MARKET
UPDATE
May 10, 2013
May 10, 2013
COMMERCIAL REAL ESTATE
FINANCE UPDATE
Don't get caught with life companies out of allocation as we approach the second half of the year. Reminds me of a great joke, which I will spare my readers. Call if you really want to hear it. Point being that we have seen a tremendous level of financing activity this year, and at some point, particularly with these low rates, we are going to see the life companies pull back due to allocations achieved for the year.
Rates continue to remain incredibly low, as we are seeing some 10 year fixed rate life company financing in the high 3's, and even had one very low leverage 10-year fixed rate deal at 3.20%! Note that the stars must all align for these low rates, and these rates are reserved for no brainers and minimum loan sizes of $5 million plus. We expect rates to remain low as long as the FED keeps stimulating, China' s economy slows, Europe remains in economic peril, and job creation continues to struggle. However, when the FED stops stimulating, and these other concerns turn positive, rates will rise, and will do so quickly. If housing construction does not slow at that point as a result of increased rates, we will see even more pressure at that point for rates to increase. Bernanke indicated the FED plans to cut back stimulus from $85 billion to $50 billion per month by the 4thQ 2013
Don't get caught with life companies out of allocation as we approach the second half of the year. Reminds me of a great joke, which I will spare my readers. Call if you really want to hear it. Point being that we have seen a tremendous level of financing activity this year, and at some point, particularly with these low rates, we are going to see the life companies pull back due to allocations achieved for the year.
Rates continue to remain incredibly low, as we are seeing some 10 year fixed rate life company financing in the high 3's, and even had one very low leverage 10-year fixed rate deal at 3.20%! Note that the stars must all align for these low rates, and these rates are reserved for no brainers and minimum loan sizes of $5 million plus. We expect rates to remain low as long as the FED keeps stimulating, China' s economy slows, Europe remains in economic peril, and job creation continues to struggle. However, when the FED stops stimulating, and these other concerns turn positive, rates will rise, and will do so quickly. If housing construction does not slow at that point as a result of increased rates, we will see even more pressure at that point for rates to increase. Bernanke indicated the FED plans to cut back stimulus from $85 billion to $50 billion per month by the 4thQ 2013
Remember, you need a 20% increase in
your gross income
to overcome a 1% increase in interest rates.
to overcome a 1% increase in interest rates.
______________________________________________________________________
Deals of the
Month
|
|
$50,000,000
life company permanent for a 203-unit luxury apartment building over ground
floor retail, 10/30 with 5 years interest only. CLOSED
$9,400,000 bridge loan on a 62% leased 71,000 SF strip retail center on the following terms: 6% for a 5-year term amortized over 30 years with one of our many bridge lenders. CLOSED
$6,350,000 correspondent Life Company Forward Commitment Escondido owner-user build to suit warehouse 4.35%, 15/15 (borrower’s request to match lease term), rate locked in June prior to construction of improvements for a forward funding in December upon completion of construction. CLOSED
$25,000,000
on an investment grade lease with 16 years remaining on a 177,000 SF office
building. CMBS 10/30, 76% loan-to-purchase. CLOSED
$6,300,000 on
a 32,770 SF Rite Aid anchored neighborhood shopping center in Indio with
a conduit lender. CLOSED$9,400,000 bridge loan on a 62% leased 71,000 SF strip retail center on the following terms: 6% for a 5-year term amortized over 30 years with one of our many bridge lenders. CLOSED
$6,350,000 correspondent Life Company Forward Commitment Escondido owner-user build to suit warehouse 4.35%, 15/15 (borrower’s request to match lease term), rate locked in June prior to construction of improvements for a forward funding in December upon completion of construction. CLOSED
$2,850,000
correspondent life company permanent for a 35,000 SF single tenant office
building in Irvine, CA. CLOSED
$2,400,000 correspondent life company permanent for a 22,350 SF multi-tenant retail center in Torrance, CA. CLOSED
$1,500,000 regional bank construction loan retail center. IN CLOSING
$1,000,000 regional bank permanent single tenant auto repair in El Cajon, CA IN CLOSING
$2,400,000 correspondent life company permanent for a 22,350 SF multi-tenant retail center in Torrance, CA. CLOSED
$1,500,000 regional bank construction loan retail center. IN CLOSING
$1,000,000 regional bank permanent single tenant auto repair in El Cajon, CA IN CLOSING
RATES
Life Companies: 5-Year Fixed 3.05% - 4.00%; 10-Year Fixed 3.20% - 4.25%
Multifamily: 5-Year Fixed 2.98% - 3.50%; 10-Year Fixed 3.88% -4.30%
Bridge Loans: $8 Million+ / 3-years plus options to extend, Fixed 5.5% - 6%
$1 Million+ / 3-years plus options to extend, Fixed 6.5% - 9%Construction Loans: LIBOR+275-400
Life Companies: 5-Year Fixed 3.05% - 4.00%; 10-Year Fixed 3.20% - 4.25%
Multifamily: 5-Year Fixed 2.98% - 3.50%; 10-Year Fixed 3.88% -4.30%
Bridge Loans: $8 Million+ / 3-years plus options to extend, Fixed 5.5% - 6%
$1 Million+ / 3-years plus options to extend, Fixed 6.5% - 9%Construction Loans: LIBOR+275-400
10-Year Treasury
Forecast The average
forecast of the 71 economists surveyed by Bloomberg in April moved their
median estimates for the 10-year Treasury yield up from 1.80% to 1.90% for
the 1st Q 2013, down from 2.62% to 2.58% for the 2nd Q 2014 and up to 2.89% for
the d Q 2014. The lowest estimates were 1.70%, up from 1.60%, 1.77% down from
1.90%, and 1.80% down from 2.08% respectively.
10 year Treasury Rates moved
up over 2.0% the highest level since April last year and up 35 bps since the
middle of December. The Fed continues to be the largest buyer of Treasuries to
try to keep rates down. The question is, how long will the FED continue to buy
Treasuries at this rate and what is the price point needed to attract other
buyers?
Expert's
Opinions
If you are interested in access to just about every major
financial publication’s editorials, check the following website and save it in
your bookmarks: http://www.realclearmarkets.com
PIMCO's View on the Housing Market's Road to Recovery:
http://www.pimco.com/EN/Insights/Pages/The-Housing-Markets-Road-to-Recovery-Slower-Speed-Limits-and-Stricter-Enforcement.aspx
Europe's Sovereign Debt Problem: http://www.pimco.com/EN/Insights/Pages/Europes-Sovereign-Debt-Problem-A-Call-for-a-Clear-Destination.aspx
PIMCO's View on the Housing Market's Road to Recovery:
http://www.pimco.com/EN/Insights/Pages/The-Housing-Markets-Road-to-Recovery-Slower-Speed-Limits-and-Stricter-Enforcement.aspx
Europe's Sovereign Debt Problem: http://www.pimco.com/EN/Insights/Pages/Europes-Sovereign-Debt-Problem-A-Call-for-a-Clear-Destination.aspx
Ports Of Long Beach &
Los Angeles Driving Our Local
Economy:
Port of Long Beach: http://www.polb.com/economics/default.asp
Long Beach Container Data: http://www.polb.com/economics/stats/tonnage.asp
Port of Los Angeles: http://www.portoflosangeles.org/
Los Angeles Container Data: http://www.portoflosangeles.org/maritime/stats.asp
______________________________________________________________________________Port of Long Beach: http://www.polb.com/economics/default.asp
Long Beach Container Data: http://www.polb.com/economics/stats/tonnage.asp
Port of Los Angeles: http://www.portoflosangeles.org/
Los Angeles Container Data: http://www.portoflosangeles.org/maritime/stats.asp
The Month In
Review
The 10-year Treasury opened at
1.81% this morning (May 7), down from 2.05% on March
15. May 7 opened with oil at $92.55, the Euro at $1.301 vs. the Dollar and Gold
at $1,590.95. Key contributors to last month's rate movement were as
follows:
- The Dow's winning streak of 10-days was the longest in nearly 17 years, pushing the DOW up 484 points (3.4%) to 14,539.
- The FED said consumer prices increased in February at the fastest pace in nearly three years, up 0.7%, raising concerns of rising inflation.
- Fear of a revived Euro debt crisis faded as Bernanke said that the Cyprus crisis posed no major risk to the US economy. However, the Euro debt crisis is still a mess and years from recovery.
- The FED also indicated that the economy has strengthened after pausing late last year, but still needs support from the central bank.
- Corporate earnings reports are beating most expectations.
- Factory orders surged in February, as orders for durable goods climbed 5.7% from the previous month.
- Housing prices rose in January at the fastest pace since the summer of 2006, up 8.1% over January 2012.
- CSU Fullerton's Southern California leading economic indicators rose 0.82% to 108.65 in the 4th Q, its highest reading to date, suggesting good times for Southern California for the next 6 months, and consistent with OC's unemployment rate dropping to 6.5%.
- Consumer spending climbed 0.7%, to the highest reading in 5 months.
- Consumer sentiment climbed in March to 78.6, the highest level since November.
- US employers only increased their payrolls by 88,000 in March, after 288,000 in February. Very disappointing numbers.
- Wholesale prices dropped 0.6% in March, largely on the decline in gas prices.
- Business inventories increased just 0.1% in February, the smallest gain since June.
- New home construction topped 1 million last month, the highest since June 2008.
- While China's growth slowed short of expectations, it still managed a 7.7% increase for the 1st Q.
- US corporate earnings on some of the bigs are coming in below expectations, but overall have been above expectations.
- The FED's Beige Book report finds a strengthening housing recovery and robust auto sales contributed to moderate growth in late February and March.
- Employers created 165,000 jobs last month, and unemployment rate dropped to 7.5%. Encouraging, but the real unemployment rate when adding those who have given up and those working part time, who would like to be full-time, is closer to 15%, and there are are over 11.7 million still out of work. Bottom line, we need over 250,000 new jobs per month to solve our "real unemployment" problem. http://wallstcheatsheet.com/stocks/unemployments-down-but-is-it-enough.html/?ref=YF
- Jobless claims fell by 4,000 last week to 323,000, the lowest in five years. Economists had forecast 335,000.
- February 6 saw oil at $96.02 the Euro at $1.304 vs. the Dollar and Gold at $1,468.60.
WESTCAP
CORP services over $1.2
BILLION with what we believe to be the best stable of life companies in Southern
California. We are representing some of the largest and most sophisticated
developers and investors in Southern California on an ongoing basis, confirming
that our sources offer great rates, flexibility and dependable execution. These
are solid lender relationships, which in most cases were originated almost 30
years ago with WESTCO, and then followed the principals to CAPMARK and then to
WESTCAP in 2007.
WESTCAP CORP is a member of Q10 Capital, an organization of 17 of major independent mortgage banking firms with 26 offices throughout the United States. Q10 members arranged $10 billion in the last 3 years, with a combined servicing portfolio of $15 billion for its institutional lenders. Q10's shared database of lending sources and market intelligence, including streaming quotes, insures that our clients are getting the best possible financing.www.Q10Capital.com
WESTCAP’s capacities include capital procurement for the following:
WESTCAP CORP is a member of Q10 Capital, an organization of 17 of major independent mortgage banking firms with 26 offices throughout the United States. Q10 members arranged $10 billion in the last 3 years, with a combined servicing portfolio of $15 billion for its institutional lenders. Q10's shared database of lending sources and market intelligence, including streaming quotes, insures that our clients are getting the best possible financing.www.Q10Capital.com
WESTCAP’s capacities include capital procurement for the following:
- Loan sizes from $1,000,000 to $150,000,000+ nationwide.
- Retail, Industrial, Office, Multifamily, Medical office, Hospitality, Self- Storage and Health Care, including some great single-tenant sources, as well the market standard for credit tenant lease financing.
- WESTCAP's stable of exclusive and
semi-exclusive correspondent sources
include:
- AEGON USA
- Allianz Investment Corp
- Aviva Investors
- Broadview Financial
- 40/86 Capital Advisors
- GENWORTH
- ING Investment Management
- MEMBERS Capital
- NATIONAL LIFE INSURANCE COMPANY
- OHIO NATIONAL FINANCIAL SERVICES
- PNC/ARCS
- StanCorp
- Sun Life Assurance of Canada
- UNUM Group
- In addition to these outstanding correspondent life companies, we also enjoy successful long-term relationships with a full range of debt and equity programs, including Fannie Mae, Freddie Mac and HUD, a long list of CMBS, construction lenders, bridge lenders and mezz sources.
We are always available to discuss potential financing
and or equity requirements, or to provide a written quote to help convince a
seller that you, or your client, are the most qualified buyer. We will also
handle any size transaction, as we are interested in establishing long-term relationships as early
as possible.
Steve
Bridges
Executive Vice President
WESTCAP CORP
9960 Irvine Center Drive
Irvine, CA 92618
Office: (949) 756-2520 x 204 Cell: (949) 235-1540sbridges@westcapcorp.com www.westcapcorp.com
CA RE Broker: 00465840
WESTCAP CORP
9960 Irvine Center Drive
Irvine, CA 92618
Office: (949) 756-2520 x 204 Cell: (949) 235-1540sbridges@westcapcorp.com www.westcapcorp.com
CA RE Broker: 00465840
