Mortgage Banking

Making sense of commercial real estate finance.

Archive for March, 2008

The SIOR Awards

Posted by Jordan Crouch on March 31, 2008

I was at the WA Chapter’s Society of Industrial and Office Realtors (SIOR) Awards breakfast a few weeks ago. It was a packed house. Congratulations to all the winners below.

Bill Neil – People’s Choice Broker of the Year

Matt Wood – Industrial Broker of the Year


Pacific Rea Estate Partners Team – Investment Team of the Year


Bill Pollard – Office Broker of the Year


AMB Valley Distribution Center – Industrial Development of the Year
amb.jpg

Lincoln Square Office Building – Office Development of the Year

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Super Cop to the Rescue

Posted by Jordan Crouch on March 31, 2008

Here are a few random thoughts on Monday.

  • Hank Paulson, the Treasury Secretary, proposed a new arrangement for US financial regulation over the weekend. This “super cop” structure will be the largest change in the financial sector since the Great Depression.
  • Spreads on commercial loans are continuing to rise. Most life companies are quoting 300+ basis points on a ten year loan. Five and seven year loans currently have the best interest rates.
  • Lenders are not allowing for lease up risk or pushing loan dollars, meaning lenders are continuing to take only the best loans.  

Rates:  

TODAY  

Last Mth

Last Year

5 Yr T-Bill:     

2.45%

2.47%

4.54%

10 Yr T-Bill:

3.42%

3.51%

4.65%

LIBOR-30 Day 

2.70%

3.11%

5.32%

 

 

 

 

10 Yr T-Bill

Last week’s range:

3.45% – 3.54%

 

 

 

YTD high:  

3.98%

 

 

 

YTD low:

3.28%

 

 

 

 

 

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Fed Funds Rate Graph

Posted by Jordan Crouch on March 19, 2008

This shows just what the Federal Reserve has done in the past 2 years to stimulate the economy. The Fed Funds rate is currently at 2.25% down from a high of 5.25% in August 2007. I can remember when the rate was 1%. We’ll see if it drops that low again. Thanks to Deal Junkie for the graph.

fedfundrate.jpg

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Lots of Movement

Posted by Jordan Crouch on March 17, 2008

  • On Friday, the investment bank Bear Sterns announces serious balance sheet problems. JP Morgan, with the help from the Federal Government, agrees to acquire Bear Sterns for the paltry sum of $2 per share on Sunday. The previous Friday the stock price was at the $30 level. It’s a steal by anyone’s estimation.
  • In order to calm the market amidst the chaos, the Federal Reserve lowered the Fed Funds rate this morning by 25 basis points. Expect to see another rate drop when the Fed meets on Tuesday.
  • Also expect more market fluctuation as several other major investment banks release earnings reports. They are not expected to be good.
  • Because of all this market turmoil investors are moving their money into US treasuries bills. This movement is raising the price of the T-Bills, which correspondingly lowers the yield. The lower yields are forcing lenders to increase their spreads on commercial real estate loans. Rates are still in the 6-ish percent range but the math to get to that rate is changing.

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A Lender’s Viewpoint on the Current Credit Market

Posted by Jordan Crouch on March 6, 2008

The CEO of Column Financial, Keiran Quinn, recently spoke at the Risk, Reward and Real Estate Conference. The following comments are taken from CoStar’s Watch List. Click here to see the full summary of Mr. Quinn’s comments.

  • Out of the $240 billion in CMBS issuance in 2007, 60% of that capacity will be gone in 2008
  • Only $1.5 billion of CMBS originations so far for 2008
  • Portfolio lenders (life insurance co.’s) are picking up some of the slack and will do $40-$50 billion in loans
  • Portfolio lenders can “cherry pick” the loans that they want
  • The government sponsored entities (Fannie/Freddie) are overwhelmed with loan requests
  • Overall property values will decrease by 5-10% due to the liquidity factor
  • Pension Funds and Instituional investors have less competition for acquiring property.

I agree with Mr. Quinn’s comments for the most part. I am seeing first hand the “cherry picking” of the portfolio companies. The one comment I would disagree with is the volume of CMBS in 2008. He says 60% less than 2007 which means that there would be about $96 billion in CMBS origination for 2008. That is too high. With only $1.5 billion originated so far a more realistic number would be in the $40 or $50 billion range. We’ll see how it plays out.

(In the interest of full disclosure my company does business with Column Financial.)

Posted in Capital Markets | 1 Comment »