges from 4.25 to 4.50 percent.

Ten-Year Fixed-Rate Commercial Real Estate Mortgages (as of August 7, 2014)
Property	Maximumloan-to-value	Class A	Class B/C
Multifamily (agency)	75–80%	T +160	T +170
Multifamily (nonagency)	70–75%	T +155	T +160
Anchored retail	70–75%	T +175	T +185
Strip center	65–70%	T +175	T +185
Distribution/warehouse	65–70%	T +175	T +185
R&D/flex/industrial	65–70%	T +185	T +190
Office	65–75%	T +175	T +185
Full-service hotel	55–65%	T +235	T +255
Debt-service-coverage ratio assumed to be greater than 1.35 to 1.

Year-to-Date Public Equity Capital Markets

Dow Jones Industrial Average: +0.56 percent

Standard & Poor’s 500 Stock Index: +7.58 percent

NASD Composite Index (NASDAQ): +8.67 percent

Russell 2000: –0.28 percent

Morgan Stanley U.S. REIT Index: +14.86 percent

Year-to-Date Global CMBS Issuance (in $ billions as of 8/15/14)
	2014	2013
U.S.	$54.9	$56.4
Non-U.S.	1.9	7.8
Total	$56.8	$64.2
Source: Commercial Mortgage Alert.

Year-to-Date Public U.S. Treasury Yields

U.S. Treasury Yields
	12/31/12	12/31/13	8/22/14
3-month	0.08%	0.07%	0.02%
6-month	0.12%	0.10%	0.05%
2-year	0.27%	0.38%	0.47%
5-year	0.76%	1.75%	1.63%
7-year	1.25%	2.45%	2.11%
10-year	1.86%	3.04%	2.41%

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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.