10 year treasury 3-27-09: 2.76%; 1 month ago 2.91%, 6 months ago, 3.84%; 1 year ago 3.52%
5 year treasury 3-27-09: 1.80%; 1 month ago 1.97%, 6 months ago, 3.02%; 1 year ago 2.58%
1 month LIBOR 3-27-09: 0.52%; 1 month ago 0.48%, 6 months ago, 3.71%; 1 year ago 2.65%
Wall Street: The Mortgage Bankers Association recent conference hosted a panel on the future of CMBS and they estimated its return in 2011. Given the amount of commercial real estate financing coming due in the next 2 years they may actually be right because all those loans have to be refinanced somewhere. In the meantime, Wells Fargo continues to be the only non-recourse lender left in this category. They continue to look for only the highest quality deals and are willing to go as high as 65% leverage. Their rates have recently increased to the mid 6% range for 2 and 3 year deals to the mid 7% range for a 5 year deal. This is probably more a sign of their reluctance to do business versus a change in interest rates which have only gone down in the past 60 days. Another lender, NATIXIS, closed shop earlier this month so the field continues to be whittled down. Only a few Wall Street firms are left financing real estate like CIBC but they only want very large deals where they do not have to compete with the smaller community banks and their interest rates are in the 9% plus range.
Life Companies: There are only a handful of life companies in the financing market today. Though many hope to be back lending towards the summer it is just not realistic. The loan to value for life deals will be maximum 60% (though there are a few that quote as high as 70%) and available only for the best quality real estate with the strongest sponsorship. Interest rates for 10 year deals range from 7% to 8%. Although the delinquencies for life portfolios continue to be historically low they have risen substantially on a % basis and the expectation (or fear) is that they will go much higher.
Credit Tenant Lease (CTL) Lenders: They have recovered with interest rates for high level investment grade deals back below 7% and for some credits like the Federal government closer to the lower 6% range. The lower level credits can range as high as the upper 8’s. Cap Rates have been rising for single tenant deals and the CTL deal becomes more feasible even for non-1031 buyers.
NEW LENDER…CREDIT UNIONS???
Can you believe it? Yes…Credit Unions are taking advantage of this current crisis to pick up market share and get some great commercial real estate loans at historic interest rate spreads on good quality assets with the best customers. Typical loan size in the $1MM to $15MM range. Loan and short term deals available with interest rates in the lower 6% range to mid 7% range. Recourse is negotiable but they are not par and charge up to 1.5 points.
Fannie Mae and Freddie Mac: Multi-family financing is widely available at attractive rates and terms primarily because of these agency lenders. The most recent 60 plus day delinquency data shows that while the rate has doubled in the past 3 months, it still is at historic lows. And the housing crisis has actually been beneficial in many markets for apartment occupancies. There was a recent article in the WSJ commenting about the positive occupancy news in Ft. Myers. Florida is a pre-review area so leverage is at 65% (though on a deal by deal basis you can get higher). The interest rates continue to be extremely attractive. A 10 year interest rate today will be in the higher 5% range with debt coverage of 1.35 times. I recently quoted a floating rate deal for Fannie Mae with an initial pay rate of 4.87% (though the deal must underwrite to a 6% interest rate)
