Monday’s Numbers: August 22, 2011

The Commercial Mortgage Alert Trepp weekly survey of 15 active portfolio lenders showed spreads widening 15+/- basis points week-over-week, putting them 35 to 50 basis points wider than at the beginning of the month. Everyone seems to be in a holding pattern, afraid to pull the trigger so to speak and get caught on the wrong side of a transaction having a 5 year or longer maturity. Our recommendation: wait out the days till Labor Day at the beach!

August 22, 2011

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“Slowdown Saps 4^th-Quarter CMBS Pipeline”

Volatility in the bond markets, gaping spreads, and increased origination costs are playing havoc with conduits, forcing many, if not all, to the sidelines. Lenders are invoking MAC (material adverse change) clauses and increasing spreads; borrowers are weighing their options i.e., talking with non-conduit lenders.

Monday’s Numbers
The Commercial Mortgage Alert Trepp weekly survey (below) of 15 active portfolio lenders showed spreads widening 15+/- basis points week-over-week and 35 to 50 basis points wider than at the beginning of the month. Everyone seems to be in a holding pattern, afraid to pull the trigger so to speak and get caught on the wrong side of a transaction having a 5 year or longer maturity. Our recommendation: wait out the days till Labor Day at the beach!

Asking Spreads over U.S. Treasury Bonds in Basis Points (10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value Ratios)
	12/31/09	12/31/10	8/12/11
Office	342	214	217
Retail	326	207	209
Multifamily	318	188	197
Industrial	333	201	206
Average Asking Spread	330	203	207
10-Year Treasury	3.83%	3.29%	2.25%

The Cushman & Wakefield Sonnenblick-Goldman Survey for the period ended August 11^th showed fixed rate spreads widening as much as 40, repeat, 40 basis points while floating rate spreads widened by 20 basis points at the low end of the range.

Property Type	Mid-Point of Fixed Rate Commercial Mortgage Spreads For 5 Year Commercial Real Estate Mortgages
	12/16/10	3/31/11	7/7/11	7/28/11	8/11/11
Multifamily - Non-Agency	+270	+245	+230	+250	+255
Multifamily – Agency	+280	+250	+220	+240	+265
Regional Mall	+280	+260	+265	+280	+290
Grocery Anchored	+280	+260	+250	+270	+285
Strip and Power Centers			+270	+290	+300
Multi-Tenant Industrial	+270	+265	+260	+275	+295
CBD Office	+280	+260	+260	+275	+290
Suburban Office	+300	+270	+270	+295	+300
Full-Service Hotel	+320	+300	+285	+2300	+320
Limited-Service Hotel	+400	+325	+310	+320	+340
5-Year Treasury	2.60%	2.23%	1.64%	1.49%	0.97%
Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type	Mid-Point of Fixed Rate Commercial Mortgage Spreads For 10 Year Commercial Real Estate Mortgages
	12/1610	3/31/11	7/7/11	7/28/11	8/11/11
Multifamily - Non-Agency	+190	+180	+185	+195	+240
Multifamily – Agency	+200	+185	+180	+190	+245
Regional Mall	+175	+180	+190	+205	+240
Grocery Anchor	+190	+185	+200	+195	+230
Strip and Power Centers			+195	+210	+250
Multi-Tenant Industrial	+190	+190	+190	+230	+240
CBD Office	+180	+180	+190	+225	+240
Suburban Office	+190	+190	+195	+235	+260
Full-Service Hotel	+290	+230	+235	+250	+275
Limited-Service Hotel	+330	+260	+250	+270	+295
10-Year Treasury	3.47%	3.45%	3.09%	2.97%	2.23%
Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type	Mid-Point of Floating-Rate Commercial Mortgage Spreads For 3 - 5 Commercial Real Estate Year Mortgages
	12/16/10	3/31/11	7/7/11	7/28/11	8/11/11
Multifamily – Non-Agency	+250-300	+225-325	+200-250	+200-250	+220-260
Multifamily- Agency	+300	+250-310	+220-260	+220-260	+230-270
Regional Mall	+275-300	+225-300	+205-270	+205-270	+220-270
Grocery Anchored	+275-300	+225-300	+205-275	+205-275	+210-275
Strip and Power Centers			+225-300	+225-300	+235-300
Multi-Tenant Industrial	+250-350	+250-350	+230-325	+230-325	+250-325
CBD Office	+225-300	+225-300	+215-300	+225-300	+235-300
Suburban Office	+250-350	+275-350	+250-325	+250-325	+265-325
Full-Service Hotel	+300-450	+350-450	+350-450	+350-450	+350-450
Limited-Service Hotel	+450-600	+400-500	+400-500	+400-500	+400-500
1-Month LIBOR	0.26%	0.22%	0.19%	0.19%	0.21%
3-Month LIBOR	0.30%	0.28%	0.25%	0.25%	0.29%
* A dash (-) indicates a range.
Source: Cushman & Wakefield Sonnenblick Goldman.

Year-to-Date Public Equity Capital Markets

DJIA ⁽¹⁾: -6.56%
S & P 500⁽²⁾:-10.66%
NASDAQ⁽³⁾: -11.72%
Russell 2000 ⁽⁴⁾:-16.84%
MSCI U.S. REIT ⁽⁵⁾:-4.55%

^{(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.}

U.S. Treasury Yields
	12/31/10	8/19/2011
3-Month	0.12%	0.00%
6-Month	0.18%	0.02%
2 Year	0.59%	0.19%
5 Year	2.01%	0.89%
10 Year	3.29%	2.07%

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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.