The Trepp survey for the week ending November 14, 2014, showed spreads basically unchanged as the debt markets entered the listless pre–holiday period; the time period stretching from now through the end of the Thanksgiving weekend should be moribund, with not much happening that qualifies as newsworthy. Lenders and borrowers alike will focus solely on getting 2014’s remaining deals closed by year-end. If you could get a lender’s attention, she or he would likely quote an all-in cost for a pristine, low-leverage, gateway-market deal in the 3.5 percent–to–4 percent range.
Asking Spreads over U.S. Ten-Year Treasury Bonds in Basis Points | |||||||
12/31/10 | 12/31/11 | 12/31/12 | 12/31/13 | This week (11/14/14) | Last week (11/7/14) | Month earlier | |
| Office | 214 | 210 | 210 | 162 | 149 | 148 | 149 |
| Retail | 207 | 207 | 192 | 160 | 141 | 139 | 140 |
| Multifamily | 188 | 202 | 182 | 157 | 138 | 135 | 136 |
| Industrial | 201 | 205 | 191 | 159 | 141 | 139 | 140 |
Average spread | 203 | 205 | 194 | 160 | 142 | 140 | 140 |
10-year Treasury | 3.29% | 2.88% | 1.64% | 3.04% | 2.32% | 2.38% | 2.21% |
The Cushman & Wakefield Equity, Debt, and Structured Finance Group’s monthly Capital Markets Update of commercial real estate mortgage spreads dated November 6 shows no change in required spreads as compared with 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.
So long as event risk is off the table, everything remains right with the financial world.
30-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 (nonagency) | 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: +7.44 percent
Standard & Poor’s 500 Stock Index: +11.64 percent
NASD Composite Index (NASDAQ): +12.84 percent
Russell 2000: +0.75 percent
Morgan Stanley U.S. REIT Index: +18.38 percent
Year-to-Date Global CMBS Issuance (in $ billions as of 11/21/14) | ||
| 2014 | 2013 | |
| U.S. | $81.5 | $77.8 |
| Non-U.S. | 4.5 | 11.7 |
| Total | $85.9 | $89.6 |
| Source: Commercial Mortgage Alert. | ||
Year-to-Date U.S. Treasury Yields
U.S. Treasury Yields | |||
| 12/31/12 | 12/31/13 | 11/21/14 | |
| 3-month | 0.08% | 0.07% | 0.01% |
| 6-month | 0.12% | 0.10% | 0.07% |
| 2-year | 0.27% | 0.38% | 0.51% |
| 5-year | 0.76% | 1.75% | 1.63% |
| 7-year | 1.25% | 2.45% | 2.00% |
| 10-year | 1.86% | 3.04% | 2.38% |
