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The relationship of Commercial Real Estate’s Cap Rate and Federal Reserve’s 10-Year Treasury Rate

9/19/2015

Commercial Real Estate’s Cap Rate is average 436 bps over 20 years reference to Federal Reserve's 10-Year Treasury Rate. In fact, its average from 1990 to 2000 is 450 bps and its average from 2002 to 2015 is 425 bps.

Transactions in 2015 are on course to exceed pre-recession peak levels, and most property sectors continue to see inflows of equity and disciplined underwriting by debt providers. With positive economic trends lifting gauges of property performance, commercial real estate remains a favored asset class on a risk-adjusted basis.

Another words, the sophisticate and savvy CRE’s investor are studying and analyzing carefully its Federal Reserve’s 10-Year Treasury Rate in order to make an informed decision on his next acquisition. It would help reduce his risk significantly.

Commercial property sectors continue to perform well amid this extended period of low interest rates and the Federal Reserve’s decision will not disrupt property performance

The Federal Reserve opted Thursday 9/17/15 to maintain its benchmark lending rate at or near zero percent. While acknowledging that the U.S. labor market continues to improve, the central bank also heeded softer conditions in foreign economies in reaching its decision to defer the first hike in the Federal Funds rate in approximately nine years. Fed Chair Janet Yellen and voting members of the policy committee will proceed cautiously, monitoring for contagion risks from other countries that could adversely affect U.S. economic performance.

The Fed’s next opportunity to take up the rate hike question comes at its meeting next month, but it may wait until December to act. Until the next meeting, the Fed will scrutinize incoming data on economic momentum, inflation trends and international volatility. Mortgage spreads widened during the summer in anticipation of a rate increase, and little appreciable effect on spreads is likely to occur in the near term.

The central bank’s decision to hold will likely spark a new round of questions about the strength of the U.S. economy in spite of relatively strong underlying fundamentals. Through August, the labor market had added an average of 212,000 jobs per month, an amount less than the pace set in 2014 but sufficient to support a forecast of 2.7 million positions this year. Factors weighing on the U.S. economy, however, include soft exports stemming from the strong U.S. dollar and anemic inflation principally related to low gas prices. Core inflation, which strips out volatile food and energy, rose only 1.8 percent year over year, below the Fed’s target threshold of 2.0 percent.

Commercial property sectors continue to perform well amid this extended period of low interest rates and the Federal Reserve’s decision will not disrupt property performance. With job growth generating new commercial space demand that dramatically outpaces construction levels, vacancy in the primary property segments remains on track to decline this year and support additional rent gains. Apartment construction has ramped up, but favorable demographic trends and challenging conditions for first-time homebuyers will continue to sustain extremely low vacancy in the multifamily sector.

Low interest rates, steady performance gains and competitive yields are supporting investment in a wide array of commercial properties. Transactions in 2015 are on course to exceed pre-recession peak levels, and most property sectors continue to see inflows of equity and disciplined underwriting by debt providers. With positive economic trends lifting gauges of property performance, commercial real estate remains a favored asset class on a risk-adjusted basis.

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We are processing and engaging with our investor regarding Limited Edition #1. When it's finalized in 4Q 2015, the press conference will be announced the owner of this Edition #1. Our investor has committed to the purchase price of $US 25 million.

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Net Lease’s Sale leaseback and Built-to-Suit Strategy

9/9/2015

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Net Lease’s Sale leaseback and Built-to-Suit Strategy

The growing business who owns real estate can raise an inexpensive working capital and/or debt reduction with Net Lease’s Sale leaseback and Built-to-Suit Strategy.

Sale-Leaseback Strategy

Sale-Leaseback Strategy Sale-leaseback strategy is a form of financing in which a company sells its real estate for cash and simultaneously signs a long-term lease with the buyer. Sale-leaseback transactions provide the lessee company with a source of capital that is an alternative to other financing sources such as corporate borrowing, mortgaging real property or selling shares of common stock.

A Seller/Tenant is able to convert the value of real estate assets into working capital it can use to:

Pay-down debt
Fund acquisitions
Reinvest in the core competencies of its business

Build-to-Suit Strategy

Through build-to-suit strategy, Investor/Lender (“Investor”) provides a growing company with the funding for the expansion of an existing facility or the construction of a new facility in a different location. Investor can source, facilitate, arrange, structure and close the build-to-suit transaction.

The build-to-suit provides innovative financing for:

Expanding existing facilities/constructing new facilities
Debt reductions
Mergers & acquisitions
Leveraged/management buyouts
Corporate restructuring/exit financing
Acquiring addition facilities, technology and equipment to grow business
Transition out of a synthetic lease, mortgage or other binding debt instrument
Matching long-term assets with long-term liabilities

Case Study: WPC’s Key Facts of Net Lease’s Sale leaseback and Built-to-Suit Strategy

Well-established, industry-leading tenant: The MAN Group is one of Europe's leading producers of commercial vehicles, engines and mechanical engineering equipment. It is a publicly traded company with a market capitalization of approximately $15 billion and is 75% owned by German automotive group Volkswagen AG.
Critical, well-located facilities: The three facilities, originally built to tenant specifications, are among the largest service stations operated by the MAN Group and serve as an important sales driver for its 24/7 fleet repair and maintenance servicing operations. Located on arterial routes, the facilities benefit from the high commercial traffic flow that connects several major German and Austrian cities and links Europe's eastern and western markets.
Long-term net leases with built-in rent growth: All three facilities are net leased, with a remaining term of approximately 15 years and CPI-based rent escalations.

Reference: NEW YORK, Sept. 9, 2015 /PRNewswire/ -- (NYSE: WPC), a real estate investment trust specializing in corporate sale-leaseback and build-to-suit financing, and the acquisition of single-tenant net lease properties, announced today that it has acquired a portfolio of three modern truck and bus servicing facilities for approximately $42.9 million (€38.9 million). The facilities — two in Germany and one in Austria — were purchased from the developer, Wohnungsunternehmen Semmelhaack, and are net leased to wholly-owned subsidiaries of MAN SE (The MAN Group).

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The relationship of Commercial Real Estate’s Cap Rate and Federal Reserve’s 10-Year Treasury Rate

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Net Lease’s Sale leaseback and Built-to-Suit Strategy

Net Lease’s Sale leaseback and Built-to-Suit Strategy

Sale-Leaseback Strategy

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Case Study: WPC’s Key Facts of Net Lease’s Sale leaseback and Built-to-Suit Strategy

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Our Blog

The relationship of Commercial Real Estate’s Cap Rate and Federal Reserve’s 10-Year Treasury Rate

Related Blogs

Decade of Peace sculpture: "The Sporting Chances for Peace"

Partnership

Net Lease’s Sale leaseback and Built-to-Suit Strategy﻿

Net Lease’s Sale leaseback and Built-to-Suit Strategy

Sale-Leaseback Strategy

Build-to-Suit Strategy

Case Study: WPC’s Key Facts of Net Lease’s Sale leaseback and Built-to-Suit Strategy

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Archives

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Contact us

Services

Company

Support

Net Lease’s Sale leaseback and Built-to-Suit Strategy