Monday’s Numbers: October 3, 2011

The Trepp LLC survey showed spreads widening dramatically during the survey period (an average of 15+/- basis points) as concern about non-real estate factors such as the Federal Reserve’s activities, the Euro-financial market crises, and the a perceived increase in Sovereign risk, to name a few, weighed on lenders minds and lending strategies.

October 3, 2011

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“Partners Tap Bank of China For New York City Trophy Loan”

The owners of two, adjacent New York City office buildings have selected the Bank of China to originate a $400 million long-term, interest only first mortgage, the proceeds of which will be used to pay down existing construction financing provided by two international banks.

This is the third large-scale New York office building loan won by the Bank of China; the first was an $800 million loan for 245 Park Avenue (November 2010) which was followed by a $250 million loan secured by 3 Columbus Circle (aka 1775 Broadway) originated in April 2011.

Monday’s Numbers

The Trepp LLC survey showed spreads widening dramatically during the survey period (an average of 15+/- basis points) as concern about non-real estate factors such as the Federal Reserve’s activities, the Euro-financial market crises, and the a perceived increase in Sovereign risk, to name a few, weighed on lenders minds and lending strategies.

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	9/23/11
Office	342	214	237
Retail	326	207	227
Multifamily	318	188	222
Industrial	333	201	229
Average Asking Spread	330	203	228
10-Year Treasury	3.83%	3.29%	1.83%

The Cushman & Wakefield Sonnenblick-Goldman Survey for the period ending September 30 showed less volatility than the Trepp survey with 10-year fixed rate spreads hovering around 250 basis points (with the exception of hotels). Our anecdotal sense is that lender mandated floors are creeping into more and more transactions as lenders seek to protect spreads, margins, and themselves from increased volatility

Property Type	Mid-Point of Fixed Rate Commercial Mortgage Spreads For 5 Year Commercial Real Estate Mortgages
	12/31/10	3/31/11	8/11/11	8/24/11	9/30/11
Multifamily - Non-Agency	+270	+245	+255	+265	+250
Multifamily – Agency	+280	+250	+265	+250	+255
Regional Mall	+280	+260	+290	+290	+300
Grocery Anchored	+280	+260	+285	+285	+290
Strip and Power Centers			+300	+300	+310
Multi-Tenant Industrial	+270	+265	+295	+285	+295
CBD Office	+280	+260	+290	+290	+290
Suburban Office	+300	+270	+300	+300	+310
Full-Service Hotel	+320	+300	+320	+320	+335
Limited-Service Hotel	+400	+325	+340	+340	+345
5-Year Treasury	2.60%	2.23%	0.97%	0.96%	0.99%
Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type	Mid-Point of Fixed Rate Commercial Mortgage Spreads For 10 Year Commercial Real Estate Mortgages
	12/31/10	3/31/11	8/11/11	8/24/11	9/30/11
Multifamily - Non-Agency	+190	+180	+240	+240	+240
Multifamily – Agency	+200	+185	+245	+230	+235
Regional Mall	+175	+180	+240	+255	+250
Grocery Anchor	+190	+185	+230	+250	+240
Strip and Power Centers			+250	+260	+255
Multi-Tenant Industrial	+190	+190	+240	+250	+250
CBD Office	+180	+180	+240	+255	+250
Suburban Office	+190	+190	+260	+260	+255
Full-Service Hotel	+290	+230	+275	+275	+300
Limited-Service Hotel	+330	+260	+295	+280	+325
10-Year Treasury	3.47%	3.45%	2.23%	2.16%	2.01%
Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type	Mid-Point of Floating-Rate Commercial Mortgage Spreads For 3 - 5 Commercial Real Estate Year Mortgages
	12/31/10	3/31/11	8/11/11	8/24/11	9/30/11
Multifamily – Non-Agency	+250-300	+225-325	+220-260	+220-260	+225-250
Multifamily- Agency	+300	+250-310	+230-270	+230-270	+230-265
Regional Mall	+275-300	+225-300	+220-270	+220-270	+225-275
Grocery Anchored	+275-300	+225-300	+210-275	+210-275	+215-275
Strip and Power Centers			+235-300	+235-300	+225-300
Multi-Tenant Industrial	+250-350	+250-350	+250-325	+250-325	+250-325
CBD Office	+225-300	+225-300	+235-300	+235-300	+240-300
Suburban Office	+250-350	+275-350	+265-325	+265-325	+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%	0.21%	0.22%	0.24%
3-Month LIBOR	0.30%	0.28%	0.29%	0.31%	0.37%
* A dash (-) indicates a range.
Source: Cushman & Wakefield Sonnenblick Goldman.

Year-to-Date Public Equity Capital Markets

DJIA ⁽¹⁾: -5.74%
S & P 500⁽²⁾:-10.04%
NASDAQ⁽³⁾: -8.95%
Russell 2000 ⁽⁴⁾:-17.81%
MSCI U.S. REIT ⁽⁵⁾:-8.21%
_____
^{(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	9/30/2011
3-Month	0.12%	0.02%
6-Month	0.18%	0.05%
2 Year	0.59%	0.24%
5 Year	2.01%	0.95%
10 Year	3.29%	1.92%

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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.