The Trepp survey for the week ending August 22 shows average spreads literally unchanged as the markets hoped that all would remain quiet in Gaza, the Ukraine, and Iraq, and that the U.S. economy would continue to improve. The last two weeks of August through the Labor Day holiday are consider prime vacation time on Wall Street, and this year is no exception. There was hardly anyone around to survey last week; they were all at the beach (as were we). Things will pick up rapidly beginning Tuesday as deal makers start to focus on closing deals by year-end.
The implied rate for ten-year, modestly leveraged commercial real estate mortgages remained at 373 basis points—81 basis points lower than at year-end 2013.
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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 (8/22/14) | Last week (8/15/14) | Month | |
Office | 214 | 210 | 210 | 162 | 145 | 146 | 141 |
Retail | 207 | 207 | 192 | 160 | 138 | 138 | 135 |
Multifamily | 188 | 202 | 182 | 157 | 138 | 137 | 130 |
Industrial | 201 | 205 | 191 | 159 | 136 | 136 | 132 |
Average spread | 203 | 205 | 194 | 160 | 139 | 139 | 135 |
10-year Treasury | 3.29% | 2.88% | 1.64% | 3.04% | 2.34% | 2.34% | 2.47% |
The Cushman & Wakefield Equity, Debt, and Structured Finance Group’s monthly Capital Markets Update of commercial real estate mortgage spreads, dated August 7, showed spreads coming in approximately 5 basis points as compared with the prior survey, dated June 10, as lenders continue to compete for business; implied all-in cost ranges from 4.25 to 4.50 percent.
Ten-Year Fixed-Rate Commercial Real Estate Mortgages (as of August 7, 2014) | |||
Property | Maximum loan-to-value | Class A | Class B/C |
Multifamily (agency) | 75–80% | T +160 | T +170 |
Multifamily (nonagency) | 70–75% | T +155 | T +160 |
Anchored retail | 70–75% | T +175 | T +185 |
Strip center | 65–70% | T +175 | T +185 |
Distribution/warehouse | 65–70% | T +175 | T +185 |
R&D/flex/industrial | 65–70% | T +185 | T +190 |
Office | 65–75% | T +175 | T +185 |
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: +3.15 percent
Standard & Poor’s 500 Stock Index: +8.39 percent
NASD Composite Index (NASDAQ): +9.67 percent
Russell 2000: +0.92 percent
Morgan Stanley U.S. REIT Index: +15.56 percent
Year-to-Date Global CMBS Issuance (in $ billions as of 8/22/14) | ||
2014 | 2013 | |
U.S. | $54.9 | $56.4 |
Non-U.S. | 1.9 | 7.8 |
Total | $56.8 | $64.2 |
Source: Commercial Mortgage Alert. |
Year-to-Date Public U.S. Treasury Yields
U.S. Treasury Yields | |||
12/31/12 | 12/31/13 | 8/30/14 | |
3-month | 0.08% | 0.07% | 0.03% |
6-month | 0.12% | 0.10% | 0.05% |
2-year | 0.27% | 0.38% | 0.50% |
5-year | 0.76% | 1.75% | 1.63% |
7-year | 1.25% | 2.45% | 2.05% |
10-year | 1.86% | 3.04% | 2.34% |