Monday’s Numbers: September 23, 2013

Year-to-date issuance of commercial mortgage–backed securities ($56.7 billion) has exceeded the entire amount ($54.3 billion) issued in 2012 and is well on its way to reaching $80 billion or higher, due to a potent combination of institutional investors chasing year-end yield, issuers intent on clearing their books of inventory of unsecuritized loans, and borrowers focused on closing deals before “tapering” becomes a reality and interest rates start to increase.

Monday’s Numbers

The Trepp survey for the period ending September 23, 2013, showed spreads widening slightly as the markets seemed to have settled in from their first exposure to “tampering.” Absent some form of economic and/or political shock to the system, we see spreads for the balance of the year trading in the 4.25 percent to 4.75 percent range.

The most recent Cushman & Wakefield Equity, Debt, and Structured Finance Group’s monthly survey of commercial real estate mortgage spreads dated September 9, 2013, showed spreads coming in 5 basis points during the survey period.

We expect the rest of the year to play out as follows: with interest rates expected to increase in the near future, borrowers will focus on closing committed deals as soon as possible so as to lock in today’s cheap financing. On the other hand, you will see lenders trying to dig in their heels and not get locked in to subpar returns for up to a ten-year holding. All-in costs should fall in the 4.50 to 5.00 percent range.

Year-to-Date Public Equity Capital Markets
DJIA ⁽¹⁾: +16.57%
S & P 500 ⁽²⁾:+19.65%
NASDAQ ⁽³⁾: +21.61%
Russell 2000 ⁽⁴⁾:+27.22%
Morgan Stanley U.S. REIT ⁽⁵⁾: +3.24%

^{(1) Dow Jones Industrial Average; (2) Standard & Poor’s 500 Stock Index; (3) NASD Composite Index; (4) Small-capitalization segment of U.S. equity universe; (5) Morgan Stanley REIT Index.}