Posted by: BayAreaComRE | April 12, 2010

Capital Markets Update – Week of April 12th

Cushman & Wakefield Sonnenblick Goldman is our investment banking arm, providing highly specialized debt structuring, debt and equity placement, hospitality financing and sales, note sales and associated advisory services. We get updates on their world often, here is the latest:

The Royal Bank of Scotland launched the first Commercial Mortgage Backed Security deal of the year. The transaction is backed by six loans backed by 81 properties with a balance of $309.7 million. Early pricing talk has the AAA’s (highest rated tranche) going off at swaps + 90 – 95. The LTV for the AAA is 41.5% with a 20.3% debt yield. Through the stack (we covered this here), the LTV is 53.4% and the debt yield is 15.8%.

As long as Treasuries were low and relatively non-volatile, fixed rate balance sheet lenders (institutions, pensions, etc) were comfortable giving absolute rate quotes. However, with the 10 year Treasury bond rates starting to move up, we know of at least one major life company that will begin quoting loans on a spread basis, and we expect others to follow.

According to Trepp, almost 45% of fixed rate, US conduit loans that reached their maturity in March 2010 paid off on their balloon date. This is the highest monthly percentage since January 2009 and is up 140% from a recent low of 18.7% in November 2009. Defeased and delinquent loans are not included in this analysis to isolate the percentage of the loans that were extending due to inability to obtain refinancing rather than ongoing cash flow issues.

REITs continue to take advantage of strong demand for corporate credits with Vornado raising $500 million of five-year senior unsecureds at 4.25%.

Thank you to Chris Moyer of Cushman & Wakefield Sonnenblick Goldman, for the update.

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