RECI Reports Interest Rates Continue to Drop as Investors Seek Safety

Jeanne Peck

CHICAGO, IL – Real Estate Capital Institute Reports Interest rates continue to decline as

bond investors seek safety from geopolitical turmoil, rather than worrying
about inflation fears.  

By the end of August, even as the US economy shows
favorable gains (e.g.,  a seven-year low in jobless claims), treasury yields
reached a 15-month low due to the problems facing Europe and the Middle
East.

Real estate capital markets are the beneficiaries of continued global
unrest.  

Therefore, expect another banner year for commercial and multifamily lending.   Borrowers want low rates; Debt investors want safer
yields with some reasonable premium.  

Commercial mortgage markets fill the void in comparison to other investment vehicles, BBB-rated bonds, for
instance.   A clear sign of this investment trend includes life insurance
companies increasing their allocation to mortgages, looking to raise
allocations to as much a 15% of their portfolios.

Ultimately, anticipation of the Fed's raising rates in the near future
should pose a challenge to realty investors seeking various types of
longer-term debt.  But for now with more pressure to fund longer-term
commercial mortgage loans, underwriting standards are loosening based on
intense competition from banks, Wall Street and life companies.  The net
result includes higher leverage, more interest-only underwriting and less
restrictive property-type and location profiles.   Rating agencies and loan
underwriters still maintain discipline, mainly by focusing on higher-quality
transactions within various sectors backed by proven sponsorship.

Overall mortgage rates are regularly dipping below 4% for 10-year money,
even for fully leverage loans. Meanwhile, short term rates remain unchanged
as borrowers enjoy floating-rate debt priced at generationally low levels.
Property owners enjoy selling at record high prices, or financing at record
low interest rates. Both scenarios are "win-win," as pricing on realty debt
and equity return to levels not seen since 2006-07.


Jeanne Peck, the director of the real estate capital Institute, advises "The
notion of real estate as an illiquid asset is changing-especially going into
an economic upturn (though slow).  Investors love brick-and-mortar, whether
debt or equity.   More and more people understand it as an institutional
investment vehicle offering competitive yields with solid collateral."

The Real Estate Capital Institute(r) is a volunteer-based research
organization that tracks realty rates data for debt and equity yields.  The
Institute posts daily and historical benchmark rates including treasuries,
bank prime and LIBOR.  Furthermore, call the Real Estate Capital RateLine at
7RE-CAPITAL (773-227-4825) for daily rate updates.

The   Real Estate Capital Institute(r)
3517 West Arthington Street
Chicago, Illinois USA 60624
Contact: Jeanne Peck, Executive Director
director@reci.com 
www.reci.com