Monday’s Numbers: October 27, 2014

The Trepp survey for the week ending October 24, 2014, showed average spreads basically unchanged, with the implied rate for ten-year, modestly leveraged commercial real estate mortgages equaling 3.64 percent—100 basis points lower than year-end 2013.

October 27, 2014

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The Trepp survey for the week ending October 24, 2014, showed average spreads basically unchanged, with the implied rate for ten-year, modestly leveraged commercial real estate mortgages equaling 3.64 percent—100 basis points lower than year-end 2013. With just over eight weeks to year-end, the focus is solely on getting deals done, period, with plans for 2016 put on the back burner.

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 (10/17/14)	Last week (10/10/14)	Month earlier
Office	214	210	210	162	149	148	141
Retail	207	207	192	160	140	137	138
Multifamily	188	202	182	157	137	133	137
Industrial	201	205	191	159	140	137	137
Averagespread	203	205	194	160	142	139	138
10-yearTreasury	3.29%	2.88%	1.64%	3.04%	2.22%	2.36%	2.57%

The Cushman & Wakefield Equity, Debt, and Structured Finance Group’s monthly Capital Markets Update of commercial real estate mortgage spreads dated September 11, 2014, showed spreads increasing 10 to 15 basis points across the board compared with the prior survey (dated July 4) as lenders seem to be trying to make up some ground after the “great low spreads due to low Treasury yields giveaway” of the past few months. Even with the uptick in rates, it remains an attractive time to finance or refinance commercial real estate.

30-Year Fixed-Rate Commercial Real Estate Mortgages (as of September 11, 2014)
Property	Maximumloan-to-value	Class A	Class B/C
Multifamily (agency)	75–80%	T +160	T +170
Multifamily (nonagency)	70–75%	T +160	T +165
Anchored retail	70–75%	T +190	T +200
Strip center	65–70%	T +190	T +200
Distribution/warehouse	65–70%	T +175	T +200
R&D/flex/industrial	65–70%	T +195	T +205
Office	65–75%	T +185	T +190
Full-service hotel	55–65%	T +250	T +270
Debt-service-coverage ratio assumed to be greater than 1.35 to 1.

Year-to-Date Public Equity Capital Markets

Dow Jones Industrial Average: +1.38 percent

Standard & Poor’s 500 Stock Index: +6.29 percent

NASD Composite Index (NASDAQ): +7.35 percent

Russell 2000: –3.83 percent

Morgan Stanley U.S. REIT Index: +15.74 percent

Year-to-Date Global CMBS Issuance (in $ billions as of 10/24/14)
	2014	2013
U.S.	$74.7	$67.1
Non-U.S.	2.3	10.3
Total	$77.0	$77.4
Source: Commercial Mortgage Alert.

Year-to-Date U.S. Treasury Yields

U.S. Treasury Yields
	12/31/12	12/31/13	10/2/14
3-month	0.08%	0.07%	0.01%
6-month	0.12%	0.10%	0.05%
2-year	0.27%	0.38%	0.39%
5-year	0.76%	1.75%	1.49%
7-year	1.25%	2.45%	1.75%
10-year	1.86%	3.04%	2.28%

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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.