Monday’s Numbers: September 5, 2011

If you want to understand why rates quoted by conduits have increased during the past few months, look no further than the trading spreads being quoted on the securities created by the pooling of commercial and multifamily mortgage loans of cash flows from the underlying mortgages.

September 6, 2011

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“Commercial Mortgage-Backed Securities Widen Substantially Over Past Three Month”

If you want to understand why rates quoted by conduits have increased during the past few months, look no further than the trading spreads being quoted on the securities created by the pooling of commercial and multifamily mortgage loans (the trading spreads post the “slicing, dicing, and pricing) of cash flows from the underlying mortgages, as follows. If the buyer’s of the underlying securities are demanding higher yields, someone has to pay for it!

CMBS 2.0 Conduit Spreads as of August 31, 2011
Fixed Rate	Priced as Spread over	August 31	3 Months Earlier	6 Months Earlier

AAA (5 Year)	10-Year Swaps	186	122	112
AAA (10-Year)	10-Year Swaps	211	153	140
AA (10-Year)	10-Year Swaps	337	231	215
A (10 Year)	10-Year Swaps	419	280	258
BBB (10-Year)	10-Year Treasury	651	395	368
BBB- (10 Year)	10-Year Treasury	659	403	373
Benchmarks as of August 31^st: 10-year Treasury Bonds = 2.232%; 10-year Interest Rate Swaps = 2.412%
Source: Trepp LLC.

Monday’s Numbers

The Trepp LLC survey will not be updated until after Labor Day.

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 will be updated after the Labor Day holiday.

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⁾: -2.91%
S & P 500⁽²⁾:-6.65%
NASDAQ⁽³⁾: -6.50%
Russell 2000 ⁽⁴⁾:-12/79%
MSCI U.S. REIT ⁽⁵⁾:-0.69%

^{(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	9/2/2011
3-Month	0.12%	0.02%
6-Month	0.18%	0.05%
2 Year	0.59%	0.20%
5 Year	2.01%	0.86%
10 Year	3.29%	1.99%

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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.