The Real Estate Capital Institute®

Long-term Mortgages Dip Below 6% for Shopping Centers

Ample Funds Available and Mortgage Pricing Stays Competitive


Chicago, IL -- (ReleaseWire) -- 09/11/2006 --The Fed raised rates all year and stopped its’ consecutive climb in mid-August. The bond market reacted favorably by lowering yield premiums as treasury debt is viewed as more stable. The net result favors borrowers as the cost of funds are declining.

Nat Zvislo, research director for the Real Estate Capital Institute suggests, “Retail properties are enjoying excellent debt pricing and terms. This sector is seen as a safe haven within the commercial real estate capital markets.”

“Malls, lifestyle, community, neighborhood, specialty and free-standing centers are all in vogue with lenders,” Zvislo adds. Retail assets are the best-performing asset class during the past decade. Furthermore, many centers have proven sales and performance histories, helping lenders gain more comfort with fundings.

Overall, retail properties are priced extremely competitively, particularly for institutional-grade assets in excess of $20 million or more. Based on treasury pricing of 4.77% for ten-year notes (09/09/06 market close), approximate pricing ranges for fixed-rate, permanent debt is as follows:

i) 5.5% to 5.75% for low-leverage (65% Loan-to-value or less), institutional-grade properties (including credit-tenant) in excess of $20 million
ii) 5.75% to 6% for full-leverage (75%-80% LTV), medium-sized loans ranging between $10 to $20 million
iii) 6% to 6.5% for smaller loans, unanchored, to-be-redeveloped or partially-leased

The above pricing guidelines as subject to numerous variables such as borrower track record, locational dynamics and rent-roll stability to name a few. Nevertheless, the narrow pricing differentials between various grades of properties illustrate the competitiveness of the capital markets.

Retail properties debt and equity data is posted daily in the Scoreboard ™ section of the Real Estate Capital Institute’s website ( On-the-hour reports for long and short-term rates are broadcasted each business day by dialing the Real Estate Capital Rateline ™ at 7RE-CAPITAL (773-227-4825).