MARKET RATE WATCH

10 year treasury 8-1-08: 3.95%; 1 month ago 4.00%, 6 months ago, 3.67%; 1 year ago 4.77%
5 year treasury 8-1-08: 3.24%; 1 month ago 3.32%, 6 months ago, 2.84%; 1 year ago 4.60%

Wall Street is back on the skids. Spreads for the long term (10 years) securitized loans are back to well over 400 basis points. That would make a 10 year rate today a whopping 8%. Wells Fargo continues to be the only player offering a fixed rate non-recourse 75% loan. Their spread for 5 year money is currently 350 (up from 325 in mid July) which puts the 5 year fixed interest rate right around 6.75%. They have been getting more attention lately on their 3 year fixed rate which has a lower spread of about 320, which makes the 3 year fixed rate today around 6% or a little under. Wells minimum loan size is $3MM but they prefer at least $5MM. No hotels.

Life company spreads have edged up as their allocations have been invested and markets started deteriorating again. Interest rates are in the higher 5% to lower 6% range for the shorter term loans (2 to 6 years) and to the mid 6% range for 10 year deals. Maximum leverage continues to be about 70% (effectively). Many life companies continue to remain on the sidelines and have told me that they are looking at 2009. Many life companies want to stay above $3MM but we do have a few clients that will do the $1MM and $2MM deals. Longer terms are available as well (15 to 25 years).

Credit Tenant Lease Transactions continue to be relatively stable. Walgreen’s credit has remained at a spread of 250 (over the interpolated 16 year rate). That makes the interest rate in the higher 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. But their interest rates have increased back to the higher 7% range or they will do shorter term deals in the low 7% range.