The Trepp survey for the week ending June 20, 2014, continued the trend of spreads implying ten-year commercial real estate mortgage rates for institutional properties at +/–4 percent. We expect the capital markets to remain relatively quiet, with many planning long Fourth of July 4 holiday weekends or even longer vacations. Anecdotally, we’ve heard of loans priced as low as 3.5 percent; we’re seeking confirmation.
Asking Spreads over U.S. Ten-Year Treasury Bonds in Basis Points | |||||||
| 12/31/09 | 12/31/10 | 12/31/11 | 12/31/12 | 12/31/13 | 6/20/14 | Month earlier | |
| Office | 342 | 214 | 210 | 210 | 162 | 148 | 149 |
| Retail | 326 | 207 | 207 | 192 | 160 | 138 | 144 |
| Multifamily | 318 | 188 | 202 | 182 | 157 | 135 | 139 |
| Industrial | 333 | 201 | 205 | 191 | 159 | 136 | 141 |
| Averagespread | 330 | 203 | 205 | 194 | 160 | 139 | 143 |
| 10-yearTreasury | 3.83% | 3.29% | 2.88% | 1.64% | 3.04% | 2.61% | 2.52% |
The Cushman & Wakefield Equity, Debt, and Structured Finance Group’s monthly Capital Markets Update of commercial real estate mortgage spreads, dated June 5, 2014, showed spreads coming in 15 to as much as 20 basis points since the prior survey dated May 9 as lenders compete for business in a very competitive business environment. No one expects this to change in the near term.
Ten-Year Fixed-Rate Commercial Real Estate Mortgages | |||
Property | Maximum loan-to-value | Class A | Class B |
| Multifamily (agency) | 75–80% | T +170 | T +170 |
| Multifamily (nonagency) | 70–75% | T +165 | T +180 |
| Anchored retail | 70–75% | T +185 | T +195 |
| Strip center | 65–70% | T +190 | T +200 |
| Distribution/warehouse | 65–70% | T +180 | T +200 |
| R&D/flex/industrial | 65–70% | T +190 | T +210 |
| Office | 65–75% | T +185 | T +195 |
| Full-service hotel | 55–65% | T +240 | T +260 |
| Debt-service-coverage ratio assumed to be greater than 1.35 to 1. | |||
Year-to-Date Public Equity Capital Markets
Dow Jones Industrial Average: +1.66 percent
Standard & Poor’s 500 Stock Index: +6.09 percent
NASD Composite Index (NASDAQ): +5.30 percent
Russell 2000: +2.22 percent
Morgan Stanley U.S. REIT Index: +12.79 percent
Year-to-Date Global CMBS Issuance (in $ billions as of 6/27/14) | ||
| 2014 | 2013 | |
| U.S. | $40.6 | $43.9 |
| Non-U.S. | 0.9 | 7.4 |
| Total | $41.5 | $51.3 |
| Source: Commercial Mortgage Alert. | ||
Year-to-Date Public U.S. Treasury Yields
U.S. Treasury Yields | |||
| 12/31/12 | 12/31/13 | 6/27/14 | |
| 3-month | 0.08% | 0.07% | 0.03% |
| 6-month | 0.12% | 0.10% | 0.07% |
| 2-year | 0.27% | 0.38% | 0.47% |
| 5-year | 0.76% | 1.75% | 1.64% |
| 7-year | 1.25% | 2.45% | 2.09% |
| 10-year | 1.86% | 3.04% | 2.54% |
