In recent articles I have detailed about how equity players, particularly the big REITs are returning. The Bid/Asked Gap is closing. The final piece of the puzzle is the availability of affordable financing. Please see the attached article about capital markets.
A friend of mine asked me recently if there was ever going to be a good time to invest. I told him that there was no need to get in now…there will be another great time to buy in a few decades. I’d call 503.577.1034 now!
from: National Real Estate Investor
Real estate capital markets continue to improve. As investor sentiment rebounds, there is a large amount of equity capital chasing a relatively constrained supply of for-sale core assets. This increased liquidity has helped to boost sale prices for core assets in primary markets by more than 10% over the past few months.
Lenders also are beginning to re-enter the commercial mortgage market, with increasing competition between lenders leading to lower mortgage rates and higher loan-to-values. As of March 2010, the average commercial mortgage rate was approximately 6.8% to 7%, with spreads over the 10-year Treasury narrowing to 320 to 370 basis points.
On the CMBS front, all tranches have rallied appreciably. Spreads on the AAA CMBX index have narrowed by more than 100 basis points during the first quarter of 2010.
In early April, Royal Bank of Scotland (RBS) successfully completed a $309.7 million commercial mortgage-backed securities (CMBS) offering backed by multiple loans, suggesting that the securitization market also is strengthening.
According to Real Capital Analytics (RCA), distressed assets in the U.S. surged to $234 billion as of March 2010. We expect the amount of distress to continue to grow as more loans mature over the next three years.
Although some of the loans will be restructured and extended, we expect to see good debt and equity opportunities for well-priced and/or distressed investments in 2010 and 2011.
The NAREIT Equity REIT Index gained 10% during the first quarter, outperforming the S&P 500 Index (5.4%). Improved access to both debt and equity markets is helping to fuel REIT performance.
Meanwhile, the NCREIF Property Index (NPI) posted a total return of 0.76% during the first quarter, following six consecutive quarters of negative returns [Figure 1]. The income portion of the quarterly return was resilient at 1.7%, but prices depreciated by 0.9%. The total return was positive for all property sectors except lodging.