Real Estate Capital Market Report - July 2006 Edition

CHICAGO, July 24, 2006 -- As the midyear mark passed the commercial realty capital markets, the following key trends are observed:

1) The mortgage yield curve is nearly flat. Class A, B and C properties are tightly priced within about 15-basis-points-per-category differential. Within property categories (e.g. retail vs. lodging), about the same relationship exists.

2) While rates bounced within a quarter-point range throughout the month, overall spreads and treasuries stayed relatively similar within the last three months. Pressure remains on cap rates and spreads to widen, but the lack of product still indicates a seller’s market.

3)The Fed raised a key interest rate by a 1/4% - the 17th straight increase and its highest since January 2001. With current spreads taken into account, rates are at about the levels of this April. However, short-term rates jumped a half point during this quarter.

4) Overall mortgage rate range is about 6% to 6.75%, reflecting spreads of about 100 to 160 basis points over the comparable-term 5 and 10-year treasuries. This pricing reflects typical leverage loans (e.g., 75-80% Loan-to-value for conventional properties).

For hourly rate updates, please call the Institute’s automated Real Estate Capital Rateline at 7RE-CAPITAL (773-227-4825.

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Director

Research Department

The Real Estate Capital Institute

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