CMBS Market Commentary

CMBS loan pricing

Current new issue spreads in the CMBS market widened, while the rates rallied across the curve. Loan coupons generally fall between 3.50% and 4.00% on stabilized commercial real estate assets.

Market commentary

Markets had been moving along most of summer before getting jolted out of their vacation haze as the calendar turned to August. The US-China trade negotiations had continued to escalate first with the US imposing an additional 10% tariff on $300B of additional Chinese goods, which was later delayed to start December 1. China retaliated by halting imports of US crops and weakening the yuan. The back and forth cause rates to drop dramatically, volatility to spike and spread markets to widen. The rate curve has flattened significantly, raising recession concerns.

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Commercial Loans $4mm to $500mm Nationwide

Single Tenant Retail, Triple Net, 1031 Exchange, Hospitality (Hotel & Motel), Hotel Construction, Multi  Family, Construction,  Office (building, condo, complex), Leisure (golf course, marina, RV park, etc.), Residential N.O.O., SBA 504, SBA 7a, Warehouse, Mixed use, Storage.

Loans

Acquisition and development, First Mortgage & Mezzanine, Rate and term refinance, Cash Out, Bridge loans, Nonrecourse, Agency lending programs, Interest Only, Private money

Our CMBS loan terms include:

All major property types, $1 million – $500+ million, Non-recourse (subject to standard carve-outs), Up to 75% LTV, 5-, 7-, or 10-year terms, 25- to 30-year amortization, Fixed or floating rates, First mortgage and mezzanine loans

North Atlantic Mortgage Corp.

John Sauro, President

1-877-794-5363

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The S&P 500 and DJIA have pulled back from all-time highs but maintain year-to-date gains of 16.6% and 12.6%, respectively¹. CMBS benchmark AAA bond spreads widened about 10-15 bps from tights in mid-July and now trade in the mid-high 90’s while some recent deals have touched 100¹. All-in coupons on CMBS loans have stayed in the same place despite this bond spread widening due to the drop in rates.

The Fed cut rates as expected at their July 31 meeting by a quarter point. This was widely expected by the market although some expected a half point cut. Following the announcement however, Fed Chairman Powell was more hawkish than some had expected, describing the cuts “as more of a mid-cycle adjustment than the beginning of a series of long term cuts.” The additional US tariffs on China and China’s retaliation have driven market expectations for a rate cut at the next meeting to at least another quarter point with a possibility of a half point. The next FOMC meeting will be on September 18.

Total 2019 year-to-date non-agency US CMBS issuance is $46.8 billion, comprised of $25.4 billion of conduit, $16.0 billion of floating rate single-asset/single-borrower, and $5.4 billion of fixed rate single-asset/single-borrower². Issuance is down year over year but the recent drop in rates and loan coupons should help keep the new origination pipeline going into the fall and year end.

CMBS Loan Pricing

Current new issue spreads in the CMBS market held flat, while the benchmark yield curve remained fairly stable. Current loan coupons generally fall between 4.90% and 5.20% on stabilized commercial real estate assets.

Market commentary

This year continues to be a positive one for risk assets, despite a recurring news loop of familiar risk factors. The market continues to move on trade negotiation and Brexit news, but seems more likely than not to hold onto recent gains now that the US government funding is behind us and the Federal Reserve maintains a flat rate outlook. The S&P 500 and DJIA have year-to-date gains of 11.5% and 10.0%, respectively¹. CMBS spreads have held steady with benchmark AAA bonds in the mid to high 90’s¹.

February economic data seems to corroborate the Federal Reserve’s decision to pause rate hikes. US core inflation (excluding food and energy) came in at 2.1% YoY, 0.1% lower than estimated¹. Nonfarm payrolls increased by 20k, well below expectations of 180k¹. Current short term bond market pricing still indicates that no further rate action from the Federal Reserve is the most likely outcome this year¹.

Total 2019 year-to-date non-agency US CMBS issuance is $12.7 billion, comprised of $6.3 billion of conduit, $4.6 billion of floating rate single-asset/single-borrower, and $1.8 billion of fixed rate single-asset/single-borrower². In February non-agency US CMBS issuance was $6.7 billion, while March month-to-date issuance is $3.3 billion². Lower volume and low volatility have helped keep spreads stable over the last month. However, CMBS spreads have lagged behind other fixed income products in recent weeks, which may allow for modest near term tightening.

Contact Us: 

John Sauro

Ph: 877-794 5363

Johnsauro@gmail.com

FINANCING AVAILABLE

For more information and offering memorandum,

Call or Email:
John Sauro
Ph: 877-794-5363
Email: JohnSauro@Gmail.com

The U.S. economy is running on all cylinders right now, which should keep the Federal Reserve on track to continue raising short-term interest rates to prevent it from overheating. While higher borrowing costs typically suppress loan origination, a crucial rollback in bank regulation earlier this year, plus the growing presence of alternative lenders, should keep the commercial lending spigot wide open in Queens.

Buoyed by robust consumer and government spending, gross domestic product – the broadest measure of goods and services produced in the U.S. – grew at a 3.5% annual rate in the third quarter, according to the Commerce Department’s first reading. That’s below the second quarter’s 4.2%, which was the strongest since the third quarter of 2014, but sharply above the first quarter’s 2.2%.

After years of being stifled, banks should become more comfortable about lending due to the partial dismantling of a major impediment: The Dodd-Frank Act. Over the past decade, lenders erred on the side of caution due to oversight stemming from broad and overreaching government regulation, which was put in place as a safeguard in the aftermath of last decade’s recession. Lenders have become more conservative due to the increased reserve requirement imposed against loans considered highly volatile commercial real estate or HVCRE.

Fast forward to May of this year when President Donald Trump signed the “Economic Growth, Regulatory Relief, and Consumer Protection Act,” the most significant rollback of Dodd-Frank regulations since its passage. Put simply, the new law increases the threshold for banks to be considered “too big to fail.” The law relaxes regulations for all but the largest U.S. banks, raising the level at which banks face the tight and extremely costly oversight spelled out in Dodd-Frank to $250 billion in assets, up from the previous threshold of $50 billion. Due to this sizeable increase, banks will likely become much more active in the lending arena.

It should be noted that the Trump administration recently turned their attention to the Volcker Rule, the Dodd-Frank bill’s regulation that created a separation between typical consumer banking from the speculative activity that fueled the financial sector’s instability before the 2008 crisis.

As the economy gained steam this year, so did the investment sales market in Queens. During the first three quarters, Queens saw 456 transactions consisting of 559 properties, totaling approximately $2.88 billion in gross consideration, according to Ariel Property Advisors’ Investment Research Division. Transaction and dollar volume were 6% and 22% higher than the same period in 2017.

For investors, the time appears ripe to acquire land in Queens since prices have become more attractive over time. For the third quarter, development sites averaged $204 per buildable square foot, down 6% from the same period a year earlier. That is also well-below Brooklyn’s and Northern Manhattan third quarter averages of $271 per buildable square foot and $237 per buildable square foot, respectively.

It has naturally become more expensive to finance construction projects. The WSJ prime rate index, used by many banks to price construction loans, reached 5.25% in October, 100 basis points higher than the same month last year. In the past, banks were the clear-cut cost leader for construction loans, but as regulations made banks less competitive, unregulated debt funds were able to gain a significant amount of market share.

Debt Funds Dominate

The future regulatory environment bodes well for Queens developers, but alternative, transitory creditors, such as debt funds and bridge lenders, have significantly sapped their market share in recent years by offering higher leverage and more structured value-add loans with less scrutiny. Unlike traditional lenders, these entities have less oversight and tend to look at a property’s long-term potential and less on the capacity and credit of a borrower.

Credit availability in the debt fund space has mushroomed, creating a progressively competitive market for these lenders, and thus pushing rates down. According to Fed surveys, banks, under pressure to compete, have relaxed their lending standards in recent quarters.

Since Dodd-Frank, large institutional borrowers have increasingly used debt funds in lieu of banks. For example, prior to refinancing with Pacific Western Bank, Normandy Real Estate financed their project at 47-11 Austell Place in Long Island City with a $23.7 million acquisition loan from SL Green Realty Corp. Elsewhere in Western Queens, along the East River waterfront, Cape Advisors financed their acquisition of 30-77 Vernon Blvd with an 18-month bridge loan from Mack Real Estate Credit Strategies.

Expect banks to begin entering this space again in the near future given their recently rediscovered flexibility. While the old guard might be clawing back at their recently relinquished market dominance, the disruption in the value add/construction financing space continues.

Now more than ever, acquiring a seasoned mortgage broker is critical as they can navigate this sea of options for a borrower to attain a holistic financing package most accretive to every project and business plan. For example, Ariel Property Advisors Capital Services Division was recently retained to secure a construction loan at 75% loan to cost. Ariel knew this area of the capital stack was impossible to achieve from banks without expensive mezzanine financing but were able to preliminarily secure the desired loan within the borrower’s interest rate tolerance.

Looking ahead, while interest rates have been on the rise, it has not impeded borrowing activity, so government rollbacks on bank regulation, coupled with copious amounts of alternative lenders, should keep commercial lending active in Queens.

Source:Ariel P.A.

The interest rate you pay on your home mortgage has a direct impact on your monthly payment; the higher the rate, the greater the payment will be. That is why it is important to know where rates are headed when deciding to start your home search.

Below is a chart created using Freddie Mac’s U.S. Economic & Housing Marketing Outlook. As you can see, interest rates are projected to increase steadily over the course of the next year.

How Will This Impact Your Mortgage Payment?

Depending on the amount of the loan that you secure, a half of a percent (.5%) increase in interest rate can increase your monthly mortgage payment significantly.

According to CoreLogic’s latest Home Price Index, national home prices have appreciated 6.2% from this time last year and are predicted to be 5.1% higher next year.

If both the predictions of home price and interest rate increases become a reality, families would wind up paying considerably more for their next homes.

Bottom Line

Even a small increase in interest rate can impact your family’s wealth, so don’t wait until next year! Meet with a local Mortgage professional to evaluate your ability to purchase your dream home now.

4.45% Rate 4.50% APR – 30 Yr. Fixed Rate

Call 877-794-5363 for more info.

WASHINGTON, D.C. (August 22, 2018) – Mortgage applications increased 4.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 17, 2018.

The Market Composite Index, a measure of mortgage loan application volume, increased 4.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased three percent compared with the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) remained unchanged from 4.81 percent, with points decreasing to 0.42 from 0.43 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100) decreased to 4.68 percent from 4.73 percent, with points decreasing to 0.28 from 0.29 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 4.82 percent from 4.77 percent, with points increasing to 0.69 from 0.68 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.25 percent from 4.27 percent, with points decreasing to 0.47 from 0.52 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 5/1 ARMs decreased to 4.00 percent from 4.06 percent, with points increasing to 0.52 from 0.48 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.

Interest Only Mortgages Are Back

The Interest Only Express Program

30 Year Fixed, 5/1, 7/1, 10/1 Arm’s

Lower Monthly Payments.

Great for self-employed individuals and those with commission or bonus income benefit from lower monthly payments and can add to principal when its more advantageous for them to do so.

Those planning to live in the home for a short time prefer to have a lower monthly payment vs. adding to principal.

• Loan Amounts to $3M
• 90% Financing for Purchase or Rate & Term Refinance
• Cash out to $1M in Hand
• Derogatory Credit History Considered

Find out how much you can save on your monthly payments.

Jumbo Reverse Mortgages  Coming Soon

We will soon be rolling out a Jumbo Reverse Mortgage program that allows for loan amounts to $4,000,000.

Currently the maximum reverse mortgage loan amount allowed by FHA is$679,650.

A nice option to have for those 62 years of age or older.

For a Free Consultation:
Call or Email:
John Sauro
Ph: 877-794-5363
Email: JohnSauro@Gmail.com

US weekly jobless claims total 210,000, vs 215,000 expected

The number of Americans filing for unemployment benefits fell last week, a sign the labor market was holding firm despite tensions between the United States and its trading partners that have spawned restrictions on global commerce.

Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 210,000 for the week ended Aug. 18, the Labor Department said on Thursday.

It was the third straight week of declines for claims, which have dropped so low that economists have scrambled for explanations. In July, claims fell to their lowest level since 1969 even though the workforce is much larger than in prior decades.

Economists polled by Reuters ahead of Thursday’s report had forecast claims rising to 215,000 in the latest week.

The signs of strength in the U.S. labor market have been a key reason behind the Federal Reserve’s ongoing campaign to raise interest rates.

Minutes of the U.S. central bank’s last policy meeting, published on Wednesday, showed officials discussed raising rates soon to counter excessive economic strength, although policymakers also examined how global trade disputes could batter businesses and households.

 Sources: Reuters, CNBC, MBA

The APR of 4.50% is based on a maximum conforming loan amount of $453,100 with a fixed rate of 4.45% for 30 years with a .336% discount fee.

Financing Available for this Walgreens Location at
1201 Main St. Peekskill NY

Price $12,750,000 NNN-No Landlord Responsibilities
Tenant Pays Taxes, Insurance, and Maintenance
Down Payment 25%
Cap Rate 5.75%
NOI $733,000
Remaining Term 17.5 YRS
Corporate Guaranteed Lease

Call or Email:
John Sauro
Ph: 877-794-5363
Email: JohnSauro@Gmail.com

Get The Interest Only Express Program

30 Year Fixed, 5/1, 7/1, 10/1 Arm’s

Lower Monthly Payments.

Great for self-employed individuals and those with commission or bonus income benefit from lower monthly payments and can add to principal when its more advantageous for them to do so.

Those planning to live in the home for a short time prefer to have a lower monthly payment vs. adding to principal.

•  Loan Amounts to $3M
• 90% Financing for Purchase or Rate & Term Refinance
• Cash out to $1M in Hand
• Derogatory Credit History Considered

Find out how much you can save on your monthly payments.

For a Free Consultation:
Call or Email:
John Sauro
Ph: 877-794-5363
Email: JohnSauro@Gmail.com

WASHINGTON, D.C. (July 25, 2018) – Mortgage applications decreased 0.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 20, 2018.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) remained unchanged at 4.77 percent, with points decreasing to 0.45 from 0.46 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100) increased to 4.72 percent from 4.66 percent, with points increasing to 0.31 from 0.30 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 4.78 percent, with points increasing to 0.73 from 0.69 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 4.23 percent from 4.22 percent, with points increasing to 0.44 from 0.42 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for 5/1 ARMs decreased to 4.09 percent from 4.12 percent, with points decreasing to 0.29 from 0.39 (including the origination fee) for 80 percent LTV loans.

Friday’s release of second quarter gross domestic product (GDP), the broadest measure of economic growth, showed a massive increase of 4.1%, which was close to the expected levels. This was up from 2.2% during the first quarter and was the highest reading since the third quarter of 2014. Strength was seen in both consumer spending and business investment. Investors now will be watching to see if the underlying trend is closer to the first quarter or the second quarter levels.

Refinancing or Buying-

Home Financing doesn’t have to be Stressful.
We monitor real time interest rates, so our clients are able to access some of the lowest rates available.
With rates still historically low, poised to move higher, many would be home buyers are moving quickly to finance their piece of the American Dream.

Existing home owners have refinanced at least once, even twice. But there are still many who have not, due to either not wanting to deal with the stress of gathering documents and not sure of qualifying for a loan.
At North Atlantic you receive attentive personalized service
(see what our clients say).
Believe me it’s a great deal easier with our help and expertise. The average time to close a loan is about 30 days. We understand the guidelines and know what different lenders can do, which increases your opportunities for a fast easy loan with a great rate.

Don’t put it off any longer and start saving with a lower mortgage payment.
There’s no salesman to speak with only qualified mortgage experts.

For a Free Consultation:
Call or Email:
John Sauro
Ph: 877-794-5363
Email: JohnSauro@Gmail.com

Looking ahead, the important monthly Employment report will be released on Friday. As usual, these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, the Core PCE price index, the inflation indicator favored by the Fed, will be released on Tuesday. The ISM national manufacturing index will come out on Wednesday, and the ISM national services index will come out on Friday. The next Fed meeting will take place on Wednesday. No change in policy is expected.

Source: MBA, Bloomberg, NAR