Stephen Blank’s market commentary will return next week.
The Trepp survey for the period ending March 14, 2014, showed spreads unchanged across all product categories, with the implied ten-year rate for properties with 50 percent to 59 percent loan-to-value ratios remaining in the 4.25 pecent range.
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 | 4/14/14 | Month earlier | |
| Office | 342 | 214 | 210 | 210 | 162 | 151 | 152 |
| Retail | 326 | 207 | 207 | 192 | 160 | 141 | 148 |
| Multifamily | 318 | 188 | 202 | 182 | 157 | 136 | 141 |
| Industrial | 333 | 201 | 205 | 191 | 159 | 139 | 144 |
| Average spread | 330 | 203 | 205 | 194 | 160 | 142 | 146 |
| 10-year Treasury | 3.83% | 3.29% | 0.88% | 1.64% | 3.04% | 2.75% | 2.75% |
The most recent Cushman & Wakefield (C&W) Equity, Debt, and Structured Finance Group’s monthly Capital Markets Update of commercial real estate mortgage spreads, dated March 5, 2014, showed spreads unchanged during the most recent survey period.
In its comment accompanying the survey, C&W noted the following:
- Floating-rate lenders (commercial mortgage–backed securities [CMBS], commercial banks, and public and private debt funds) are becoming increasingly active. Floating-rate loans are often used to finance transition properties, allowing the borrower to prepay without penalty, increase the loan based on increases in cash flow (and therefore property value), and pay for tenant and other capital improvements. Loans are priced at LIBOR plus a spread in the high 100s to 400s.
- Real Capital Analytics reported that U.S. real estate investment from China tripled last year while investment from Middle Eastern sources doubled during the period.
- CMBS delinquencies decreased for the ninth-consecutive month. Trepp LLC noted that this is the first time the rate has been below 7 percent since February 2010. Today’s rate is 264 basis points below where it stood a year ago.
Ten-Year Fixed-Rate Commercial Real Estate Mortgages (as of January 8, 2014) | |||
Property | Maximum loan-to-value | Class A | Class B |
| Multifamily (agency) | 75–80% | T +175 | T +180 |
| Multifamily (nonagency) | 70–75% | T +185 | T +195 |
| Anchored retail | 70–75% | T +205 | T +220 |
| Strip center | 65–70% | T +220 | T +235 |
| Distribution/warehouse | 65–70% | T +195 | T +210 |
| R&D/flex/industrial | 65–70% | T +210 | T +230 |
| Office | 65–75% | T +195 | T +215 |
| Full-service hotel | 55–65% | T +255 | T +280 |
| Debt-service-coverage ratio assumed to be greater than 1.35 to 1. | |||
Year-to-Date Public Equity Capital Markets
Dow Jones Industrial Average: –1.65%
Standard & Poor’s 500 Stock Index: +0.98%
NASD Composite Index (NASDAQ): +2.40%
Russell 2000: +2.59%
Morgan Stanley U.S. REIT Index: +5.30%
Year-to-Date Global CMBS Issuance | ||
2014 | 2013 | |
| U.S. | $15.6 | $21.6 |
| Non-U.S. | 0.5 | 2.5 |
| Total | $16.1 | $24.1 |
| Source: Commercial Mortgage Alert | ||
Year-to-Date Public U.S. Treasury Yields
U.S. Treasury Yields | |||
12/31/12 | 12/31/13 | 3/12/14 | |
| 3-month | 0.08% | 0.07% | 0.05% |
| 6-month | 0.12% | 0.10% | 0.06% |
| 2-year | 0.27% | 0.38% | 0.43% |
| 5-year | 0.76% | 1.75% | 1.71% |
| 7-year | 1.25% | 2.45% | 2.30% |
| 10-year | 1.86% | 3.04% | 2.75% |
