CAPITAL MARKETS
UPDATE
October 8, 2014
Market Commentary
U.S. payroll
employment
increased
by 248,000
jobsHurricane
in September. In
••Market
activity
was disrupted
a bit last
week after
addition,
the
level
of
employment
in
both
July
and
August
was revised
Sandy battered the Northeast and Mid-Atlantic, but essential
upward.
We
expect
employment
growth
to
remain
strong
throughout
infrastructure (trains, phone lines, electricity, etc.) has gradually the
coming
year, and
boosting
demand
for all forms
of commercial
real estate. See
been
restored
we do
not foresee
any significant
on-going
our
C&W
Research
Publication
attached.
effects on the capital markets.
• In an effort to deploy their remaining 2012 allocations, many
• As employment
continues to rise, the odds that the Federal Reserve will
insurance
companies
have removed interest rate floors and
start to raise short term interest rates increases as well. The timing and
narrowed their spreads. For high quality, core mortgages, interest
extent of the interest rate increases will depend on how the economy
rates are in the mid 2%s for 3-years, mid to high 2%s for 5-years,
performs over the next several months, but there seems to be a
high 2%s to low 3%s for 7-years, and mid 3%s for 10 years. These
consensus that the Fed will start to test rate increases in the first half of
rates will likely increase 15-25 bps after December 31 as
2015.
insurance companies start fresh with their 2013 allocations.
More than recently
$26 billion
of CMBS
priced floating
in the inrate
3Q bringing
YTD totals to
•• Northstar
priced
a $351M
CMBS transaction,
$64.8
billion of that
pricedtransitional
in September.
Even withat
thea flood
which
is billion.
backed$11.6
by mortgages
against
properties,
of
deals
to
hit
the
market,
AAA
pricing
remained
steady
in
the
+ 80s.
weighted average rate of L + 163. It is the first such deal since S2007
Although
$100
billion
is
likely
out
of
reach
for
calendar
year
2014,
2014
and presents the opportunity for other similar transactions.
origination
should
exceed
2013
and
the
outlook
for
the
CMBS
market
is
• Opportunity funds that are struggling to find enough return
positive.
potential on existing properties are increasingly considering common
and preferred equity for development, mostly multifamily and some
• In addition to a liquid CMBS market, life companies, banks, debt funds, and
condominium developments, in major markets. Although this is good
mortgage REITs are all very actively originating loans. The increased
news only for developers right now, this may benefit operators in the
competition continues to increase financing options for transitional assets
future if these developments payoff within the funds' investment
and new developments and allow for more flexible terms on cash flowing
periods and the funds are able to consider more core-plus
deals. There is also a deep market for subordinate debt options for both
transactions in the future.
cash flowing and transitional properties up to 90%+ LTV.
Subscribers to the2Bloomberg Professional
service
3
4 can access the C&W EDSF
5 Capital Markets 8Update by typing CWSG<GO>.
10
RECENT DEALS/CLOSINGS/QUOTES – DEBT
Asset Type
Type of Financing
Type of Lender
Multifamily
Fixed
CMBS
Multifamily
Fixed
Agency
Multifamily
Fixed
Agency
Office - Suburban
Fixed
CMBS
Office - Suburban
Fixed
CMBS
Office
Fixed
Bank
Office
Fixed
Life Company
Office
Fixed
CMBS
Office
Fixed
CMBS
Office
Fixed
CMBS
Mixed-Use - Development
Floating
Bank
Retail - Single Tenant
Fixed
CMBS
Retail - Single Tenant
Fixed
CMBS
Office
Fixed
Life Company
Office - Value Add
Floating
Debt Fund
Rate/Return
S + 175
T + 160
T + 175
S + 170
S + 215
S + 150
T + 170
S + 175
S + 215
S + 235
L + 250
S + 153
S + 148
T + 130
L + 420
Loan-to-Value
78%
75%
80%
75%
75%
70%
70%
75%
70%
75%
60%
55%
55%
50%
75%
RECENT DEALS/CLOSINGS/QUOTES - EQUITY
Asset Type
Type of Financing Type of Investor
Office - Suburban
JV Equity Opportunity Fund
Multifamily
JV Equity
Life Company
Mixed-Use - Value Add
JV Equity Opportunity Fund
Multi-Family - Development
JV Equity Opportunity Fund
Mixed-Use - Value Add
JV Equity Opportunity Fund
Target Return
20.0%
10.0%
20.0%
22.0%
20.0%
Equity Contribution Levels
90%/10%
49%/51%
75%/25%
90%/10%
75%/25%
2
3
4
SENIOR & SUBORDINATE LENDING SPREADS
Maximum Loan-to-Value
DSCR
Spreads
Fixed Rate - 5 Years
65 - 75% (1)
1.30 - 1.50 T + 135 - 285
Fixed Rate - 10 Years
65 - 75% (1)
1.30 - 1.50 T + 125 - 265
Floating Rate - 5 Years
Core Asset
<65% (2)
1.30 - 1.50
L + 130 - 215
Value Add Asset
<65% (2)
1.25 - 1.40
L + 200 - 400
Mezzanine Moderate Leverage
65 - 80%
1.05 - 1.15
L + 575 - 800
Mezzanine High Leverage
75 - 90%
L + 800 - 1400
(1) 70-75% for Multi-Family (non-agency) (2) Libor floors at 0-0.50%
10-YEAR FIXED RATE RANGES BY ASSET CLASS
Maximum Loan-to-Value
Class A
Class B/C
Anchored Retail
70 - 75%
T + 185
T + 195
Strip Center
65 - 75%
T + 185
T + 195
Multi-Family (non-agency)
75 - 80%
T + 160
T + 170
Multi-Family (agency)
75 - 80%
T + 170
T + 175
Distribution/Warehouse
65 - 70%
T + 185
T + 195
R&D/Flex/Industrial
65 - 70%
T + 190
T + 200
Office
65 - 75%
T + 180
T + 190
Full Service Hotel
55 - 65%
T + 245
T + 265
* DSCR assumed to be greater than 1.25x
New York - HQ
1290 Avenue of the
Americas, 8th Floor
New York, NY
212 841 9200
Atlanta
55 Ivan Allen Jr.
Blvd., Suite 700
Atlanta, GA
404 875 1000
Boston
225 Franklin St.
Suite 300
Boston, MA
617 330 6966
Chicago
200 S. Wacker
Dr., Suite 2800
Chicago, IL
312 470 1800
800%
Term
10 years
10 years
7 years
10 years
5 years
10 years
10 years
10 years
7 years
7 years
2+1+1
10 years
10 years
10 years
3+1+1
18
10
Amortization/Comments
30 year, 5 Years IO
30 year, 4 Years IO; 0.5% fee
30 year, 2 Years IO; 0.5% fee
30 year, 5 Years IO; 9.5% DY
30 year, 9.5% DY
30 year
30 year
30 year, 1 Year IO; 8% DY
30 year, 3 Years IO
30 year, 1 Year IO
IO
IO, 12% DY
30 year, 12% DY
IO, 0.4% fee
30 year, 3 Years IO; 1% fee
Comments/Promote
20% > 12%, 30% > 18%, 35% > 22%
15% > 8%, 20% > 12%
10% > 15%, 20% > 20%
10% > 8%, 25% > 15%; 35% > 20%
15% > 15%, 20% > 20%
BASE RATES
October 8, 2014 Two Weeks Ago
One Year Ago
30 Day LIBOR
0.15%
0.15%
0.17%
U.S. Treasury
5 Year
1.63%
1.82%
1.42%
10 Year
2.35%
2.57%
2.67%
Swaps
Current Swap Spreads
5 Year
1.82%
0.19%
10 Year
2.51%
0.16%
Source: Bloomberg, Board of Governors of the Federal Reserve System
Cushman & Wakefield Equity, Debt & Structured Finance ("EDSF") has arranged
approximately $25 billion of capital from more than 125 capital sources for 270
transactions in the past five years. For more information on this report or on
how we can assist your financing needs or hospitality sales, please contact any of
our offices or:
Steven A. Kohn
President, EDSF
(212) 841-9216
[email protected]
Los Angeles
New Jersey
10250 Constellation One Meadowlands
Blvd., Suite 2200
Plaza, Suite 700
Los Angeles, CA
East Rutherford, NJ
213 955 5100
201 935 4000
Phoenix
2555 E. Camelback
Road, Suite 300
Phoenix. AZ
602 253 7900
Christopher T. Moyer
Director
(212) 841-9220
[email protected]
San Diego
San Francisco
4747 Executive Dr. 425 Market Street
Suite 900
Suite 2300
San Diego, CA
San Francisco, CA
858 452 6500
415 397 1700
Washington, D.C.
2001 K St., NW
Suite 700
Washington, DC
202 467 0600
Although we believe the above information to be reliable, we make no guarantee, warranty or representation about it. Any opinions or estimates contained in this update represent the current judgment of Cushman & Wakefield, Inc., and are subject to change without notice. We undertake no
responsibility or obligation to revise or update any of our opinions or estimates. Rates and analysis are based on certain assumptions with respect to significant factors that may prove to be incorrect. You should understand the assumptions and evaluate whether they are appropriate for your purposes.