The Ground Floor

Monday's Numbers and Noteworthy News

Commercial Mortgage Alert mortgage spreads based upon a weekly survey of 15 active portfolio lenders conducted by Trepp, the analytics firm.

Asking Spreads over U.S. Treasury Bonds in Basis Points (10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value ratios)
	11/6	11/13	11/27	12/4
Office	365	380	366	361
Retail	377	398	365	369
Multifamily	323	323	314	323
Industrial	361	374	350	355
Source: Trepp

Indicated Spreads for Conventional Fixed and Floating Commercial Mortgages (as of November 20, 2009)

Property Type	Mid-Point of Commercial Mortgage Rate Spreads for 5-10 Year Fixed-Rate Mortgages
	10/01/09	10/15/09	10/28/09	11/11/09	11/20/09
Multifamily: Non-Agency	+350	+350	+340	+375	+360
Multifamily: Agency	+240	+240	+220	+220	+220
Regional Malls	+458	+438	+438	+400	+400
Strip/Power Centers	+465	+450	+450	+425	+425
Multi-Tenant Industrial	+470	+465	+440	+400	+395
CBD Office	+460	+450	+425	+390	+388
Suburban Office	+475	+475	+475	+388	+413
Full-Service Hotel	+563	+550	+550	+563	+563
Limited-Service Hotel	+575	+575	+575	+575	+575
5-Treasury	2.47%	2.41%	2.37%	2.35%	2.20%
10-Year Treasury	3.43%	3.49%	3.44%	3.47%	3.36%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

Property Type	Mid-Point of Floating Rate Commercial Mortgage Rate Spreads for 3-5 Year Fixed-Rate Mortgages
	10/01/09	10/15/09	10/28/09	11/11/09	11/20/09
Multifamily: Non-Agency	+413	+375	+375	+375	+375
Multifamily: Agency	NA	NA	NA	NA	NA
Regional Malls	+450	+413	+413	+413	+413
Strip/Power Centers	+438	+413	+413	+413	+413
Multi-Tenant Industrial	+388	+388	+388	+388	+388
CBD Office	+375	+375	+375	+400	+350
Suburban Office	+400	+400	+400	+400	+400
Full-Service Hotel	+600	+538	+538	+538	+538
Limited-Service Hotel	+650	+600	+600	+600	+600
1-Month LIBOR	0.25%	0.24%	0.24%	0.24%	0.24%
3-Month LIBOR	0.29%	0.28%	0.28%	0.28%	0.27%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

	Spread in Basis Points over Interest Rate Swaps
	Current	3 Months Ago
AAA	509	555
AA	2984	3304
A	3620	4192
BBB	5199	6026
BBB-	6289	7121
Source: Trepp

Sign the Times? For as many who say that the capital markets crises is easing or ending or whatever, there is daily evidence that things are not quite that rosy as shoe after shoe continues to drop. A number of this week’s shoes included the following:

“What I learned at the ULI Fall Meeting 2009”

1. I continued to improve my vocabulary, adding more words starting with the letter “D” such as “de-lever” and “de-risk”. I also learned that financial institutions are trying to “distance” themselves from real estate.
2. I added to my “Myths Debunked” the following:
1. “Tails” on bell shaped curves predict occurrences too unlikely to require worrying about; sort of like a 1,000 year flood. Think about the 34 days between September 8 and October 12, 2008 when we endured a number of 1,000 year floods in rapid succession including: Lehman Brothers filing for bankruptcy; conservatorship of Fannie Mae and Freddie Mac; the acquisition of Washington Mutual and Merrill Lynch by Bank of America; the bailout of AIG; the conversion of Goldman Sachs and Morgan Stanley from investment to commercial banks; and the acquisition of Wachovia by Wells Fargo. [Did I miss any other 1,000 year floods?]
2. Risks of borrowing “short” and investing in illiquid assets can be hedged; ask anyone who was forced to sell their “illiquid assets” if they were effectively hedged against risk.
3. I learned we had entered a period of “Statistical Economic Recovery”; I guess that’s when the numbers look better even if your personal finances don’t.
4. The “era of the three earner family—husband, wife, and house” has ended as the house is “on strike”; consumers still don’t feel too good. And as always, the real estate economy requires job creation, period!
5. A new breed of mortgage REITs will add some much needed liquidity to the debt market.
6. Commercial Mortgage Securitization Version 2.0 is on the horizon. This has been a long time in coming but everything we hear says they have a very good working model.
7. In addition to additional words for my vocabulary, I now have a new set of one liners—all related to mortgage refinancing—including: “extend and pretend”; “delay and pray”; “a rolled loan gathers no loss”; “excessive forbearance”; and “foreclose and dispose”.
8. I learned that properties can be “unburdened” and “unencumbered” by leases and tenants.
9. “In foreclosure, no one is a winner”.
10. “The Lindsey Lohanization of the capital markets has ended”.
11.  Reminder to self: real estate remains a lagging indicator.
12. Reminder to self: due diligence is not a spectator sport.
13.  There are still some “Black Holes” we need to worry about including: $300 billion +/- per year of commercial real estate loans requiring refinancing; construction loans that have no exit strategy; and condominium projects still under construction.
14. “Emerging Trends in Real Estate 2010”: read the book; it presents a clear road map for next year.

Monday’s Numbers

Year-to-Date Equity Market Performance (as of December 5, 2009):

DJIA⁽¹⁾: +19.32%
S & P 500⁽²⁾: +22.49%
NASDAQ⁽³⁾: +38.89%
Russell 2000⁽⁴⁾: +20.21%
MSCI U.S. REIT⁽⁵⁾: +16.95%

(1) Dow Jones Industrial Average.
(2) Standard & Poor’s 500 Stock Index.
(3) NASD Composite Index.
(4) Small Capitalization segment of U.S. equity universe.
(5) Morgan Stanley REIT Index.

U.S. Treasury Yields: (as of December 13, 2009)

3-month: 0.04%
6-month: 0.17%
2-Year: 0.83%
5-Year: 2.24%
10-Year: 3.47%

Monday's Numbers and Noteworthy News

Commercial Mortgage Alert mortgage spreads based upon a weekly survey of 15 active portfolio lenders conducted by Trepp, the analytics firm.

Asking Spreads over U.S. Treasury Bonds in Basis Points (10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value ratios)
	10/30	11/6	11/13	11/27
Office	397	365	380	366
Retail	406	377	398	365
Multifamily	343	323	323	314
Industrial	389	361	374	350
Source: Trepp

Indicated Spreads for Conventional Fixed and Floating Commercial Mortgages (as of November 11, 2009)

Property Type	Mid-Point of Commercial Mortgage Rate Spreads for 5-10 Year Fixed-Rate Mortgages
	9/01/09	10/1/09	10/15/09	10/28	11/11
Multifamily: Non-Agency	+425	+350	+350	+340	+375
Multifamily: Agency	+240	+240	+240	+220	+220
Regional Malls	+458	+458	+438	+438	+400
Strip/Power Centers	+465	+465	+450	+450	+425
Multi-Tenant Industrial	+488	+470	+465	+440	+400
CBD Office	+460	+460	+450	+425	+390
Suburban Office	+475	+475	+475	+475	+388
Full-Service Hotel	+563	+563	+550	+550	+563
Limited-Service Hotel	+575	+575	+575	+575	+575
5-Treasury	2.47%	2.41%	2.41%	2.37%	2.35%
10-Year Treasury	3.45%	3.43%	3.43%	3.44%	3.47%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

Property Type	Mid-Point of Floating Rate Commercial Mortgage Rate Spreads for 3-5 Year Fixed-Rate Mortgages
	9/01/09	10/01/09	10/15/09	10/28/09	11/11/09
Multifamily: Non-Agency	+413	+413	+375	+375	+375
Multifamily: Agency	NA	NA	NA	NA	NA
Regional Malls	+475	+450	+413	+413	+413
Strip/Power Centers	+488	+438	+413	+413	+413
Multi-Tenant Industrial	+413	+388	+388	+388	+388
CBD Office	+375	+375	+375	+375	+400
Suburban Office	+388	+400	+400	+400	+400
Full-Service Hotel	+600	+600	+538	+538	+538
Limited-Service Hotel	+650	+650	+600	+600	+600
1-Month LIBOR	0.26%	0.25%	0.24%	0.24%	0.24%
3-Month LIBOR	0.38%	0.29%	0.28%	0.28%	0.28%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

	Spread in Basis Points over Interest Rate Swaps
	Current	3 Months Ago
AAA	527	576
AA	3016	3329
A	3652	420
BBB	5259	6121
BBB-	6349	7166
Source: Trepp

Sign the Times? For as many who say that the capital markets crises is easing or ending or whatever, there is daily evidence that things are not quite that rosy as shoe after shoe continues to drop. A number of this week’s shoes included the following:

• A total of six banks, including AmTrust, failed Friday, bringing the total number of failures this year to 130. Together, they had $13.4 billion in assets and $9.4 billion in deposits. The FDIC estimated that the failures' combined cost to the deposit-insurance fund would be about $2.4 billion.

• According to Deutsche Bank research, banks' lending to commercial real estate is down 86.5 percent from the market peak in 2007 and the lending by life insurance companies is down 71.4 percent.

Monday’s Numbers

Year-to-Date Equity Market Performance (as of December 5, 2009):

DJIA⁽¹⁾: +18.37%
S & P 500⁽²⁾: +22.44%
NASDAQ⁽³⁾: +39.14%
Russell 2000⁽⁴⁾: +20.69%
MSCI U.S. REIT⁽⁵⁾: +19.08%

(1) Dow Jones Industrial Average.
(2) Standard & Poor’s 500 Stock Index.
(3) NASD Composite Index.
(4) Small Capitalization segment of U.S. equity universe.
(5) Morgan Stanley REIT Index.

U.S. Treasury Yields: (as of December 5, 2009)

3-month: 0.04%
6-month: 0.17%
2-Year: 0.83%
5-Year: 2.24%
10-Year: 3.47%

Monday's Numbers and Noteworthy News

PLEASE NOTE: ULI’S REAL ESTATE CAPITAL MARKETS BLOG WILL NOT BE PUBLISHED WEEK DUE TO THE THANKSGIVING HOLIDAY; THE NEXT ISSUE WILL BE PUBLISHED ON DECEMBER 7, 2009.

Commercial Mortgage Alert mortgage spreads based upon a weekly survey of 15 active portfolio lenders conducted by Trepp, the analytics firm.

Asking Spreads over U.S. Treasury Bonds in Basis Points (10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value ratios)
	10/23	10/30	11/6	11/13
Office	381	397	365	380
Retail	398	406	377	398
Multifamily	335	343	323	323
Industrial	377	389	361	374
Source: Trepp

Indicated Spreads for Conventional Fixed and Floating Commercial Mortgages (as of November 11, 2009)

Property Type	Mid-Point of Commercial Mortgage Rate Spreads for 5-10 Year Fixed-Rate Mortgages
	9/01/09	10/1/09	10/15/09	10/28	11/11
Multifamily: Non-Agency	+425	+350	+350	+340	+375
Multifamily: Agency	+240	+240	+240	+220	+220
Regional Malls	+458	+458	+438	+438	+400
Strip/Power Centers	+465	+465	+450	+450	+425
Multi-Tenant Industrial	+488	+470	+465	+440	+400
CBD Office	+460	+460	+450	+425	+390
Suburban Office	+475	+475	+475	+475	+388
Full-Service Hotel	+563	+563	+550	+550	+563
Limited-Service Hotel	+575	+575	+575	+575	+575
5-Treasury	2.47%	2.41%	2.41%	2.37%	2.35%
10-Year Treasury	3.45%	3.43%	3.43%	3.44%	3.47%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

Property Type	Mid-Point of Floating Rate Commercial Mortgage Rate Spreads for 3-5 Year Fixed-Rate Mortgages
	9/01/09	10/01/09	10/15/09	10/28/09	11/11/09
Multifamily: Non-Agency	+413	+413	+375	+375	+375
Multifamily: Agency	NA	NA	NA	NA	NA
Regional Malls	+475	+450	+413	+413	+413
Strip/Power Centers	+488	+438	+413	+413	+413
Multi-Tenant Industrial	+413	+388	+388	+388	+388
CBD Office	+375	+375	+375	+375	+400
Suburban Office	+388	+400	+400	+400	+400
Full-Service Hotel	+600	+600	+538	+538	+538
Limited-Service Hotel	+650	+650	+600	+600	+600
1-Month LIBOR	0.26%	0.25%	0.24%	0.24%	0.24%
3-Month LIBOR	0.38%	0.29%	0.28%	0.28%	0.28%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

	Spread in Basis Points over Interest Rate Swaps
	Current	3 Months Ago
AAA	503	580
AA	2933	3330
A	3564	4226
BBB	5121	6072
BBB-	6211	7167
Source: Trepp

Sign the Times? For as many who say that the capital markets crises is easing or ending or whatever, there is daily evidence that things are not quite that rosy as shoe after shoe continues to drop.  A number of this week’s shoes included the following:

“Suspended due to Emerging Trends in Real Estate 2010 U.S. and Asia Pacific Road Shows”

Monday’s Numbers

Year-to-Date Equity Market Performance (as of November 20, 2009):

DJIA⁽¹⁾: +17.57%
S & P 500⁽²⁾: +20.83%
NASDAQ⁽³⁾: +36.08%
Russell 2000⁽⁴⁾: +17.06%
MSCI U.S. REIT⁽⁵⁾: +12.47%

(1) Dow Jones Industrial Average.
(2) Standard & Poor’s 500 Stock Index.
(3) NASD Composite Index.
(4) Small Capitalization segment of U.S. equity universe.
(5) Morgan Stanley REIT Index.

U.S. Treasury Yields: (as of November 21, 2009)

3-month: 0.01%
6-month: 0.13%
2-Year: 0.72%
5-Year: 2.18%
10-Year: 3.37%

Monday's Numbers and Noteworthy News

Noteworthy News

Commercial Mortgage Alert mortgage spreads based upon a weekly survey of 15 active portfolio lenders conducted by Trepp, the analytics firm.

Asking Spreads over U.S. Treasury Bonds in Basis Points (10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value ratios)
	10/16	10/23	10/30	11/6
Office	385	381	397	365
Retail	403	398	406	377
Multifamily	339	335	343	323
Industrial	379	377	389	361
Source: Trepp

Indicated Spreads for Conventional Fixed and Floating Commercial Mortgages (as of October 28, 2009)

Property Type	Mid-Point of Commercial Mortgage Rate Spreads for 5-10 Year Fixed-Rate Mortgages
	8/20/09	9/01/09	10/1/09	10/15/09	10/28
Multifamily: Non-Agency	+400	+425	+350	+350	+340
Multifamily: Agency	+220	+240	+240	+240	+220
Regional Malls	+470	+458	+458	+438	+438
Strip/Power Centers	+465	+465	+465	+450	+450
Multi-Tenant Industrial	+475	+488	+470	+465	+440
CBD Office	+443	+460	+460	+450	+425
Suburban Office	+478	+475	+475	+475	+475
Full-Service Hotel	+525	+563	+563	+550	+550
Limited-Service Hotel	+550	+575	+575	+575	+575
5-Treasury	2.65%	2.47%	2.41%	2.41%	2.37%
10-Year Treasury	3.46%	3.45%	3.43%	3.49%	3.44%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

Property Type	Mid-Point of Floating Rate Commercial Mortgage Rate Spreads for 3-5 Year Fixed-Rate Mortgages
	8/20/09	9/01/09	10/01/09	10/15/09	10/28/09
Multifamily: Non-Agency	+413	+413	+413	+375	+375
Multifamily: Agency	NA	NA	NA	NA	NA
Regional Malls	+500	+475	+450	+413	+413
Strip/Power Centers	+488	+488	+438	+413	+413
Multi-Tenant Industrial	+488	+413	+388	+388	+388
CBD Office	+488	+375	+375	+375	+375
Suburban Office	+550	+388	+400	+400	+400
Full-Service Hotel	+650	+600	+600	+538	+538
Limited-Service Hotel	+725	+650	+650	+600	+600
1-Month LIBOR	0.27%	0.26%	0.25%	0.24%	0.24%
3-Month LIBOR	0.43%	0.38%	0.29%	0.28%	0/28%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

	Spread in Basis Points over Interest Rate Swaps
	Current	3 Months Ago
AAA	525	512
AA	2978	3085
A	3609	3961
BBB	5161	5912
BBB-	6231	7007
Source: Trepp

Sign the Times? For as many who say that the capital markets crises is easing or ending or whatever, there is daily evidence that things are not quite that rosy as shoe after shoe continues to drop.  A number of this week’s shoes included the following:

Suspended due to Emerging Trends in Real Estate 2010 Road Show!

Monday’s Numbers

Year-to-Date Equity Market Performance (as of November 13, 2009):

DJIA⁽¹⁾: +17.02%
S & P 500⁽²⁾: +21.06%
NASDAQ⁽³⁾: +37.47%
Russell 2000⁽⁴⁾: +17.39%
MSCI U.S. REIT⁽⁵⁾: +13.11%

(1) Dow Jones Industrial Average.
(2) Standard & Poor’s 500 Stock Index.
(3) NASD Composite Index.
(4) Small Capitalization segment of U.S. equity universe.
(5) Morgan Stanley REIT Index.

U.S. Treasury Yields: (as of November 13, 2009)

3-month: 0.054%
6-month: 0.15%
2-Year: 0.80%
5-Year: 2.25%
10-Year: 3.42%

Light at the End of the Tunnel

This post was written by Trisha Riggs, vice president of communications for ULI.

Has the financial meltdown ended? Yes. Is the recession over? Yes. Will the employment outlook improve anytime soon? No. So, while an economic recovery may be on the horizon, it will be a largely jobless recovery, meaning there is plenty of pain forthcoming for real estate. That was the consensus of a group of leading economists and industry practitioners speaking at ULI’s 2009 Fall Meeting in San Francisco.

Kenneth T. Rosen, chairman, Fisher Center for Real Estate and Urban Economics, Haas School of Business, University of California Berkeley, pointed to several factors that will hamper the real estate recovery: 1) the likelihood that interest rates--kept artificially low during the lending crisis--will start to rise now that the financial stress has been relieved; 2) slow economic growth (despite the recent boost from sales generated by the "cash for clunkers" program; 3) very slow job growth; 4) minimal consumer spending. Rosen’s odds for a "fragile" recovery: 65 percent. Rosen’s silver lining for real estate: for-sale housing, a sector already showing positive signs, and which will continue to be buoyed by the federal government’s extension of a home buyer tax credit.

Raymond Torto, global chief economist for CB Richard Ellis, weighed in on the commercial sector with some statistics showing that higher vacancies are expected for the office, industrial, multifamily and retail sectors in the months ahead. In general, most sectors are "well on their way to hitting bottom," but growth in all property types will be stymied by the fact that some of the jobs lost in the U.S. have been permanently lost to other countries, he said.

Any significant rise in U.S. employment will not occur until around 2013, Rosen predicted. For next three years, he said, industry professionals would do well to focus either on government projects or 'build-to-suit' projects.

Still, despite the lackluster economic outlook for the nation as a whole, it pays to find the bright spots, which are mainly on the nation’s coasts, panelists said. There are vast differences in local real estate markets and business strategies should be mapped out accordingly, noted George Marcus, chairman of Marcus and Millichap and Essex Property Trust. "Now is the time to look hard at where to buy and build," he said, pointing to the San Francisco metro area as one example of a very tight housing market with promising job growth.

Torto pointed out that cities in the U.S. with economies centered on emerging technologies such as alternative energy are the ones with the most promise. "There are opportunities…there are deals to be made," he said. However, the returns will be generated by income, not necessarily property appreciation, he added.

Monday's Numbers and Noteworthy News

Noteworthy News

Commercial Mortgage Alert mortgage spreads based upon a weekly survey of 15 active portfolio lenders conducted by Trepp, the analytics firm.

Asking Spreads over U.S. Treasury Bonds in Basis Points (10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value ratios)
	10/9	10/16	10/23	10/30
Office	407	385	381	397
Retail	430	403	398	406
Multifamily	375	339	335	343
Industrial	395	379	377	389
Source: Trepp

Indicated Spreads for Conventional Fixed and Floating Commercial Mortgages (as of October 15, 2009)

Property Type	Mid-Point of Commercial Mortgage Rate Spreads for 5-10 Year Fixed-Rate Mortgages
	8/20/09	9/01/09	10/1/09	10/15/09	10/28
Multifamily: Non-Agency	+400	+425	+350	+350	+340
Multifamily: Agency	+220	+240	+240	+240	+220
Regional Malls	+470	+458	+458	+438	+438
Strip/Power Centers	+465	+465	+465	+450	+450
Multi-Tenant Industrial	+475	+488	+470	+465	+440
CBD Office	+443	+460	+460	+450	+425
Suburban Office	+478	+475	+475	+475	+475
Full-Service Hotel	+525	+563	+563	+550	+550
Limited-Service Hotel	+550	+575	+575	+575	+575
5-Treasury	2.65%	2.47%	2.41%	2.41%	2.37%
10-Year Treasury	3.46%	3.45%	3.43%	3.49%	3.44%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

Property Type	Mid-Point of Floating Rate Commercial Mortgage Rate Spreads for 3-5 Year Fixed-Rate Mortgages
	8/20/09	9/01/09	10/01/09	10/15/09	10/28/09
Multifamily: Non-Agency	+413	+413	+413	+375	+375
Multifamily: Agency	NA	NA	NA	NA	NA
Regional Malls	+500	+475	+450	+413	+413
Strip/Power Centers	+488	+488	+438	+413	+413
Multi-Tenant Industrial	+488	+413	+388	+388	+388
CBD Office	+488	+375	+375	+375	+375
Suburban Office	+550	+388	+400	+400	+400
Full-Service Hotel	+650	+600	+600	+538	+538
Limited-Service Hotel	+725	+650	+650	+600	+600
1-Month LIBOR	0.27%	0.26%	0.25%	0.24%	0.24%
3-Month LIBOR	0.43%	0.38%	0.29%	0.28%	0/28%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

	Spread in Basis Points over Interest Rate Swaps
	Current	3 Months Ago
AAA	500	550
AA	2948	3200
A	3579	4091
BBB	5126	5912
BBB-	6231	7007
Source: Trepp

Sign the Times? For as many who say that the capital markets crises is easing or ending or whatever, there is daily evidence that things are not quite that rosy as shoe after shoe continues to drop.  A number of this week’s shoes included the following:

None; too busy at the ULI Fall Meeting!

Monday’s Numbers

Year-to-Date Equity Market Performance (as of November 8, 2009):

DJIA⁽¹⁾: +14.21%
S & P 500⁽²⁾: +18.38%
NASDAQ⁽³⁾: +33.95%
Russell 2000⁽⁴⁾: +16.20%
MSCI U.S. REIT⁽⁵⁾: +6.59%

(1) Dow Jones Industrial Average.
(2) Standard & Poor’s 500 Stock Index.
(3) NASD Composite Index.
(4) Small Capitalization segment of U.S. equity universe.
(5) Morgan Stanley REIT Index.

U.S. Treasury Yields: (as of November 8, 2009)

3-month: 0.04%
6-month: 0.15%
2-Year: 0.84%
5-Year: 2.25%
10-Year: 3.50%

Paranoid Optimism: The Best Attitude Toward Economic Recovery

This post was written by Trisha Riggs, vice president of communications for ULI.

"Paranoid" optimism--a belief in the ability to overcome the negatives that could be coming--may be the best attitude to take regarding the economy’s recovery, according to renowned economist Bill Emmott. The former editor-in-chief of The Economist provided a global economic outlook during yesterday’s opening session of ULI’s Annual Fall Meeting in San Francisco.

Borrowing an analogy from former U.S. Department of Defense Secretary Donald Rumsfeld, Emmott said that moving from recession to recovery might best be analyzed by considering the "known knowns" versus the "known unknowns."

Among Emmott’s known knowns: 

• An economic recovery is underway to some extent in most countries, with the rebound in the U.S. and Western Europe being more gradual while China and India will be more immediate.
• Economic globalization and openness to cross-border trade has remained intact. "We are seeing some sense of global sharing of the rebound," Emmott said.
• A continuation of the fiscal stimulus in the U.S. and Western Europe helps to keep the momentum going.
• An acknowledgement that consumers remain cautious and that consumer spending will not lead the recovery.
• The likelihood that more government-funded programs will be created in the U.S., China, and Japan.
• The likelihood of tighter financial regulation in the U.S. and the U.K.

Among the "known unknowns":

• The extent to which consumers and corporations will pay down debt.
• How quickly eliminated jobs will be recreated.
• How quickly the value of Chinese currency will be re-evaluated in relation to the dollar. Quicker re-valuation so the currency is not artificially low would benefit world trade and revive U.S. exports, Emmott noted.
• The future of oil prices, which as yet have not reflected the global recession.

The known unknowns, Emmott said, have created a course of "uncharted waters" that could change the character of the economic recovery. His reasons for optimism: a belief that job growth will occur sooner rather than later; faith in the flexibility of the economy, particularly that of the U.S.; and encouraging prospects for U.S. exports.

"Be realistic but positive," he advised ULI fall meeting attendees. "There is much we do not know, but new situations bring as many positive possibilities for growth and change as negative ones. Paranoid optimism is the right feeling to have as we move forward."  

Monday's Numbers and Noteworthy News

Happy Halloween!

In response to reader’s suggestions, we are re-ordering—slightly—the order of presentation as well as adding commercial mortgage-backed securities trading spreads.

Commercial Mortgage Alert mortgage spreads based upon a weekly survey of 15 active portfolio lenders conducted by Trepp, the analytics firm.

Asking Spreads over U.S. Treasury Bonds in Basis Points (10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value ratios)
	10/2	10/9	10/16	10/23
Office	391	407	385	381
Retail	405	430	403	398
Multifamily	361	375	339	335
Industrial	373	395	379	377
Source: Trepp

Indicated Spreads for Conventional Fixed and Floating Commercial Mortgages (as of October 15, 2009)

Property Type	Mid-Point of Commercial Mortgage Rate Spreads for 5-10 Year Fixed-Rate Mortgages
	7/29/09	8/20/09	9/01/09	10/1/09	10/15/09
Multifamily: Non-Agency	+350	+400	+425	+350	+350
Multifamily: Agency	+220	+220	+240	+240	+240
Regional Malls	+475	+470	+458	+458	+438
Strip/Power Centers	+450	+465	+465	+465	+450
Multi-Tenant Industrial	+463	+475	+488	+470	+465
CBD Office	+420	+443	+460	+460	+450
Suburban Office	+460	+478	+475	+475	+475
Full-Service Hotel	+453	+525	+563	+563	+550
Limited-Service Hotel	+550	+550	+575	+575	+575
5-Treasury	2.70%	2.65%	2.47%	2.41%	2.41%
10-Year Treasury	3.69%	3.46%	3.45%	3.43%	3.49%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

Property Type	Mid-Point of Floating Rate Commercial Mortgage Rate Spreads for 3-5 Year Fixed-Rate Mortgages
	7/29/09	8/20/09	9/01/09	10/01/09	10/15/09
Multifamily: Non-Agency	+413	+413	+413	+413	+375
Multifamily: Agency	NA	NA	NA	NA	NA
Regional Malls	+550	+500	+475	+450	+413
Strip/Power Centers	+538	+488	+488	+438	+413
Multi-Tenant Industrial	+488	+488	+413	+388	+388
CBD Office	+525	+488	+375	+375	+375
Suburban Office	+600	+550	+388	+400	+400
Full-Service Hotel	+650	+650	+600	+600	+538
Limited-Service Hotel	+725	+725	+650	+650	+600
1-Month LIBOR	0.29%	0.27%	0.26%	0.25%	0.24%
3-Month LIBOR	0.49%	0.43%	0.38%	0.29%	0.28%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

	Spread in Basis Points over Interest Rate Swaps
	Current	3 Months Ago
AAA	465	646
AA	3908	3511
A	3554	4412
BBB	5186	6283
BBB-	6191	7378
Source: Trepp

Sign the Times? For as many who say that the capital markets crises is easing or ending or whatever, there is daily evidence that things are not quite that rosy as shoe after shoe continues to drop.  A number of this week’s shoes included the following:

Updating last week’s story: Nine Bank Failures (This Week) Brings Total to 115 for the Year
Perspective: 115 bank failures is the most in one year (and we still have 8 weeks to go) since the height of the savings and loan crises in the early 1990s.

Perspective: The “Over-Under” on the number of bank which will fail during the current crises is 400!

Monday’s Numbers

Year-to-Date Equity Market Performance (as of October 30, 2009):

DJIA⁽¹⁾: +10.67%
S & P 500⁽²⁾: +14.72%
NASDAQ⁽³⁾: +29.68%
Russell 2000⁽⁴⁾: +12.68%
MSCI U.S. REIT⁽⁵⁾: +6.81%

(1) Dow Jones Industrial Average.
(2) Standard & Poor’s 500 Stock Index.
(3) NASD Composite Index.
(4) Small Capitalization segment of U.S. equity universe.
(5) Morgan Stanley REIT Index.

U.S. Treasury Yields: (as of October 30, 2009)

3-month: 0.04%
6-month: 0.16%
2-Year: 0.89%
5-Year: 2.31%
10-Year: 3.38%

Monday's Numbers and Noteworthy News

Noteworthy News

Signs of the Times? For as many who say that the capital markets crises is easing or ending or whatever, there is daily evidence that things are not quite that rosy as shoe after shoe continues to drop.  A number of this week’s shoes included the following:

Seven Bank Failures (This Week) Brings Total to 106 for the Year
Perspective: 106 bank failures is the most in one year (and we still have 9 weeks to go) since the height of the savings and loan crises in the early 1990s.

Perspective: The "Over-Under" on the number of bank which will fail during the current crises is 400!

Monday’s Numbers

Year-to-Date Equity Market Performance (as of October 24, 2009):

DJIA⁽¹⁾: +13.963%
S & P 500⁽²⁾: +19.52%
NASDAQ⁽³⁾: +36.62%
Russell 2000⁽⁴⁾: +20.16%
MSCI U.S. REIT⁽⁵⁾: +10.44%

(1) Dow Jones Industrial Average.
(2) Standard & Poor’s 500 Stock Index.
(3) NASD Composite Index.
(4) Small Capitalization segment of U.S. equity universe.
(5) Morgan Stanley REIT Index.

U.S. Treasury Yields: (as of October 24, 2009)

3-month: 0.05%
6-month: 0.17%
2-Year: 1.00%
5-Year: 2.45%
10-Year: 3.49%

Commercial Mortgage Alert has added loan spreads to its weekly “Market Monitor” data page. The spreads are based upon a weekly survey of 15 active portfolio lenders conducted by Trepp, the analytics firm. Survey participants include: national banks, insurance companies, and finance companies.

Asking Spreads over U.S. Treasury Bonds in Basis Points (10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value ratios)
	9/30	10/2	10/9	10/16
Office	381	391	407	385
Retail	396	405	430	403
Multifamily	334	361	375	339
Industrial	373	383	395	379
Source: Trepp

Indicated Spreads for Conventional Fixed and Floating Commercial Mortgages (as of October 15, 2009)

Property Type	Mid-Point of Commercial Mortgage Rate Spreads for 5-10 Year Fixed-Rate Mortgages
	7/29/09	8/20/09	9/01/09	10/1/09	10/15/09
Multifamily: Non-Agency	+350	+400	+425	+350	+350
Multifamily: Agency	+220	+220	+240	+240	+240
Regional Malls	+475	+470	+458	+458	+438
Strip/Power Centers	+450	+465	+465	+465	+450
Multi-Tenant Industrial	+463	+475	+488	+470	+465
CBD Office	+420	+443	+460	+460	+450
Suburban Office	+460	+478	+475	+475	+475
Full-Service Hotel	+453	+525	+563	+563	+550
Limited-Service Hotel	+550	+550	+575	+575	+575
5-Treasury	2.70%	2.65%	2.47%	2.41%	2.41%
10-Year Treasury	3.69%	3.46%	3.45%	3.43%	3.49%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

Property Type	Mid-Point of Floating Rate Commercial Mortgage Rate Spreads for 3-5 Year Fixed-Rate Mortgages
	7/29/09	8/20/09	9/01/09	10/01/09	10/15/09
Multifamily: Non-Agency	+413	+413	+413	+413	+375
Multifamily: Agency	NA	NA	NA	NA	NA
Regional Malls	+550	+500	+475	+450	+413
Strip/Power Centers	+538	+488	+488	+438	+413
Multi-Tenant Industrial	+488	+488	+413	+388	+388
CBD Office	+525	+488	+375	+375	+375
Suburban Office	+600	+550	+388	+400	+400
Full-Service Hotel	+650	+650	+600	+600	+538
Limited-Service Hotel	+725	+725	+650	+650	+600
1-Month LIBOR	0.29%	0.27%	0.26%	0.25%	0.24%
3-Month LIBOR	0.49%	0.43%	0.38%	0.29%	0.28%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

Monday's Numbers an Noteworthy News

Signs of the Times? For as many who say that the capital markets crises is easing or ending or whatever, there is daily evidence that things are not quite that rosy as shoe after shoe continues to drop.  A number of this week’s shoes included the following:

The following appeared in this week’s edition of Roundtable Weekly, published by The Real Estate Roundtable.

FINANCIAL MARKETS POLICY
Federal Banking Regulators Preparing Guidelines for "Prudent" CRE Loan Workouts
Federal banking regulators are preparing guidance to facilitate commercial real-estate loan workouts and reduce the growing risk of foreclosures and credit losses for U.S. banks, especially smaller community banks, Bloomberg reported Oct. 14. The guidance "is intended to promote supervisory consistency, enhance the transparency of CRE workout transactions, and ensure that regulatory policies and actions do not inadvertently curtail the availability of credit to sound borrowers," Office of Thrift Supervision (OTS) official Timothy Ward testified at a Senate Banking subcommittee hearing on Wednesday.

Ward, who is OTS' deputy director of examinations, supervision and consumer protection, was joined on the witness panel by Federal Deposit Insurance Corp. (FDIC) Chair Sheila Bair, U.S. Comptroller of the Currency John Dugan, and Federal Reserve Gov. Daniel Tarullo.

"The most prominent area of risk for rising credit losses at FDIC-insured institutions during the next several quarters is in CRE lending," said Bair, whose agency has taken over 98 failed banks this year and now has 416 banks on its confidential "problem list" (up from 305 in the first quarter). She added, "Prudent loan workouts are often in the best interest of financial institutions and borrowers."

FDIC Vice Chairman Martin J. Gruenberg expressed similar concerns at the Fall 2009 Roundtable Meeting in Washington, D.C., last month. (Roundtable Weekly, Oct. 2)

Tarullo said the guidelines will include the principle that modifying loans is "often in the best interest of both the financial institution and the borrower," and will call for banks to accurately account for loan losses (AP, Oct. 14)

A Fed presentation to banking regulators last month warned U.S. banks "will be slow to recognize the severity" of losses on commercial real estate loans -- "just as they were in residential" (The Wall Street Journal, Oct. 7; Roundtable Weekly, Oct. 9).

The forthcoming bank regulatory guidance on loan workouts should complement a recent IRS rule (Revenue Procedure 2009-45)--recommended by The Roundtable and its real estate trade association partners -- allowing commercial real estate borrowers to proactively discuss possible modifications to securitized loans that are at risk of default (Roundtable Weekly, Sept. 18).

Although federal policymakers have taken some extraordinary policy actions this past year to try to address the CRE liquidity crisis, The Roundtable continues to urge additional policy steps to help restore flows of real estate debt and equity capital.

"The current credit system in America simply does not have the capacity to meet the legitimate demand for commercial real estate debt," Roundtable President and CEO Jeffrey DeBoer testified before Congress in July. "As the demands for debt remain unmet, the stress to the financial services system overall, individual financial institutions, and those who have invested in real estate directly or indirectly will increase. . . there is increasing concern about a potential wave of defaults--from maturing loans--that will further exacerbate the current credit crisis.  Needless to say, this has broad systemic consequences and will reverse the progress that has been made in healing the banking system and credit markets to date."

Monday’s Numbers

Year-to-Date Equity Market Performance (as of October 17, 2009):

DJIA⁽¹⁾: +13.91%
S & P 500⁽²⁾: +20.43%
NASDAQ⁽³⁾: +36.76%
Russell 2000⁽⁴⁾: +23.76%
MSCI U.S. REIT⁽⁵⁾: +10.27%

(1) Dow Jones Industrial Average.
(2) Standard & Poor’s 500 Stock Index.
(3) NASD Composite Index.
(4) Small Capitalization segment of U.S. equity universe.
(5) Morgan Stanley REIT Index.

U.S. Treasury Yields: (as of October 17, 2009)

3-month: 0.06%
6-month: 0.15%
2-Year: 0.95%
5-Year: 2.35%
10-Year: 3.38%

Commercial Mortgage Alert has added loan spreads to its weekly “Market Monitor” data page. The spreads are based upon a weekly survey of 15 active portfolio lenders conducted by Trepp, the analytics firm. Survey participants include: national banks, insurance companies, and finance companies.

Asking Spreads over U.S. Treasury Bonds in Basis Points (10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value ratios)
	9/18	9/30	10/2	10/9
Office	381	381	391	407
Retail	396	396	405	430
Multifamily	334	334	361	375
Industrial	373	373	383	395
Source: Trepp

Indicated Spreads for Conventional Fixed and Floating Commercial Mortgages (as of September 1, 2009)

Property Type	Mid-Point of Commercial Mortgage Rate Spreads for 5-10 Year Fixed-Rate Mortgages
	7/14/09	7/29/09	8/20/09	9/01/09	10/1/09
Multifamily: Non-Agency	+340	+350	+400	+425	+413
Multifamily: Agency	+210	+220	+220	+240	NA
Regional Malls	+500	+475	+470	+458	+350
Strip/Power Centers	+455	+450	+465	+465	+240
Multi-Tenant Industrial	+450	+463	+475	+488	+458
CBD Office	+420	+420	+443	+460	+465
Suburban Office	+460	+460	+478	+475	+470
Full-Service Hotel	+525	+453	+525	+563	+460
Limited-Service Hotel	+588	+550	+550	+575	+475
5-Treasury	2.33%	2.70%	2.65%	2.47%	2.41%
10-Year Treasury	3.44%	3.69%	3.46%	3.45%	3.43%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

Property Type	Mid-Point of Floating Rate Commercial Mortgage Rate Spreads for 3-5 Year Fixed-Rate Mortgages
	7/14/09	7/29/09	8/20/09		9/01/09
Multifamily: Non-Agency	+450	+413	+413	+413	+413
Multifamily: Agency	NA	NA	NA	NA	NA
Regional Malls	+550	+550	+500	+475	+450
Strip/Power Centers	+538	+538	+488	+488	+438
Multi-Tenant Industrial	+488	+488	+488	+413	+388
CBD Office	+513	+525	+488	+375	+375
Suburban Office	+600	+600	+550	+388	+400
Full-Service Hotel	+650	+650	+650	+600	+600
Limited-Service Hotel	+725	+725	+725	+650	+650
1-Month LIBOR	0.30%	0.29%	0.27%	0.26%	0.25%
3-Month LIBOR	0.54%	0.49%	0.43%	0.38%	0.29%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.