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MARKET
UPDATE
March 14, 2012 |
COMMERCIAL REAL ESTATE
FINANCE UPDATE
Rates continue to remain incredibly low, although we are starting to see upward movement in the Treasuries, with substantial movement the past two weeks, on the first meaningful job numbers, a drop in unemployment to 7.7% from 7.9%, continued positive US corporate earnings reports, signs of traction in China's economy, continued indications that the worst of the Euro debt crisis may be behind them (although tough to see that yet), and most importantly traction in US housing construction on continued all time low residential inventory levels nationwide. I have been saying for the past two years that we would see no recovery or meaningful job growth until we see a rebound in housing construction. Well, it's hear, and based on current inventory levels, I would say it's here to stay for some time, unless we get sidetracked with Sequestration and the upcoming federal budget negotiations. The housing recovery will lead to more positive news and higher interest rates, as indicated below in the upward revised Bloomberg economists' survey. This said, we just received notice from one of our correspondent life companies that their rates are 3.05% for 5 years, 3.30% for 7 years and 3.95%-4.05% for 10 years.
Remember, you need a 20% increase in your
gross income Rates continue to remain incredibly low, although we are starting to see upward movement in the Treasuries, with substantial movement the past two weeks, on the first meaningful job numbers, a drop in unemployment to 7.7% from 7.9%, continued positive US corporate earnings reports, signs of traction in China's economy, continued indications that the worst of the Euro debt crisis may be behind them (although tough to see that yet), and most importantly traction in US housing construction on continued all time low residential inventory levels nationwide. I have been saying for the past two years that we would see no recovery or meaningful job growth until we see a rebound in housing construction. Well, it's hear, and based on current inventory levels, I would say it's here to stay for some time, unless we get sidetracked with Sequestration and the upcoming federal budget negotiations. The housing recovery will lead to more positive news and higher interest rates, as indicated below in the upward revised Bloomberg economists' survey. This said, we just received notice from one of our correspondent life companies that their rates are 3.05% for 5 years, 3.30% for 7 years and 3.95%-4.05% for 10 years.
to overcome a 1% increase in interest rates.
Deals of the Month
$25,000,000 on an
investment grade lease with 16 years remaining on a 170,000 SF
office building.
CMBS 10/30, 76% loan-to-purchase. CLOSED
$2,850,000 life company permanent for a 35,000
SF single tenant office building in Irvine, CA. CLOSED
$50,000,000 life company
permanent for a 203-unit luxury apartment building over ground floor retail, at
4.15% 10/30 with 5 years interest only. CLOSED
$6,300,000 on a 32,770 SF Rite Aid anchored neighborhood shopping center in Indio with a conduit lender. CLOSED
$29,400,000 hotel construction loan with a major money center bank. IN CLOSING
$17,500,000 hotel CMBS permanent loan. IN CLOSING
$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 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
$6,300,000 on a 32,770 SF Rite Aid anchored neighborhood shopping center in Indio with a conduit lender. CLOSED
$29,400,000 hotel construction loan with a major money center bank. IN CLOSING
$17,500,000 hotel CMBS permanent loan. IN CLOSING
$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 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
RATES
Life Companies: 5-Year Fixed 3.05% - 4.25%; 10-Year Fixed 3.75% - 4.5%
Multifamily: 5-Year Fixed 3.0% - 4.0%; 10-Year Fixed 3.25% -4.25%
Bridge Loans: $8 Million+ / 3-years plus options to extend, Fixed 5.5% - 6%
Construction Loans: LIBOR+300-400
Life Companies: 5-Year Fixed 3.05% - 4.25%; 10-Year Fixed 3.75% - 4.5%
Multifamily: 5-Year Fixed 3.0% - 4.0%; 10-Year Fixed 3.25% -4.25%
Bridge Loans: $8 Million+ / 3-years plus options to extend, Fixed 5.5% - 6%
Construction Loans: LIBOR+300-400
10-Year
Treasury Forecast The average forecast of the 71 economists surveyed by Bloomberg
in February moved their median estimates for the 10-year Treasury
yield up from 1.80% to 1.90% for the 1st Q 2013, up from
2.51% to 2.62% for the 2nd Q 2014 and up from 2.71% to
2.79% for the 3rd Q 2014. The lowest estimates were 1.60%, up
from 1.40%, 1.98% up from 1.70%, and 2.04% up from 1.71%
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.comBill Gross Raises PIMCO's Growth Forecast to 3% for 2013:
http://www.bloomberg.com/news/2013-03-08/gross-raises-u-s-economic-growth-forecast-to-3-in-2013.html
Treasury Yields Rise to 11-Month High As Job Gains Top Forecasts: http://www.bloomberg.com/news/2013-03-08/treasuries-drop-as-payrolls-increase-unemployment-rate-falls.html
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
2.05% this morning (March 15), up from
1.97% on February 6, on positive investor reaction to the 12th hour fiscal cliff
deal. The month opened with oil at $96.63, the Euro at $1.3519 vs. the Dollar
and Gold at $1,676.50. January's revised job growth was adjusted down from
156,000 to 119,000. Key contributors to last month's rate movement were as
follows:
- Home prices rose at the fastest pace in 6 years, up 8.3% in December.
- Europe's index of manufacturing & services rose to a 10-month high.
- The US trade defect narrowed 21% in December, to smallest in 3 years.
- US corporate earnings reports continue to impress.
- OC home sales rose 30% with a 17% increase in the median price.
- Default notices fell year over year 77% in OC and 78% in CA.
- OC hotel occupancy was 75% in 2012, up from 72.8%, while room rates rose 5.4% overall, with luxury hotels gaining 7.8% over 2011.
- OC job growth predicted to outpace the nation's and state's in 2013.
- FED votes to keep buying bonds unless jobless rate declines, which spooked investors.
- German business confidence rose sharply, adding evidence that the country may avoid recession, and lending additional optimism to the Euro debt crisis recovery.
- Home prices in LA & OC rose 10.2% the 2nd half of 2012.
- The consumer confidence index rose to 69.6, after 3 months of declines.
- 2012 US bank earnings were the second best ever. They are lending again!
- Bernenke testimony pushes the market higher, as he indicates the FED has the tools necessary to reduce stimulus and avoid a spike in inflation, but that the FED's ultra-low-rate policy is still needed "to help support housing, automobiles and other parts of the economy."
- The US economic growth slowed to a crawl as 4th Q GDP grew 0.1%.
- New car and truck sales were up 4% in February.
- US manufacturing grew at the fastest pace since June 2011, as the manufacturing index reached 54.2. A reading above 50 indicates growth.
- The effects of sequestration loom as no agreement is in sight between Congress and the White House.
- OC has the nation's 4th-highest gain in home prices, up 11.7% from January 2011
- The FED survey showed 10 of its 12 banking districts reported moderate to modest growth, which Boston and Chicago reported slow growth.
- Employers added 236,000 jobs last month, the biggest increase in six years, and unemployment dropped last month from 7.9% to 7.7%. This is a very positive step, although the real unemployment still stands above 14%.
- US employers advertised for more job openings in January, up 2.2% from December, and employers laid off the fewest workers in January since records for this statistic began in 2001.
- Optimists slightly out-numbered pessimists among California consumers for the first time in six years.
- US retail sales rose 1.1% in February, exceeding all Bloomberg survey expectations, and by the most in five months as improved job growth and stronger household finances cushioned the effects of higher payroll taxes.
- February 6 saw oil at $92.55, the Euro at
$1.301 vs. the Dollar and Gold at $1,590.95.
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:
- 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 interest
Steve Bridges
Executive Vice President WESTCAP CORP 9960 Irvine Center Drive Irvine, CA 92618 Office: (949) 756-2520 x 204 Cell: (949) 235-1540 sbridges@westcapcorp.com www.westcapcorp.com CA RE Broker: 00465840 |
