MARKET RATE WATCH

10 year treasury 6-3-08: 3.99%; 1 month ago 3.83% , 6 months ago, 3.97%; 1 year ago 4.90%

5 year treasury 6-3-08: 3.31%; 1 month ago 3.10%, 6 months ago, 3.35%; 1 year ago 4.86%

Wall Street is stabilizing. For the past 8 weeks the spreads for securitized loans have steadily reduced as pools are brought to market. This is the longest period of stability since the turmoil started a year ago. Column Financial has joined Wells Fargo in being able to offer 10 year deals at 300 basis point spreads. That is for a 75% LTV with a 1.25 debt coverage ratio. The spread can be lower (maybe 20-30 basis points) for a more conservative loan. Wells can also still do the 5 and 3 year deals also in the 300 basis point range which put the interest rate today in the lower 6% range. The minimum deal size is $3MM for Wells Fargo and $5MM for Column Financial. Hotels are still a problem for the securitized side.

Life Companies rates are still ranging in the mid 5% range for shorter term loans (2 to 6 years) to the low 6% range for 10 year deals. Maximum leverage continues to be about 70% (effectively). Some life companies continue to remain on the sidelines. Most life companies want to stay above $3MM but we do have a few clients that will do the $1MM and $2MM deals. Longer terms available as well (15 to 25 years).

Credit Tenant Lease Transactions have been stable for the past 90 days. Walgreen’s credit has remained at a spread of 250 (over the interpolated 16 year rate). That makes the interest rate in the mid 6% range for a 25 year fully amortizing deal. Higher leverage (75% to 85%) is achievable for non-investment grade tenant deals through a division of GE. The interest rate continues to be in the mid 7% range for these deals.

Multi-Family - FANNIE MAE is still the best choice for multi-family permanent loans. Spreads for 10 year deals are about 220 which put the rates today in the lower 6’s. Fannie Mae can also do 5 year deals at a spread in the 240 range (5.6% today). 80% loan to value is still available but coverage has increased slightly to 1.25 times. Fannie Mae will not consider a cap rate lower than 6.5% when calculating value. Supplemental fundings are key to these deals. You can build your LTV back up to 80% twice during the loan term AND if you sell the new buyer can get the loan back up to 80%. That basically eliminates the whole prepayment penalty risk.