The Trepp survey for the week ending September 5, 2014, again showed average spreads literally unchanged as the markets got back after the three-day holiday weekend, rested and ready to take on the world’s challenges. If you are planning financing and/or refinancing this year, now is the time to put the pedal to the floor. Lenders are checking their dance cards, matching borrowers with available capital. Absent a “black swan” event, rates should trade in a narrow range through year-end.
The implied rate for ten-year, modestly leveraged commercial real estate mortgages equaled 3.85 percent, 79 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 (9/5/14) | Last week (8/29/14) | Month earlier | |
Office | 214 | 210 | 210 | 162 | 146 | 150 | 148 |
Retail | 207 | 207 | 192 | 160 | 143 | 142 | 140 |
Multifamily | 188 | 202 | 182 | 157 | 140 | 140 | 138 |
Industrial | 201 | 205 | 191 | 159 | 140 | 140 | 138 |
Average spread | 203 | 205 | 194 | 160 | 143 | 143 | 141 |
10-year Treasury | 3.29% | 2.88% | 1.64% | 3.04% | 2.42% | 2.46% | 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 percent 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: +2.48 percent
Standard & Poor’s 500 Stock Index: +7.42 percent
NASD Composite Index (NASDAQ): +9.36 percent
Russell 2000: –0.26%
Morgan Stanley U.S. REIT Index: +10.09 percent
Year-to-Date Global CMBS Issuance (in $ billions as of 8/29/14) | ||
2014 | 2013 | |
U.S. | $59.3 | $56.7 |
Non-U.S. | 1.9 | 8.5 |
Total | $61.3 | $65.1 |
Source: Commercial Mortgage Alert. |
Year-to-Date U.S. Treasury Yields
U.S. Treasury Yields | |||
12/31/12 | 12/31/13 | 9/5/14 | |
3-month | 0.08% | 0.07% | 0.02% |
6-month | 0.12% | 0.10% | 0.05% |
2-year | 0.27% | 0.38% | 0.58% |
5-year | 0.76% | 1.75% | 1.53% |
7-year | 1.25% | 2.45% | 2.29% |
10-year | 1.86% | 3.04% | 2.62% |