RECI Reports Real Estate Buyers and Sellers Enjoy Best Capital Market Ride in Years

Jeanne Peck

Chicago, IL – Real Estate Capital Institute reports Good News Bears stomp out Bad News Bulls,

as investors now worry about how good times keep getting better. 

  Rates are still low, but investors grow increasingly skeptical such trends will continue, including the following:

*   "Cap Rates are not capped" - Dipping below 5% for credit-tenant

properties and core assets is no longer impossible.  Low mortgage ranges

along with insatiable appetites for all type of cash-flowing commercial real

estate drive record-high pricing, even above 2006-2007 levels.  1031X buyers

prevail for smaller deals, while institutional players try to expand more

into urban-infill assets, where product availability is scarce.   Less

pricing differential for primary vs. secondary markets, as long as asset

quality and store sales performance [e.g., retail] reflect solid results.

Astute owners are pruning their portfolios, mainly selling assets in

smaller, less strategic markets to take advantage of current risk-pricing

dislocation.

*   "Flat spreads" -  As commercial property markets steadily improve with

the retail sector leading the way, mortgage spreads between various property

types flatten out.  Overall spreads start as low as 120 basis points over

comparable-term treasuries for low leverage loans (below 50% LTV); 150-170

basis points for moderate leverage (65% LTV) and under 220 basis points for

full leverage loans (75% LTV).  With rates remaining in comparatively low

ranges over the past few years, more owners comfortably stay with

floating-rate debt.  As with equity markets, little pricing differentiation

for mortgage rates in primary vs. secondary markets.

*   "Replacement costs count" - Peaking property values ignite more new

construction demand:  More and more, cost-equals-value formulas drive

investment decisions. Developers and tenants find new construction more

appealing.  In particular, users are driven to high-density urban areas near

public transportation.  Automobile parking lots are shrinking, while bicycle

racks grow.

Jeanne Peck of the Real Estate Capital Institute(r), suggests, "The party

continues as owners and sellers enjoy the best capital market ride in years.

When will the music stop?  No one knows for sure, but why worry -- just go

with the flow!"

For a complete copy of the company’s news release, please contact:

Jeanne Peck, Executive Director

director@reci.com / 

www.reci.com