The Real Estate Capital Institute®

The Real Estate Capital Scoreboard - February, 2007

Minimal changes in capital markets. Given lower equity returns combined with favorable debt pricing, investors are using more equity dollars to capture positive-leverage returns.


Chicago, IL -- (ReleaseWire) -- 02/02/2007 --During January, key treasury rates steadily climbed by about a quarter percent, rebounding slightly with yesterday’s Fed announcement to hold rates steady. Overall rates are similar to spring, 2006, although mortgage spreads continued narrowing. As is the case since August with short-term rates, Bank Prime and LIBOR stayed unchanged.

During the month, a variety of mixed signals hit the capital markets. The Labor Dept. reported the lowest inflation in three years. The Fed also warned of a financial crisis due to mounting government debt as baby-boomers enter retirement age – warning of sharp spending cuts, tax increases or both. Housing starts unexpectedly rose and building permits to the highest their highest levels in four years. Lastly, residential construction dropped nearly 15%, the biggest yearly decline since 1991.

With incredibly competitive lending conditions, lenders have dropped spreads over treasuries by five basis points or more. Mortgage spreads between various property types remain very tight. Class-A apartments, lodging, industrial, office and retail properties are priced within a 25 basis-point-range.

The most commonly discussed issues within the past month include:

(1) Steadily rising rates.
(2) Condo projects converted to rental units.
(3) Have income-property prices finally peaked?
(4) Office markets continue signs of steady improvement.


James Postweiler, an Advisory Board Member of The Real Estate Capital Institute says, "Institutional buyers are increasingly optimistic about rental revenue growth accompanied by lower vacancies.” He adds, “Cap rates and IRR targets remain steady and aggressive.”


The Real Estate Capital Institute 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, interest rates are updated hourly by calling the Real Estate Capital RateLine at 7RE-CAPITAL (773-227-4825).

Nat Zvislo, Research Director
The Real Estate Capital Institute