Posted by: BayAreaComRE | June 21, 2010

Capital Markets Update – Week of June 21st

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:

In the wake of the Greek debt crisis, and with growing concerns about the pace of the recovery in the U.S., CMBS spreads have widened in the past 60 days, with senior 10-year AAA’s trading to swaps plus 380-400. It was in this environment that JPMorgan launched a $716 million securitized financing, the second multi-borrower pool of the year, consisting of 36 newly originated loans on 96 properties contributed by JPM and Ladder Capital. With an overall LTV of 61.5%, an average life of 6 years, and a pool-wide debt coverage ratio of 1.64x, this pool was originally expected to price inside of the RBS pool completed a couple of months earlier. However, the final pricing was 50bp wide of the RBS deal (swaps + 140 vs. swaps + 90) for the nearly $420 million of AAA bonds. Interestingly, 71% of the collateral in the pool was retail, with industrial and office constituting another 23% of the pool.

The mood at the NYU Hospitality Industry Investment Conference in New York last week was upbeat. Many owners are reporting that they are well ahead of budget in 2010 and most are showing year-over-year improvement. Several noteworthy sales, including the $90 million purchase of the Sir Francis Drake at $216,000 per key by Pebblebrook Lodging Trust and the $155.5 million purchase of the Hilton Minneapolis Hotel by DiamondRock Hospitality, confirmed that buyers are willing to take a forward-looking view of value.

Multi-family development financing is showing the first tentative signs of returning to the market. We expect to see institutional investors beginning to fund development deals as cap rates continue to be bid down. Many institutions would rather invest in brand new product and build to 7.5-8.0% development yields, rather than engage in bidding wars for existing assets.

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

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