The Trepp survey for the week ended December 5 th, showed spreads relatively unchanged over the past 30 days, with the average spread increasing 2 basis points. The implied all-in cost of for a 10-year mortgage remains in the 3.50 percent to 4.00 percent range; last year at this time we were talking rates of 4.50 percent to 5.00 percent.
All eyes are focused on closing this year’s deals although you are starting to hear some “musings” about next year’s availability and cost given the likelihood that interest rates will increase. People are talking about a “Goldilocks” like year with not too much or too little debt capital available. Banks and insurance companies should continue to be strong performers; CMBS came oh-so-close to $100 billion in issuance in 2014; it should should make a strong contribution in 2015.
The “shadow banking” arena, consisting of sovereign wealth funds, hedge funds, pension funds and other tax-exempt institutional investors, family offices, and wealthy individual and the like, should continue to play an important role and in fact, is likely to play an increasingly important role in the mega-size deals we see so frequently.
Asking Spreads over U.S. Ten-Year Treasury Bonds in Basis Points | |||||||
| Sectors | 12/31/10 | 12/31/11 | 12/31/12 | 12/31/13 | This Week (12/5/14) | Last Week (11/28/14) | Month Earlier |
| Office | 214 | 210 | 210 | 162 | 148 | 149 | 148 |
| Retail | 207 | 207 | 192 | 160 | 142 | 141 | 139 |
| Multifamily | 188 | 202 | 182 | 157 | 139 | 138 | 135 |
| Industrial | 201 | 205 | 191 | 159 | 141 | 141 | 142 |
| Average Spread | 203 | 205 | 194 | 160 | 143 | 142 | 141 |
| 10-year Treasury | 3.29% | 2.88% | 1.64% | 3.04% | 2.31% | 2.18% | 2.31% |
The Cushman & Wakefield Equity, Debt, and Structured Finance Group’s monthly Capital Markets Update of commercial real estate mortgage spreads dated November 6th show no change in required spreads as compared to the prior survey period, confirming our suspicion that all everyone is thinking about and focusing on is getting this year’s deals closed as well as issuing commitments for Q1-2015 deals that have been in the pipeline for a while.
Year Fixed-Rate Commercial Real Estate Mortgages | |||
Property | Maximum loan-to-value | Class A | Class B/C |
| Multifamily (agency) | 75–80% | T +160 | T +170 |
| Multifamily (non-agency) | 70–75% | T +170 | T +165 |
| Anchored retail | 70–75% | T +185 | T +195 |
| Strip center | 65–70% | T +185 | T +195 |
| Distribution/warehouse | 65–70% | T +185 | T +195 |
| R&D/flex/industrial | 65–70% | T +190 | T +200 |
| Office | 65–75% | T +180 | T +190 |
| 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: +4.25%
Standard & Poor’s 500 Stock Index: +8.333%
NASD Composite Index (NASDAQ): +11.42%
Russell 2000: -0.96%
Morgan Stanley U.S. REIT Index: +20.77%
Year-to-Date Global CMBS Issuance | ||
| 2014 | 2013 | |
| U.S. | $90.4 | $83.3 |
| Non-U.S. | 5.8 | 12.5 |
| Total | $96.2 | $95.9 |
| Source: Commercial Mortgage Alert. | ||
Year-to-Date U.S. Treasury Yields
U.S. Treasury Yields | |||
| 12/31/12 | 12/31/13 | 12/12/14 | |
| 3-month | 0.08% | 0.07% | 0.02% |
| 6-month | 0.12% | 0.10% | 0.09% |
| 2-year | 0.27% | 0.38% | 0.56% |
| 5-year | 0.76% | 1.75% | 1.53% |
| 7-year | 1.25% | 2.45% | 1.86% |
| 10-year | 1.86% | 3.04% | 2.10% |
