Interest
Rates
Prime
3.25%
10 Year
Treasury
2.53%
5 Year
Treasury
1.42%
30 Day
Libor
0.19%
90 Day
Libor
0.27%
6 Month
Libor
0.47%
5 Year
Swap
1.63%
10
Year
Swap
2.74%
11th Dist
.97%
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Steve Bridges
949-756-2520
x204
Mobile:
949-235-1540
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MARKET
UPDATE June 27,
2013
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COMMERCIAL REAL ESTATE
FINANCE UPDATE
Corporate bonds suffered a double whammy as interest rates rose and credit
spreads widened after Federal Reserve chairman Ben Bernanke insinuated that the
Fed would begin to slowly reduce its asset purchase program as soon as this
fall. (Be sure to check Bill Gross' read in the Expert Section
below)Feedback from our life companies this week has been that they
expect the 10-year Treasury to increase to 3.50% to 5.00% after FED stimulus
subsides. This would be consistent with historical 10-year Treasury rates, which
run about 2.50% over the inflation rate during periods of no FED stimulus, as
well with Bill Gross' range (see Expert's Section). There is also a real
concern that as rates rise, and assuming the Obama Administration continues to
spend as they have, which all assume they will, the government could soak up the
majority of those investment funds available after stimulus ends, potentially
leaving the private sector with a liquidity crunch.
Our CMBS sources feel
that spreads will likely come in after the 4th of July for the following
reasons:
- CMBS has to mark their portfolios to market at the end of
each quarter
- As Swaps trend higher, value of the portfolios drop, just
like bonds.
- As a result, investors don't like to buy at the end of
quarters, and particularly in rising rate environments.
- Most of our CMBS
sources also feel there has been some over reaction, and for this reason as
well, expect spreads to come back in a bit after the end of the
quarter.
Finally, expect life companies to approach their allocation
limits in the second half of the year, which will result in them becoming more
selective and possible increases in spreads.
Bottom line, if you are
looking to refinance, it would be wise to do it and lock rate as soon as
possible.
Remember, you need a 20% increase in
your gross income
to overcome a 1% increase in interest rates.
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Four industrial properties totaling 609,750 square feet refinanced
with Sun Life of Canada in Corona, Corona, Jurupa and Riverside. Two were
single tenant with short term rollover. These were separate loans.
CLOSED
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110,000 SF Pacific
Sales, Petco anchored center refinanced with GENWORTH (life company).
CLOSED
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OTHER HIGHLIGHTED CLOSINGS THIS
YEAR
$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
$29,400,000
hotel construction loan with a major money center bank. Irvine Spectrum.
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
$17,150,000 CMBS permanent loan on a
Residence Inn, San Juan Capistrano. 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
$6,300,000 on a 32,770 SF Rite Aid anchored
neighborhood shopping center in Indio with a conduit lender.
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
$3,350,000 correspondent life company
permanent for a 120,000 SF multi-tenant industrial park in Riverside, CA.
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
CLOSED
$1,000,000 regional bank permanent single tenant auto repair in El
Cajon, CA IN
CLOSED
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RATES
Life
Companies: 5-Year Fixed 3.90% - 4.90%; 10-Year Fixed
4.40% - 5.10%
Multifamily:
5-Year Fixed 3.57% -
3.94%; 10-Year Fixed 4.78% - 5.20%
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
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10-Year Treasury
Forecast The forecast
of the 71 economists surveyed by Bloomberg in June moved their median estimates
for the 10-year Treasury yield up from 1.90% to 2.10% for the 2nd Q 2013, to
2.50% for the 2nd Q 2014 and to 2.80% for the 4th Q 2014. The survey was done
between June 7th and 12th when the 10 year Treasury was
at 2.10%.
10 year Treasury Rates moved
up over 2.6% on June 24th up 97 bps since May 1, 2013. The Fed has been
the largest buyer of Treasuries to try to keep rates down. They indicated after
their meeting this month that they may start to curtail their acquisition of
Treasuries the end of this year, which triggered this most recent run up in
rates.
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The Month In
Review The 10-year Treasury opened at
2.54% this afternoon (June
26), up from 1.81% on June 7. June 7 opened with oil at $96.02
the Euro at $1.304 vs.. the Dollar and Gold at $1,468.60. Key contributors to last month's
rate movement were as follows:
- Although Corporate earnings reports have
slowed, profits are still at record levels and projected to rise through the end
of the year.
- The median price for an OC home was up
27.4% in March, while sales increased 14%, the highest level since April 2006.
This trend is occurring nationwide on historic low inventories, as construction
of new homes are well below levels needed to fill the void.
- 11% jump in US home prices
- The CPI dropped to 1.1% annually in April,
matching the smallest increase since the CPI records began in 1960. That was
down from 1.9% for the year ending April 2012. "Slowing inflation has twice
spurred FED fears that deflationary psychology could damage the recovery as
consumers postpone purchases." Bernanke indicated that stimulus is still
needed, but suggests the FED may start scaling back on bond purchases as early
as next month.
- OC home prices jumped 20.1% in the 12
months ending April.
- Troubling data reports send the DOW
plunging. These reports include weak hiring at private companies, a plunge in
mortgage applications and sluggish US factory orders.
- Foreign investment in China rose 0.4% over
the past 12 months, dramatically short of the increase anticipated. China's
trade surplus is one-tenth the official $61 billion reported so far this year
after accounting for fake transactions used to disguise hot-money inflows,
according to Bank of America.
- The German economy's return to growth in
the first Q was hampered by declines in construction activity as a severe winter
and the continuing European recession continues to dampen
demand.
- On a positive note, the European Central
Bank indicated they will take steps to shore up the ailing European economies.
And several major retailers released better than expected sales reports for
May.
- US employers added 175,000 jobs in May.
These figures were lower than expected and well below an average of at least
250,000 per month needed to solve our unemployment, which rose to 7.6%. Again,
this percentage is misleading as it does not include those who have given up
looking and those who are part-time but want full-time employment.
- Chapman University forecasts 2.3% job
growth through this year and 2.6% growth next year.
- Four reports showed a brighter US economy,
as housing and manufacturing continued to improve and consumer confidence hit
its highest level in 5-1/2 years (81.4), as orders for durable goods were up
3.6%, and sales of new homes rose in May to a seasonally adjusted 476,000, the
fastest pace since July 2008.
- The US economy grew at revised 1.8% for the
1st Q.
- February 6 saw oil at $94.94 the Euro at
$1.300 vs. the Dollar and Gold at $1,230.50.
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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 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.
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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.
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