Monday’s Numbers: September 26, 2011

The Trepp LLC survey showed spreads continuing at current levels as everyone appears focused on an array of non-real estate factors and events such as the Federal Reserve doing the “Twist”, Euro-financial market confusion, and Sovereign risk, to name a few. Deals are continuing to get done at slightly wider spreads.

September 26, 2011

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“None Worth Mentioning”

For real estate, it was just another week; properties were bought and sold, financed and refinanced. Against this background, the news of the week was the Euro-crises and its extension from solely country (Sovereign) risk to questions about the solvency of Euro-banks and other financial institutions.

Against this backdrop, one wonders why the indices were only down between 5.0 percent and 9.0 percent; it could have been a rout!

In case you’re interested (or just a glutton for punishment), the damage was widespread:

Dow Jones Industrial Average: -6.41 percent
NASDAQ Composite: -5.30 percent
S & P 500 Index: -6.54 percent
NYSE Index: -7.86 percent
AMEX Index: -7.79 percent
Russell 2000: -8.65 percent
Morgan Stanley REIT Index: -8.88 percent

Monday’s Numbers

The Trepp LLC survey showed spreads continuing at current levels as everyone appears focused on an array of non-real estate factors and events such as the Federal Reserve doing the “Twist”, Euro-financial market confusion, and Sovereign risk, to name a few. Deals are continuing to get done at slightly wider spreads.

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	9/16/11
Office	342	214	220
Retail	326	207	211
Multifamily	318	188	208
Industrial	333	201	212
Average Asking Spread	330	203	207
10-Year Treasury	3.83%	3.29%	2.05%

We expect the Cushman & Wakefield Sonnenblick-Goldman Survey will be updated during the upcoming week. Based on anecdotal information, the survey’s spreads appear to be “market good”.

Property Type	Mid-Point of Fixed Rate Commercial Mortgage Spreads For 5 Year Commercial Real Estate Mortgages
	12/16/10	3/31/11	7/28/11	8/11/11	8/24/11
Multifamily - Non-Agency	+270	+245	+250	+255	+265
Multifamily – Agency	+280	+250	+240	+265	+250
Regional Mall	+280	+260	+280	+290	+290
Grocery Anchored	+280	+260	+270	+285	+285
Strip and Power Centers			+290	+300	+300
Multi-Tenant Industrial	+270	+265	+275	+295	+285
CBD Office	+280	+260	+275	+290	+290
Suburban Office	+300	+270	+295	+300	+300
Full-Service Hotel	+320	+300	+230	+320	+320
Limited-Service Hotel	+400	+325	+320	+340	+340
5-Year Treasury	2.60%	2.23%	1.49%	0.97%	0.96%
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	7/28/11	8/11/11	8/24/11
Multifamily - Non-Agency	+190	+180	+195	+240	+240
Multifamily – Agency	+200	+185	+190	+245	+230
Regional Mall	+175	+180	+205	+240	+255
Grocery Anchor	+190	+185	+195	+230	+250
Strip and Power Centers			+210	+250	+260
Multi-Tenant Industrial	+190	+190	+230	+240	+250
CBD Office	+180	+180	+225	+240	+255
Suburban Office	+190	+190	+235	+260	+260
Full-Service Hotel	+290	+230	+250	+275	+275
Limited-Service Hotel	+330	+260	+270	+295	+280
10-Year Treasury	3.47%	3.45%	2.97%	2.23%	2.16%
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	8/11/11	7/28/11	824/11
Multifamily – Non-Agency	+250-300	+225-325	+220-260	+200-250	+220-260
Multifamily- Agency	+300	+250-310	+230-270	+220-260	+230-270
Regional Mall	+275-300	+225-300	+220-270	+205-270	+220-270
Grocery Anchored	+275-300	+225-300	+210-275	+205-275	+210-275
Strip and Power Centers			+235-300	+225-300	+235-300
Multi-Tenant Industrial	+250-350	+250-350	+250-325	+230-325	+250-325
CBD Office	+225-300	+225-300	+235-300	+225-300	+235-300
Suburban Office	+250-350	+275-350	+265-325	+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%	0.21%	0.19%	0.22%
3-Month LIBOR	0.30%	0.28%	0.29%	0.25%	0.31%
* A dash (-) indicates a range.
Source: Cushman & Wakefield Sonnenblick Goldman.

Year-to-Date Public Equity Capital Markets

DJIA ⁽¹⁾: -6.96%
S & P 500⁽²⁾:-9.64%
NASDAQ⁽³⁾: -6.39%
Russell 2000 ⁽⁴⁾:-16.74%
MSCI U.S. REIT ⁽⁵⁾:-6.65%
_____
^{(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	9/23/2011
3-Month	0.12%	-0.01%
6-Month	0.18%	0.01%
2 Year	0.59%	0.21%
5 Year	2.01%	0.86%
10 Year	3.29%	1.83%

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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.