Category: Commercial Mortgage Lending
Commercial Property Prices Continue to Rise
Prices on commercial real estate assets continued to move upward in July, the most recent period for which data is available, according to Moody’s/RCA Commercial Property Price Indices (CPPI). The all-property composite index rose 0.7 percent during the month, and 2.8 percent during the three-month period leading to July 31.
Prices on retail assets rose the most in July, by 1.7 percent, followed by prices on apartment buildings, which rose by 1.0 percent. Prices on office properties moved up 0.2 percent.
Read entire article at National Real Estate Investor
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CMBS Lenders Jack Up Loan Spreads; Others Follow Suit
Commercial Real Estate Direct Staff Report
Lenders in recent weeks have responded to the volatility rocking the CMBS market by increasing the premiums, or spreads, they use to determine their loan rates.
Their loan spreads are now 235-250 basis points more than swaps, up from 175-200 bps two months ago. But because Treasury rates, from which swap rates are derived, have declined since July, the overall rates that borrowers are seeing haven’t increased much.
While CMBS lenders have been most impacted – spreads for benchmark CMBS are now some 25 bps wider than they were two months ago, and for lower-rated classes, spreads are 75 bps wider – other lenders are following suit.
CMBS lenders are now quoting rates of 4.5 percent to 4.75 percent. While those are still historically low levels, they’re up from the 4.15-4.3 percent rates that were commonly seen earlier in the year.
Other lenders, including life insurance companies, banks and the housing-finance
agencies, haven’t widened their spreads as much as CMBS lenders – they’ve widened them by at least 20 bps – so they’re evidently not taking advantage of volatile market conditions to pick up market share. That’s in part because they might not be able to. Still, they’re hotly pursuing low-leverage loans against favored property types in strong locations.
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Commercial Real Estate Finance
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CMBS Pricing Is Uncertain Amid “Skittish” Market
Anyone watching the CMBS investment market in recent weeks has seen some warning signs. Spreads have widened, while ratings agencies such as Moody’s have expressed concerns about “deteriorating credit quality.”
“There is some definite nervousness in the market, and it is not clear yet which way the market will move,” says Manus Clancy, senior managing director at research firm Trepp. CMBS spreads started to widen in June, including one big move that occurred in late June/early July and a second big move in early August as it relates to new issuance.
“We believe that has more to do with the general skittishness of the global economy, the slowing growth in China and the potential unintended consequences of a rate hike from the Fed than it has to do with the credit quality of CMBS per se,” says Clancy.
Read entire article here in National Real Estate Investor
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Baby Boomers, Less Homeownership Supports Apartment Markets
The apartment business is depending on strong demographics and stronger demand to keep absorbing the hundreds of thousands of apartments still planned to open this year.
“In 2014, apartment rents grew 4.6 percent despite a fairly good amount of supply,” says K.C. Sanjay, senior economist for data firm Axiometrics. “The reason for this is the job growth, right above 200,000 new jobs a month, and rental household formation.”
That’s sounds like a solid foundation for strong demand for apartments. But a close look at the demographics shows a few odds twists and turns in the data. The growing number of U.S. households turns out to be largely due to an aging population, not young Millennials with new jobs, according to a recent report by the Terner Center for Housing Innovation at the University of California at Berkeley. Also, an unusually low rate of homeownership is driving people to rental housing—but that can’t last forever, reports Axiometrics.
Read entire article here in National Real Estate Investor
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