Property Report

REAL ESTATE
BRIEF SECOND QUARTER 2014
INTRODUCTION
VIDEO INTRODUCTION
Click or scan the QR
code below to watch our
video introduction.
Welcome to the latest edition of Bloomberg Brief: Real Estate, which focuses
on recent transformations in commercial and residential real estate. This special issue features guest commentaries and exclusive interviews with leading
industry professionals analyzing the markets trends.
In this issue, Tim Ng, managing director and head of research at Clearbrook
Global Advisors, says commercial mortgage bond sales volume is undermined
by increased participation from overseas investors who dont need loans to
finance office building purchases. In some cases, the purchases are all-cash
deals and some of these investors end up leasing the land underneath their
buildings to insurers to help finance transactions.
Behind this growing interest from overseas buyers is the notion that U.S. real
estate still remains something of a safe haven, says Stuart Rothstein, COO
and partner of Apollo Global Managements global real estate group. International investors would like to park their capital in a hard asset in the U.S. rather
than their local currency, Rothstein says.
Meanwhile, the decline in residential lending is expected to spur title insurer
and appraisal company mergers, according to Brett Huff, a research analyst at
Stephens Inc. who tracks real estate information service companies.
The changes in the real estate sector are not relegated to financing residential and commercial property purchases. Shifts are also evident in building use.
Market professionals at CBRE Group found that how tenants work with their
office space is changing, and the move to convert office buildings to residential
properties likely will continue.
As veteran developer Bill Rudin puts it, conversion of obsolete office buildings
reinforces the trend of urbanization where workers and their families want to
be able to walk to work.
We also dig into the data in this issue and find that issuance of bonds backed
by commercial real estate has slowed. In the first three months of the year,
about $36 billion worth of securities pooling commercial real estate mortgages
were sold by Wall Street firms, down 9 percent from the first quarter of 2013.
At the same time, the amount of agency collateral resold into CMBS dropped
to $12.8 billion from $16.83 billion in the fourth quarter of 2013 and $13.78 billion a year ago. On the positive side, the foreclosure rate for all types of commercial property loans fell to 0.44 percent during the first three months of the
year, a low not seen since June 2009.
In the residential space, the first quarter saw a dramatic decline in applications for home loans. The industrys measure of loan applications in February
fell to a level not seen since 1995, even as mortgage rates remained low by
historic standards.
Refinancings a key source of profit for many lenders also dropped in
the first quarter. In March, 52.8 percent of all loan applications were related
to mortgage refinancings, down from 75 percent at the same time last year.
Some of the drop in residential home loan refinancings may be due to a decline in demand for loans that extract equity from homes cash-out refinancings that hit a peak in 2006.
We look forward to hearing your feedback on this special edition of Bloomberg
Brief. The next quarterly real estate market update will be published in the fall.
07.24.14 www.bloombergbriefs.com
Bloomberg Brief | Real Estate
BY THE NUMBERS
$194 net loss
on each loan underwritten by independent mortgage

banks and mortgage subsidiaries of chartered banks in the first quarter of 2014.
5.3 months
$150 net profit on each loan underwritten by independent mortgage
of new homes
in April 2014.
banks and mortgage subsidiaries of chartered banks in the fourth quarter of 2013.
4.19% rate
for a 30-year fixed rate

mortgage in May 2014.
66
% of new U.S. single
family homes that use gas for

heating fuel sold in 2013.
50
% of new U.S.
single family homes

that use gas for heating fuel sold in 1985.
3.54% rate
for a 30-year fixed rate

mortgage in May 2013.
155.00 MBA
Purchase Index
reading on
Feb. 21, 2014.
156.80 MBA
Purchase Index
4.5 months
of supply
of supply
of new homes
in May 2014.
$8,025 Total loan production expenses for each
mortgage underwritten in the first quarter of 2014.
$6,959 Total loan production expenses for each

mortgage underwritten in the fourth quarter of 2013.
3.29% mortgage
rate for a 15-year fixed rate
2.72% mortgage
rate for a 15-year fixed
home loan in May 2014.
rate home loan in May 2013.
reading on
Dec. 27, 1996.
52.6 May 2014 reading of Architecture Billings Index.
39% of homeowners refinanced in the first quarter of 2014 into a

shorter term fully amortizing loan to pay down principal and build
home equity faster.
49.6 April 2014 reading of Architecture Billings Index.
$2.3 trillion
48.7 April 2013 reading of Architecture Billings Index.
A reading above 50 indicates an increase in billings.
$322 price
of framed lumber
(random lengths,
composite price)
per 1,000 board
feet on June 21,
2013.
Growth in home
equity in the
U.S. in 2013.
$373 price of framed
$6.5 billion
Amount of home
equity cashed out
via refinancings of
home loans in the
first quarter of 2014.
$84 billion
Amount of home
equity cashed out via
refinancings of home
loans in the second
quarter of 2006 a peak.
lumber on June 20, 2014.
49
NAHB housing market index in June 2014.

A reading of 50 is the threshold for what are
considered good building conditions.
Number of consecutive months

the NAHB housing market index
has been below a reading of 50.
Source: Freddie Mac, U.S. Census Bureau, Mortgage Bankers Association
Front page | Previous page | Next page
CONTENTS
DATA: MORTGAGE REFINANCINGS, CRE LEVERAGE
Fewer home owners refinanced their mortgage loans, CMBS issuance declined in the
first three months of the year and interestonly mortgages still played a big role in commercial real estate finance.
PAGE 8
NEW REGULATORY ENVIRONMENT SETS
TONE FOR REAL ESTATE BANKING
William Cohan explains how changes imposed by regulators after the credit crisis will
alter how some Wall Street firms participate
in real estate investment banking.
PAGE 9-10
AGING BABY BOOMERS STICK BY
SINGLE-FAMILY NEST
Empty-nest boomers are lingering in their
single-family homes, contrary to popular
assumptions, writes Fannie Mae director
Patrick Simmons.
PAGE 11
DATA: COLLATERAL AND BOND SPREADS
The amount of agency debt resold into commercial mortgage backed bonds declined
in the first quarter and BBB-rated CMBS
spreads narrowed versus swaps.
PAGE 12
COMMERCIAL PROPERTY TENANTS MANAGE
TO DO MORE WITH LESS
The average square footage for each employee in a commercial space has decreased
and likely will continue to decline reflecting changes in the way that space is used
by employers, write CBRE Groups Georgia
Collins and Lenny Beaudoin.
PAGE 13-14
DATA: CAP RATES BY PROPERTY TYPE

The weighted average cap rate for retail,
office and hotel property loans rose in the
first three months of 2014, while cap rates for
multifamily debt fell.
PAGE 15
DATA: TOP UNDERWRITERS OF
DELINQUENT CMBS DEBT
Among underwriters of commercial mortgage
loans resold as CMBS, LaSalle Bank NA had
the biggest number of delinquent loans as of
May 21, 2014.
PAGE 16
WHY SECONDARY U.S. CITIES MAY
DRAW INVESTOR INTEREST
Apollo Global Managements Stuart Rothstein
explains in an interview why secondary cities
that experience growth in employment and
population likely will attract real estate investors.
PAGE 18-19
DATA: CMBS LOAN DELINQUENCIES, FORECLOSURES
Foreclosures of commercial property mortgages
resold into securities fell to a near five-year low.
PAGE 20-21
WHATS ATTRACTING OVERSEAS INVESTORS TO
U.S. COMMERCIAL REAL ESTATE
Tim Ng of Clearbrook Global Advisors says
sovereign wealth funds, pensions and high
net worth families are putting money to work
in gateway city commercial properties and
some of these are all-cash deals.
PAGE 22
WHAT IS THE NEW NORMAL FOR
MORTGAGE LENDERS?
The Mortgage Bankers Associations Michael
Fratantoni looks at some of the reasons why
demand for mortgages to buy homes has
declined and offers his outlook on 2015.
PAGE 23
Bloomberg Brief Real Estate Supplement
WHY THE DROP IN RESIDENTIAL LENDING WILL

SPUR INFORMATION SERVICE COMPANY MERGERS
Real estate information service companies involved with title insurance, closing
and settlement services will merge or buy
competitors to manage the downturn in home
sales and mortgage refinancings, Brett Huff
of Stephens Inc. says in an interview.
PAGE 25
FOCUS ON REITS
Bloomberg Intelligence examines how technology and media companies are key drivers
for offices in many major markets. Plus, a
look at how owners of high-quality malls are
weathering retailer store closings.
PAGE 26-29
THE RELUCTANT LENDER
Richard Bove, financial services analyst
with Rafferty Capital Markets, warns that
regulations in the post-crisis era are hurting
mortgage lending.
PAGE 31-32
DATA: HOME LOAN DELINQUENCIES
Washington state, California and Nevada lead
the decline in residential mortgage delinquencies. The industrys gauge of requests
for mortgages declined to its lowest level
since 1995.
PAGE 33
OFFICE BUILDING CONVERSIONS ARE
A GOOD THING FOR NEW YORK CITY
Bill Rudin of Rudin Management says
the conversion of obsolete office buildings
reinforces the trend of urbanization where
workers and their families want to be able to
walk to work.
PAGE 34-35

Newsletter Ted Merz

Executive Editor tmerz@bloomberg.net
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Real Estate Jennifer Prince

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Business Manager nferris2@bloomberg.net
212-617-6975

Managing Jennifer Rossa

Editor jrossa@bloomberg.net
+1-212-617-8074

CMBS Analyst Tadvana Narayanan
tnarayanan1@bloomberg.net
212-617-3814
Advertising Adrienne Bills

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212-617-6073

Real Estate Aleksandrs Rozens

Editor arozens@bloomberg.net
212-617-5211

Contributing Jeffrey Langbaum

Bloomberg jlangbaum1@bloomberg.net
Intelligence Analyst 609-279-4658

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717-505-9701
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415-617-7026

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Bloomberg
dfretz@bloomberg.net
Editor 212-617-5166

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212-617-5113
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VERBATIM
before them. All of those college degrees
will sooner or later pay dividends and they
will buy homes.
Richard Fry, a senior economist at the Pew

Research Center in Washington, in an interview
with Bloomberg (June 24, 2014)
Comments have been edited and condensed.
construction, vacancy rates are rising in

some markets, slowing the pace of growth
in rental rates.
Office of the Comptroller of the Currency,

Semiannual Risk Perspective (June 25, 2014)
Were seeing
very slow improvement on the housing front with most
markets still trying
to move beyond
stall speed.
We need to step on the housing accelerator again because there is widespread

concern about access to credit. Tens of
thousands of creditworthy people arent
getting mortgages.
There is still a shortage of overall housing supply in the U.S. Pent-up

demand is going to result in more than 1
million households being formed annually
the next several years. We should have
more demand than total housing supply
for the next three years.
Brian Chappelle, a former FHA official and

partner at Potomac Partners LLC, a consulting
firm for lenders in Washington, in an interview with
Bloomberg (June 17, 2014)
Nadeem Meghji, a managing director at New

York-based Blackstone, in a telephone interview
with Bloomberg (May 22, 2014)
One of the fundamental changes occurring in the FHLBank System is membership composition. While the traditional
membership base has been contracting,
membership interest from insurance companies has been expanding. Advances
to insurance companies have increased
from one percent of advances in 2000 to
14 percent in 2013 and the number of insurance company members in the System
is now up to 290.
Melvin Watt, FHFA Director, in a prepared

speech (May 6, 2014)
The very top, the north of $10 million

[New York luxury] market, has the potential of getting saturated in a year to two
years from now.
Donna Olshan, president of Olshan Realty Inc.,

in an interview with Bloomberg (May 27, 2014)
Given the Great Recession and the

slow recovery, millennials have faced
very difficult economic circumstances. But
they have a very significant tailwind. They
are more educated than any generation
The credit
quality was the
best weve seen
since the mid1990s. There was
a premium for
being an early
mover since it
was a brand new
market.
Chris Hentemann
Source: Bloomberg/
Peter Foley
Chris Hentemann,
chief investment
officer at 400 Capital
Management LLC, speaking with Bloomberg
about a Freddie Mac bond in which private investors share the risk of home-loan defaults with the
mortgage-finance company (May 29, 2014)
The CRE vacancy recovery under way

since 2010 has been uneven across property types. Apartment vacancies returned
to pre-recession levels before other property types, largely because the decline
in homeownership increased apartment
demand. Accordingly, apartment net
operating incomes are already above
their previous peak and are expected to
grow as rents increase further. Because
of a significant increase in apartment
Frank Nothaft
Source: Bloomberg/
Andrew Harrer
Frank Nothaft, chief

economist at Freddie
Mac, in a statement
published on Bloomberg (June 25, 2014)
The fundamentals that drive new

hotel construction are improving as both
the RevPAR and financing environments
continue to get better. In fact our new construction franchise agreement executions
have now increased year over year in
10 of the last 11 quarters. Consequently,
we believe the timing is right to invest in
our new construction development team
to take advantage of the improvement in
the new construction environment. We
believe the industry is in the early stages
of growth, which we expect to accelerate
over the next several years.
David White, chief financial officer at Choice

Hotels, on an earnings call (April 28, 2014)
Our fundamental view on the recovery

in the home improvement market has not
changed. We didnt expect the recovery in
2014 to be as dramatic as last years, but
we continue to believe that home price
appreciation, affordability in an aging
housing stock in need of investment will
continue to drive growth.
EXPLORE THE WORLD

OF PRIVATE EQUITY
Francis Blake, chief executive officer at Home

Depot, on an earnings call (May 20, 2014)
PEM
<GO>
Bloomberg Brief compiled recent remarks from

investors, housing executives and regulators
touching on major themes for the residential
and commercial real estate markets.
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REAL ESTATE TRENDS

Refinancing Activity Diminished by Rising Mortgage Rates; Leverage Stays High in CRE
Although mortgage rates are up from year-ago levels, they remained low by historic standards in the first quarter. In late March, the rate
for 30-year mortgage loans was 4.65 percent, up from 3.89 percent at the same point in 2013. Higher rates have hurt demand for home
loan refinancings. The Mortgage Bankers Associations measure of homeowner requests for mortgage refinancings was 1,391 at the
end of the first quarter, down from 4,189 in late March 2013. This gauge of home loan refinancings was as high as 7,414 in January 2009
when 30-year mortgage rates were at 5.13 percent.
At the same time, issuance of commercial mortgage-backed bonds fell 10 percent in the first quarter from the same period a year ago.
Use of interest-only and partial IO loans for commercial properties accounted for more than half of all loans resold as bonds.
Multi-Family Housing Starts Rose From Year Ago
5,500
1.25
Multi-Family Starts
Millions (Annualized Pace)
Mortgage Rate Rise Sinks Refinancing Activity

4.9
5,000
Single Family Starts
4,500
4.7
4,000
4.5
3,500
0.75
3,000
2,500
MBA Refinance Index (left)
4.3
MBA 30-Year Effective Mortgage Rate %

(right)
4.1
2,000
0.5
3.7
1,500
0.25
2008
Source: Bloomberg
2009
2010
2011
2012
2013
2014
3.9
1,000
12/12
3/13
6/13
Source: Mortgage Bankers Association
3.5
9/13
12/13
3/14
Single-family starts declined in the first three months of the year from the
same period a year ago, while multi-family starts rose from first quarter
2013 levels. Some of the drop in starts was tied to inclement weather.
While U.S. mortgage rates have remained low by historic standards,

they are up from year-ago levels, chipping away at mortgage refinancings by homeowners.
CMBS Market Still Likes Interest-Only Mortgages
CMBS Issuance Declined From Nov. 13 Peak
Partial IO
IO
Balloon
25
Fully Amort
100
All U.S.
90
All Non-U.S.
20
Issuance ($Billions)
80
70
60
50
40
30
20
15
10
5
10
0
2000
2002
* Transactions completed in Q1
2004
2006
2008
2010
2012
* 2014
Source: Bloomberg LP
Just over 50 percent of commercial mortgage debt resold into bonds was
in the form of interest-only or partial IO mortgages, continuing a trend
evident in 2013 when leverage approached pre-crisis levels.
1/13
3/13
5/13
7/13
9/13
11/13
1/14
3/14
Issuance of U.S. commercial mortgage bonds totaled just over $36 billion
in the first quarter of 2014, down slightly from the same period a year ago
when just over $40 billion of CMBS were sold.
GUEST EDITORIAL
WILLIAM COHAN
New Regulatory Environment Sets Tone for Real Estate Banking
If the years leading up to the 2008 financial crisis were marked by the astounding failure of many Wall Street bankers,
traders and executives to perceive the
risks they were larding onto their balance
sheets especially when it came to real
estate related securities these days the
tables have turned diametrically.
Now, the focus of Wall Streets top executives seems to be on doing everything
possible to reduce risk.
Systemically, we are a much less risky
industry today, says one global head
of real estate finance with a Wall Street
banking firm, who declined to be named.
That doesnt mean people arent taking
risks but we are not in the business of taking risk. Our business is getting rid of it.
That difference between misunderstanding risk and hoarding it and attempting to be more astute about it and
offloading it will likely set the tone for
real estate banking on Wall Street for
years to come.
What that means precisely is, of course,
anyones guess and will continue to depend on the Federal Reserves monetary
policies, on how strictly Washington and
European regulators enforce the new
rules on proprietary trading and capital
requirements, the continued zeal by
investors for outsized returns, and the
markets demands for Wall Streets services, such as debt and equity underwriting, loan originations and merger advice.
But, in the short term, the heightened
focus on risk reduction will likely mean
that Wall Street will continue to be stingy
with credit, especially when a request
falls outside the narrow spectrum of what
qualifies as acceptable.
That means it will still be difficult for

developers even the most respected
among them to get construction loans
from the big Wall Street banks for new office buildings. Nor should anyone expect a
revival anytime soon in the long dormant
markets for residential mortgage-backed
securities or for synthetic collateralizeddebt obligations, two of the many Wall
Street innovations that helped plunge
the economy over a cliff six years ago.
Any revival of these markets will likely
be dependent on the ultimate resolution
of Fannie Mae and Freddie Mac. Bridge
loans to an equity takeout? Fuhgeddaboudit. Expect the credit bar to move up
even higher when the big banks are soon
required by the Dodd-Frank financial
sector reform to retain a non-hedgeable
5 percent of underwritten securities on
their balance sheet, as a way to have
skin in the game and to try to prevent the
bad behavior that led to the crisis of 2008.
What does seem to be enticing Wall
Street these days are what used to be
considered unexciting, bread-and-butter
In the good old days of 2007,

a single Wall Street bank would
think nothing of packaging up as
much as $2 billion of commercial
real estate mortgages in a deal.
Today Wall Street bankers are
much more likely to work together
on creating the conduit.
Regulatory changes
imposed after the
credit crisis of 2008
will alter how some
Wall Street firms
participate in real
estate investment
banking, writes
former senior
Wall Street M&A
investment banker
William Cohan.
deals: refinancing the mortgages of fully

leased existing office towers or lending to
a publicly traded real estate investment
trust. Some bankers will even consider
refinancing a less than fully leased-up
office building as long as the developers
have a clear plan and a track record
of returning the property to fully leased

status. There does also seem to be a miniboomlet in the issuance of commercial
mortgage-backed securities. Some $100
billion in commercial MBS is expected
in 2014, well off the $230 billion peak in
2007, and more in line with what bankers
in 2004 and 2005 thought was a very nice,
healthy business, where what amounts
to fees of between 2 and 3 percent of the
capital raised is considered a good days
work. What bankers and investors both appreciate about these deals is that genuine
due diligence can be performed on the underlying real estate collateral. In the days
leading up to the financial crisis, mortgages on as many as 10,000 singe-family
homes would find their way into a single
residential mortgage-backed security.
That degree of mixture made it virtually
impossible for an investor or the underwriting bank to faithfully evaluate the quality of
the underlying assets.
There seems to be a higher degree of
caution at the moment in the so-called
conduit market as well, although those
deals are getting done. In the good old
days of 2007, a single Wall Street bank
would think nothing of packaging up as
much as $2 billion of commercial real estate mortgages in a deal. Today Wall Street
bankers are much more likely to work
together on creating the conduit.
So Citigroup might join forces with Goldman Sachs and Bank of America Merrill
Lynch to underwrite a $1.5 billion conduit
deal, with each firm packaging up $500 million in mortgages, reducing their risk.
Off balance sheet SIVs structured investment vehicles are also out, especially
at Citigroup, which famously ended up
winding down its massive, more than $17
billion SIV portfolio in 2008 by bringing the
assets onto its balance sheet.
Long gone, too, are the days when the
now-defunct Lehman and Tishman Speyer
teamed up in 2007 to buy Archstone, a
Colorado-based developer of apartment
complexes, for more than $23 billion, using
billions of dollars of leverage, with the hope
of using the equity markets as the source
of debt repayment. Lehmans collapse
ended any prospect of that happening.
continued on next page
Bloomberg Brief | Real Estate 10
GUEST EDITORIAL
continued from previous page
(In 2012, the Lehman estate sold Archstone for around $6.5 billion to Equity
Residential, a company controlled by
legendary real estate investor Sam Zell,
and to Avalon Properties.)
These days, the regulators crawling
over the big Wall Street banks would
immediately question such a deal and
require that a large equity capital reserve be posted if it were to remain on
the balance sheet.
Not surprisingly, the slack in the
market for the riskiest tranches of real
estate financing is being picked up by
competitors subject to far less regulation than the big Wall Street banks. This
group includes a smattering of hedge
funds, as well as the Blackstone Group
now one of the largest owners of single-family homes in the country funds
affiliated with Starwood, the publicly
traded Ladder Capital and Rialto Capital
Management, a subsidiary of Lennar,
the home builder.
Its both unsurprising and healthy that

Wall Street real estate bankers and
traders remain gun shy about deals that
evoke the excesses of the years leading
up to the financial crisis. Their cautiousness follows a familiar pattern. A Wall
Street innovation for instance, the
creation of junk bonds or the securitization of cash flows leads to outsized
profits for the innovators (Mike Milken, at
Drexel Burnham; Lew Ranieri, at Salomon
Brothers). This will be followed by a determined Wall Street effort to deconstruct
the innovation and then a feverish game
of imitation to try and get their share of
the profits that had been going solely to
the innovator. The resulting battles lead to
lowering of credit standards, market excess and a mispricing of risk that seems
to end in one way only: the bursting of the
bubble that was inflated on the back of the
clever innovation.
As the global head of real estate
finance at the Wall Street investment
bank sees it, Creativity and innovation in

finance has gotten the industry consistently into more trouble than the benefits
that clients have reaped from it. Were
just making widgets now.
And for the time being, well all be better
off for that degree of caution.
William D. Cohan, a former senior Wall Street
M&A investment banker for 17 years at Lazard
Frres & Co., Merrill Lynch and JPMorgan
Chase, is the New York Times bestselling
author of three non-fiction narratives about
Wall Street: Money and Power: How Goldman Sachs Came to Rule the World; House of
Cards: A Tale of Hubris and Wretched Excess
on Wall Street; and The Last Tycoons: The Secret History of Lazard Frres & Co., the winner
of the 2007 FT/Goldman Sachs Business Book
of the Year Award. His new book, The Price of
Silence, about the Duke lacrosse scandal, was
published in April 2014 and is also a New York
Times bestseller.
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GUEST EDITORIAL
PATRICK SIMMONS, FANNIE MAE
Aging Baby Boomers Stick by Single-Family Nest

Empty-nest baby
boomers are lingering
in their single-family
homes, contrary
to some popular
assumptions, writes
Patrick Simmons,
director of strategic
planning in the economic and strategic
research group at
Fannie Mae.
Popular perception holds that baby boomers have begun to change their housing
consumption as they exit their childrearing
years and approach retirement.
Multiple media accounts point to an
emerging trend of Boomers downsizing from suburban single-family homes
to urban multifamily residences as they
become empty nesters.
While baby boomers certainly are experiencing major life changes that could
have significant housing implications, one
key metric of boomer housing consumption the proportion of the population
residing in a detached single-family home
so far provides little support for the
downsizing narrative.
Given baby boomers vast numbers, even
small changes in their housing tendencies
could have significant market impacts.
The boomer generation comprises roughly
80 million individuals, and boomers residing
in detached single-family homes account for
more than one-quarter of the nations entire
occupied housing stock.
A frequently cited cause of boomer
downsizing is the departure of children
from the home. As the empty-nester
theory goes, once children leave home,
boomers have little need for the abundant
living space, quality schools, and other
amenities typically associated with suburban single-family residency.
Indeed, boomers are becoming emptynesters in droves. Between 2006 and
2012, the proportion of leading-edge
boomer households consisting of a married couple with at least one child under
age 18 declined from 10 percent to just
3 percent, and the proportion for trailingedge boomers dropped from 35 percent to
20 percent. The total number of Boomer

nuclear-family households fell by more
than 5 million.
In addition to experiencing changes in
household composition, leading-edge
baby boomers are reaching retirement
age in large numbers.
Departure from the workforce could lead
to a downshift in housing consumption
if boomers adjust their housing costs to
match the reduced income of retirement,
or if they decide to relocate once proximity
to work is no longer a consideration.
Whether due to the Great Recessions
widespread job dislocations or voluntary retirement, labor force participation
among baby boomers has fallen notably
in recent years, particularly among the
oldest boomers. Between 2006 and 2012,
the proportion of leading-edge boomers
who were not in the labor force jumped by
16 percentage points.
In spite of shrinking households and
declining labor force participation, baby
boomers do not appear to be altering
their housing consumption by abandoning
detached single-family homes.
The proportion of boomers who are
householders (i.e., the person, or one of
the persons, in whose name the house
is owned, being bought, or rented) residing in detached single-family homes
increased slightly between 2006 and
2012. Even leading-edge boomers, who
have largely exited the childrearing
stage and have begun to retire in substantial numbers, experienced a slight
uptick in the per-capita rate of singlefamily occupancy.
Another way to study baby boomer
housing consumption is to examine the
proportion of boomer householders (as
opposed to the proportion of the total
boomer population) who occupy detached
single-family homes.
As with the per-capita metric, the
household-based measure shows no
major change, only a 0.3 percentage point
drop from peak levels.
Given the substantial life changes experienced by boomers, why are they not
leaving their single-family homes? One
explanation is that they simply prefer to
remain in place.
Supporting this hypothesis, a 2010

survey by AARP found that nearly 9 in 10
boomers prefer to remain in their current
residences for as long as possible.
Another possible explanation is that
economic and housing market conditions
have forced or at least encouraged
boomers to stay put even if they would
prefer to change their housing situation.
One likely mobility constraint is declining
home values during the housing bust. Between 2006 and 2012, the average value
of an owner-occupied detached singlefamily home with a boomer householder
declined by 13 percent.
For some boomers, the decline in home
value means that they are in a negative
equity position on their mortgage, thereby
making it difficult to sell the home and move.
Even if the home isnt underwater,
boomers who experienced a substantial
decline in home equity might prefer to
postpone moving until they have recouped
more of its former value.
Furthermore, should boomers wish to
sell, they might have a hard time finding buyers for their current homes or
they might face an inadequate supply of
homes to purchase, should they want to
remain homeowners.
Declining home values and the recession-scarred economy may have suppressed boomers residential mobility, thus
slowing the rate at which they can adjust
their housing consumption.
Between 2006 and 2012, the proportion
of boomer householders who moved during the preceding year dropped from 10.2
percent to 7.9 percent.
The stability in detached single-family
housing occupancy among boomers
will eventually come to an end, if not by
boomers choice, then as a consequence
of advancing years that would make it
difficult or impossible to maintain a singlefamily home.
Indeed, because the data presented here
are available only through 2012, they might
miss more recent changes in boomer
housing behavior in response to continued
economic and housing market recovery.
CMBS: COLLATERAL AND BOND SPREADS

Use of Agency Debt Falls, Large Loan Floaters Get More Play as Collateral
Aleksandrs Rozens
Agency Collateral Use Fell in First Quarter, Large Loan Floaters Up
Historical Issuance Volume (Billions)
45
European
40
Large loan floaters
Conduit
Agency
35
30
25
20
15
10
5
0
2012
2012
(Q1)
(Q2)
2012
(Q3)
2012
(Q4)
2013
(Q1)
2013
(Q2)
2013
(Q3)
2013
(Q4)
2014
(Q1)
Yield Premiums for Lower Rated CMBS Narrower Versus Year Ago
700
Spreads Versus Swaps (Basis Points)
The amount of agency debt resold into

commercial mortgage-backed securities
(CMBS) declined in the first quarter from
the fourth quarter and the same period a
year ago, according to data compiled by
Bloomberg.
The amount of conduit debt fell in the
first quarter from the fourth quarter,
though it is up from year-ago levels.
Just over $15 billion of collateral from
conduits was resold into CMBS in the
first three months of the year and $12.8
billion of agency collateral was repackaged into securities.
Use of large loan floaters for collateral
increased to $1.15 billion in the first quarter from $850 million in the fourth quarter
of 2013. In the first quarter of 2013, no
large loan floating rate debt was resold
into securities.
The pooling of large loan floating rate
collateral in CMBS is at its highest level
since 2007 when $3.93 billion of this
type of debt was resold into commercial
mortgage-backed bonds.
Lower rated commercial mortgagebacked securities spread to swaps narrowed in the first quarter from late 2013
and the first quarter of 2013.
BBB-rated commercial mortgage-backed
bonds were changing hands at 223 basis
points over swaps in late March, in from
280 basis points in the last three months
of 2013 and from 270 basis points over
swaps a year ago.
Higher rated commercial mortgagebacked debt ended the quarter narrower
from late 2013, but they are wider than
year-ago levels.
In March AAA-rated CMBS were at a
spread of 58.5 basis points over swaps, in
from 80 basis points late last year. A year
ago, yield premiums for AAA-rated CMBS
were at 46 basis points over swaps.
BBB-rated CMBS*
600
AAA-CMBS*
(* CMBS 2.0 and 3.0 Spreads)
500
400
300
200
100
0
2012
(Q2)
2012
(Q3)
2012
(Q4)
2013
(Q1)
2013
(Q2)
2013
(Q3)
2013
(Q4)
2014
(Q1)
Source: Commercial Real Estate Direct - crenews.com
C
I
M
O
N
O
C
E
CHINA
>ECFC CN
>
>
S
T
S
FORECA
<GO>
GUEST EDITORIAL
GEORGIA COLLINS AND LENNY BEAUDOIN, CBRE GROUP, INC.
Commercial Property Tenants Manage to Do More in Less Space

the likelihood of informal interaction and
employee engagement.
Assigned seats give way to shared
spaces. The traditional approach to space
allocation has created two classes of workers: the haves (those assigned offices) and
the have nots (those assigned cubes or
open workstations). This approach gives the
haves unlimited access to multifunctional
space (offices can be good both for collaboration and focused work) at the expense of
the have nots (cubes generally arent good
for either collaboration or focused work). Yet
we find that all employees have a need for
focused work or space for private conversation. To resolve this imbalance, many
organizations are offering a greater variety
of shared workspace types in order to give
everyone access.
More space for me gives way to more
services for me. We see an increasing shift
toward a more consumer oriented mindset
among employees.
(Apples Genius Bar is, more often than
not, a pleasant and efficient experience.
Why cant the Helpdesk at work be more
like it?)
Employers today are integrating the kinds
of services we find in retail and hospitality
environments into office environments. The
Occupied Square Footage Per Worker Trends Lower

230
45
40
220
35
210
30
25
200
190
180
20
15
Occupied (Left Axis)

Occupied Forecast (Left Axis)
Inflation Adj. Rent (Right Axis)
Inflation Adj. Rent, Forecast (Rt Axis)
10
170
1990 1993
Source: CBRE
$/Sq Ft
Demand for office space is always a leading topic for discussion in the commercial
real estate world. Recently, the conversation has focused on the basic premise that
changes in occupier preferences, such
as how much space companies provide
each of their employees, will reduce future
demand for office space.
But is it true that demand is decreasing?
The answer isnt a simple yes or no. It is
both a yes and a no.
Yes, we see occupiers planning more
efficient spaces to reduce their future
demand. In a survey last year by CoreNet
Global, a leading real estate association,
over 450 corporate real estate executives
indicated their average square footage per
worker had decreased from 225 to 150. We
think the reality on this score is slightly less
dramatic. From our own estimate of new
construction starts, on average, the new
space being delivered is 20 percent to 30
percent more efficient per employee than
the space being exited.
Is overall demand in the market decreasing as a result? Research from CBRE
Econometric Advisors (CBRE EA) suggests its not. In fact, their analysis shows a
clear upward trend in the average occupied
square footage per worker allocation over
the past 10 years. As of 2013, CBRE EA put
average allocation per worker at 215 square
feet, about 5 percent higher than it was a
decade ago.
Square Feet/Worker
The average square footage for each employee in

a commercial space has decreased and likely
will continue to decline reflecting changes in
the way that space is used by employers, write
Georgia Collins, managing director, and Lenny
Beaudoin, senior managing director, at CBRE
Group, Inc.
At face value, the CBRE EA data seems

to contradict completely what many have
promoted as the inevitable move toward
greater efficiency in commercial real estate.
In our view, these two perspectives are not
irreconcilable.
Many leading organizations are transforming their work environments and while
efficiency is often a positive result of the
change, it is not the driving force. Instead
the focus is on creating a great work experience, one that is conducive to getting good
work done.
In our own analysis of employee and
organizational workplace priorities, a few
common themes emerge.
Density is replaced by choice. Too often
equated with cost cutting, the mere mention of density summons for some images
of miserable cube farms the traditional
approach to office design, only smaller.
Banish that picture from your mind and
replace it with one more akin to an urban
streetscape. In this new paradigm, density
is good. In this image, there is a hum of activity, a diversity of work settings to choose
from, a high frequency of serendipitous
encounters. In this office, space is not so
much shrunk as it is re-proportioned. The
result offers employees more choice in
where their work gets done and increases
0
1997
2001
2005
2008
2012
2016
2020
GUEST EDITORIAL...
result is often a transfer of spending from

capital expense (more space) to operating
expense (more service).
So if density is a good thing, space is
being re-proportioned to better align with
work patterns and preferences, and people
will trade more space for better service, why
hasnt the sq.ft./person metric decreased?
During the recession, downward shifts
in employment increased the amount of
space tenants were forced to maintain. Said
differently, firms could lay off workers, but
with longer leases in place, they could not
lay off space. As a result, anticipating future
demand over a 10- to 15-year lease has led
many organizations to plan for peak utilization under optimistic growth forecasts, as
opposed to driving greater utilization of the
space they currently maintain. Given that
real rental rates (adjusted for inflation) are
relatively low compared to highs in the late
1990s, tenants have lacked real incentives
to change that approach.
So what does this mean for the future?
Both the rate of employment (new job

growth) and the price of office space (real
rental price) are increasing. This is forcing many organizations, for the first time,
to reduce future space estimates in favor
of new models for how they allocate and
manage their work environment. As a result,
we believe that offices will become more
efficient, but that gains in efficiency wont be
achieved by shrinking the size of desks and
offices. Instead, the gains will be achieved
by right-sizing existing standards to align
with use patterns over time; re-proportioning
the amount of individual and collaborative
spaces; capping or eliminating planned
vacancy rates; and planning for average occupancy rather than peak occupancy.
In this vision of the future, organizations
will optimize their work environments for
employee productivity by focusing more on
services than on space. They will solve for
peak demand by leveraging shared office
models, rather than by carrying vacancy. In
this future, the cube may well get smaller
or even cease to exist altogether but

demand for offices will remain. The relative size of an office any one organization
holds will likely decrease, but it will also be
augmented by a number of other space-ondemand offerings.
Fortunately, we think this re-imagined
environment lines up with what the workforce wants. We all know that work happens everywhere (ask anyone who owns
a smartphone). We also know that people,
especially younger workers, want to be
connected, in person, to the people they
work with. Worker demands, coupled with
employment growth and increased rental
costs, will push organizations to abandon
the notion that work happens in one predictable place, and in one predictable manner.
A more competitive office will emerge one
that makes it easier to get work done, connect and collaborate with colleagues, and
one that is far more agile and efficient to
accommodate future business demands.
Your property project needs

space to succeed.
We know where and how.
Properties are our world. We have 2,400 employees on
three continents to help you finance your international
projects. We also offer extensive services and IT solutions
for the housing industry and the commercial property
management sector.
We create
the space for success.
Explore now!
As one of the leading international specialists, we create

the space you need to operate successfully. Lets talk to
each other. We can tell you where and how your efforts
can reap the greatest rewards.
Find out more at www.aareal-bank.com
CAP RATES
Most Commercial Property Cap Rates Increased in Q1 2014
The weighted average cap rate for retail, office and hotel property loans resold into bonds rose in the first three months of 2014, while
the weighted average rate for multifamily properties fell, according to data compiled by Bloomberg. The spread to U.S. Treasury rates
earned by lenders for all property types rose in the first quarter from the fourth quarter, though it was down from the same period a year
ago. Weighted average cap rates for hospitality property loans were at their highest in the first quarter since the fourth quarter of 2011.
Aleksandrs Rozens
Retail Loan Cap Rise to 6.27% in First Quarter

9
U.S. Treasury 10-year Yield
Spread
Weighted Avg. Cap rate
Spread
Cap Rate (Percent)
Cap Rate (Percent)
Multifamily Cap Rates Decline, Bucking Trend
6
5
4
3
2
6
5
4
3
1
2010
2011
2012
2013
2014
1
2008
2009
2010
2011
2011
2012
2013
2014
The weighted average cap rate for retail mortgages resold into CMBS was
at 6.27 percent in the first quarter of 2014, up from 5.76 percent in the
fourth quarter of 2014 and up from 6.21 percent a year ago.
Multifamily cap rates ended the first quarter at 6.07 percent, down from
6.29 percent in the last three months of 2013. The spread to Treasuries
earned by lenders widened to 3.35 percent from 3.26 percent in Q1 2014.
Hospitality Cap Rates Rise in First Quarter
Office Cap Rates Edge Up to 6% in First Quarter
12
Spread
10
10
Cap Rate (Percent)
6
4
2
0
2010
2011
Spread
6
4
2011
2012
2013
2014
Cap rates for hotel loans rose to 8.52 percent in the first three months
of 2014 from 7.35 percent in the fourth quarter of 2013. Cap rates for this
property type were as high as 10.34 percent in the third quarter of 2010.
0
2010
2011
2012
2013
2014
Cap rates for office property loans climbed to 6 percent in Q1 2014 from
5.82 percent in the last three months of 2013. The spread to Treasuries
earned by lenders rose to 3.28 percent from 2.79 percent in Q4 2013.
ECONOMIC
WORKBENCH:
HAVE OUR DATA MAKE YOUR POINT
ECWB
<GO>
Cap Rates (Percent)
12
TOP UNDERWRITERS OF DELINQUENT LOANS

LaSalle Is Top Underwriter of Delinquent CMBS Property Loans
Among underwriters of commercial mortgage loans resold as CMBS, LaSalle Bank NA had the biggest number of delinquent mortgage loans as of
May 21, according to data compiled by Bloomberg LP. LaSalle, which agreed to be acquired by Bank of America in 2007, had 204 delinquent loans for
commercial real estate properties and 15 of these loans involved borrowers that filed for bankruptcy court protection. Column Financial was the number
two underwriter of problem loans 203 of its mortgages were delinquent and Wachovia was third biggest. One hundred and eighty nine of the 3,504
loans underwritten by Wachovia were delinquent. Wachovia was acquired by Wells Fargo in 2008.
Aleksandrs Rozens
LOAN ORIGINATOR
CURRENT
BALANCE ($BN)
DELINQUENT
BALANCE ($M)
TOTAL
NUMBER
OF LOANS
NUMBER OF
DELINQUENT
LOANS
NUMBER OF LOANS
WITH BORROWERS
IN BANKRUPTCY
PERCENTAGE
OF LOANS
DELINQUENT
LaSalle Bank National Association
15.04
2,358.48
5,159
204
15
3.95%
Column Financial
24.57
2,756.11
6,437
203
3.15%
Wachovia Bank NA
40.98
5,777.23
3,504
189
5.39%
Merrill Lynch & Co. Inc.
11.91
2,365.37
2,378
150
6.31%
JPMorgan Chase & Co.
57.46
2,687.57
4,982
140
2.81%
Bank of America, NA
37.15
2,233.01
4,274
118
2.76%
Lehman Brothers
18.87
1,364.37
4,032
110
2.73%
Greenwich Capital
15.58
2,138.88
1,863
101
5.42%
CRF
8.67
1,035.81
1,297
91
7.02%
10
CIBC
10.19
1,134.26
1,861
83
4.46%
11
Morgan Stanley Mortgage Capital Holding
19.06
1,055.58
1,867
71
3.80%
12
German American Capital
28.97
1,983.72
1,931
68
3.52%
13
PNC
11.57
740.74
1,881
65
3.46%
14
UBS AG
21.51
1,369.09
2,459
65
2.64%
15
CGM
11.38
1,171.84
1,077
64
5.94%
16
General Electric Capital Corp.
7.47
713.61
2888
62
2.15%
17
Wells Fargo Bank, NA
38.43
478.82
6,001
61
1.02%
18
Goldman Sachs
28.66
1,313.90
1,690
60
3.55%
19
Bridger Commercial Funding
2.34
304.98
966
50
5.18%
20
Washington Mutual Bank
1.14
51.45
2,573
46
1.79%
21
Bear Stearns Co. Inc.
14.40
1,002.40
2,401
39
1.62%
22
Barclays
8.87
630.49
844
34
4.03%
23
Morgan Stanley
11.65
240.36
2197
31
1.41%
24
Artesia Mortgage Capital Corporation
2.50
252.61
937
30
3.20%
25
NCCI
4.80
354.10
963
30
3.12%
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Q&A WITH APOLLOS STUART ROTHSTEIN

Secondary U.S. Cities May Draw Investor Interest, Apollos Rothstein Says
Secondary U.S. cities that see growth in employment and population likely will attract real estate
investors, Stuart Rothstein, COO and partner
of Apollo Global Managements global real
estate group and CEO of Apollo Commercial
Real Estate Finance, said in an interview with
Bloomberg Briefs Aleksandrs Rozens.
Q: What is your outlook on commercial

real estate in the U.S. and overseas?
A: We are generally positive on commercial real estate in the U.S. Without being
overly bullish, from our perspective it does
feel like we are in the middle stages of a
recovery and there is still upside in terms
of occupancy and rent gains as well as
positive fund flows and transaction flows.
The recovery, to date, has been most
pronounced in gateway cities and primary
asset types. The operating fundamentals
in most markets are generally positive
despite the fact that job growth has been
less than some economists would want to
see. Job growth is clearly one of the most
important leading indicators for the commercial real estate space.
Fund flows into the space will stay positive for the foreseeable future, which is a
good thing for transactional activity and
asset values. The other thing that speaks
positively to the underlying value of commercial real estate is that for the last 10
to 15 years in the U.S., there has been
a general under-supply of new product
created. There has been very limited
development activity. It has picked up
most notably in multi-family around the
country. If you look at historical data with
respect to the amount of existing stock
that becomes obsolescent and then the
amount of new product that is being built,
we generally have been under-supplying
the country.
We would define Europe as several
years behind the U.S. in terms of recovery.
The recovery in GDP across the region
and the job figures have been much more
muted as compared to the U.S. There is a
fair bit of uncertainty around underwriting
occupancy levels or rent levels. However,
you have started to see a real estate recovery in certain parts of Western Europe.
Consistent with past cycles, the recovery

started in the major cities in the United
Kingdom. You have seen the major cities
in Germany recover. We are starting to see
some capital flow into parts of France and
we are seeing many investors focused on
Spain and Northern Italy. The one similarity
that exists between the U.S. and Europe
today is that there is clearly a good-sized
amount of equity capital that is actively pursuing transactions in Europe. The finance
infrastructure is not as recovered, though.
Generally speaking, there is not as much
debt capital available throughout Europe
today for real estate transactions.
Q: So it may be harder to refinance a
transaction today in Europe?
A: Absolutely. We are still in the early
stages of the return of securitization and
we are in the early stages of banks lending and we are in the early stages of sub
debt or mezzanine capital forming. Its
moving in the right direction and it feels
positive but it feels much more like the
U.S. in 2010 and 2011. It is a more efficient
capital market in the U.S. today, particularly on the debt side.
Q: You mentioned the recovery in gateway cities. Why have the secondary
cities been overlooked? What are the
common denominators in secondary
cities that may add value?
A: In some respects, what has gone on in
gateway cities is more about capital flows
than underlying real estate fundamentals.
For example, take a city like New York or a
city like San Francisco. You have inter-
national capital flowing into those cities

because the real estate markets have
been well-traded and proven to be liquid
through most market cycles. But, just as
importantly, you have capital going into
hard assets in those cities because international investors would like to park their
capital in a hard asset in the U.S. rather
than their local currency. With Treasury
rates where they are, its fairly compelling to move your capital into a hard real
estate asset as opposed to Treasury debt.
Clearly in a gateway city like San Francisco what has gone on vis-a-vis employment growth in the technology sector has
led to real underlying economic fundamentals that support rising valuations.
Ultimately we are looking for secondary
cities, which we believe are vital to the
U.S. economy in terms of employment
growth and population growth. For example, we have been reasonably active in
pursuing office buildings in various parts
of Florida which have shown improving
occupancy rates, rising rent levels and,
generally speaking, positive demographic
trends. Houston is an interesting city
where we recently bought a hotel. While
Texas overall is doing well, Houston is
benefiting dramatically from what is going
on in the energy sector.
Q: It sounds like you are willing to
consider any property types.
A: We continue to be opportunistic in
our equity investing. We have invested in
hotels, office buildings, data centers. We
have looked at housing in various forms,
either buying single-family homes to rent
Age: 48
Education: Bachelor of Science from Pennsylvania State University and
Masters of Business Administration from the Stanford University Graduate
School of Business
Professional Background: Co-Managing Partner of Four Corners Properties;
Director of KKR Financial Advisors, LLC; Executive Vice President of Related
Capital Company; Chief Financial Officer of Spieker Properties
Family: Married with two sons
Q&A...
or finance as well as condo projects or

other types of residential. We also look at
health-care-related real estate.
Q: Can 2005, 2006 and 2007 debt be
readily refinanced?
A: The real estate capital markets are
continuing to rebound and all aspects of
the market banks, insurance companies, newly created finance companies
and the securitization market are currently functioning. More specifically, the
CMBS market rebounded strongly in 2012
and 2013. 2014 is off to a fine start, but it
is not as robust as people have expected.
If you look at deals done in 2005, 2006
and 2007, these were probably done
broadly speaking at 65 percent LTVs at
the time. A lot of that on a re-underwritten
basis today is probably 80 to 85 percent
LTV, which means a good slug of it will
be refinanced as either first mortgage or
mezzanine debt. But if we assume that
LTVs cap out at the 75 percent range,
there will be a need for new equity capital
to recap some transactions from that time
period. Because of that, you will see a lot
of deal activity in 2015, 2016 and 2017. For
an organization like ours that is both on
the debt and equity side, we are generally optimistic that there will be a lot of
deal activity coming. I dont think it all gets
refinanced as debt.
Q: What property type is more likely to
be refinanced?
A: You have seen the most value increases in multi-family. Given the activity
of the GSEs in that space, and just where
property levels have rebounded to, I think
you should expect to see the most successful refinancing in that property type.
Other opportunities will come in broadly
speaking office, hospitality and maybe

secondarily retail.
Q: Why is 2014 not as robust as expected in the CMBS market? Is it because
insurers are keeping more of the raw
collateral on their balance sheets?
A: I think insurance companies and the
money center banks are being more
aggressive in terms of getting assets on
their balance sheet. Part of this comes to
the fact that in a low-interest-rate-environment, you have entities that need longterm yield. There are not many places to
find it today. So, the biggest competition
for the conduit market today are those that
are willing to do things on balance sheets.
Q: Does that mean a borrower can get
better terms?
A: It depends on the situation. In some
situations lenders are competing purely on
price, in which case the borrower will get
either more proceeds i.e., a higher LTV
or just better pricing i.e., lower interest
rates. In other cases for more transitional
assets, borrowers are more comfortable
going with a balance sheet lender. It is
easier to deal with a balance sheet lender
when you need something done to a loan,
as opposed to something that has been
sold into a securitization, and trying to
deal with a servicer if something happens
with the underlying asset.
Q: What is your outlook on residential
housing? We have had data in the first
six months of the year suggesting a pullback in demand for loans to buy homes.
A: There will be more homebuilding activity and housing activity, in general, as we
go forward. Its important to remember
that in the context of the prior peak, the
LEARN HOW TO USE

BLOOMBERG FUNCTIONS
high for annual home building product was

2 million, 2.1 million units in a given year.
Now we are between 800,000 and 1 million units a year. So, we have witnessed a
significant decrease. That is in the face of
continued population growth and household formation. Over time, the amount
of housing created is going to have to
increase and we are going to need to create a residential mortgage infrastructure
that provides access to capital for people
to be able to buy homes. There is still a
large segment of the population that cannot access mortgage finance today. Im
certainly not in any way indicating that we
should go back to what existed in 2004
through 2007, where providers were very
aggressive. That is not the answer, but it
seems to us that weve gone from a home
ownership rate of 68 to 69 percent down
to the low 60s today. Probably the natural
home ownership rate is somewhere in between those two numbers. In order to get
there the government will need to figure
out what it wants to do with Fannie and
Freddie. Once that decision is made, well
have more clarity as to where residential
mortgage finance is headed in the future.
Q: Whats your outlook for the future of
single-family home finance?
Do the GSEs continue to play an important role?
A: Im slightly biased towards the notion
that they will still have some sort of a role
going forward. The future probably involves more of a mix between GSEs and
a private market where today the market
is very much dominated by Fannie, Freddie and FHA.
<HELP>
CMBS MORTGAGE DEBT FORECLOSURE RATE

March Commercial Mortgage Debt Foreclosure Rate Lowest Since June 2009
Delinquencies Up From Feb., Off From Year Ago
3.5
3.0
Delinquency Rate (Percent)
Foreclosures of commercial property mortgages resold into securities fell to a nearly five-year low in March.
The rate of commercial mortgage debt foreclosures involving all
property types was 0.44 percent in March, the lowest since June
2009 when it was at 0.42 percent.
Foreclosures of commercial mortgage debt peaked in July 2011 at
1.92 percent.
The 30-day delinquency rate of commercial mortgage debt involving all property types was 0.28 percent in March. Thats up from
Februarys 0.27 percent.
Commercial mortgage debt delinquent 60 days was at a rate of
0.18 percent in March, up from Februarys 0.16 percent; this was the
third consecutive month of increases in the rate of 60-day commercial mortgage debt delinquencies.
Sixty-day delinquency rates were as high as 0.72 percent in
April 2010.
Ninety-day delinquencies of commercial mortgage debt rose to
1.1 percent in March from 1.01 percent in February. In June 2010,
90-day delinquencies were as high as 4.06 percent.
30 Day
60 Day
90 Day-plus
Foreclosure
2.5
2.0
1.5
1.0
0.5
0.0
3/2012
9/2012
3/2013
9/2013
3/2014
Aleksandrs Rozens
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REAL ESTATE

BRIEF SECOND QUARTER 2014

Bloomberg Brief | Real Estate

on each loan underwritten by independent mortgage

$150 net profit on each loan underwritten by independent mortgage

for a 30-year fixed rate

% of new U.S. single

family homes that use gas for

single family homes

for a 30-year fixed rate

$8,025 Total loan production expenses for each

mortgage underwritten in the first quarter of 2014.

$6,959 Total loan production expenses for each

home loan in May 2014.

rate home loan in May 2013.

52.6 May 2014 reading of Architecture Billings Index.

39% of homeowners refinanced in the first quarter of 2014 into a

49.6 April 2014 reading of Architecture Billings Index.

$373 price of framed

lumber on June 20, 2014.

NAHB housing market index in June 2014.

Number of consecutive months

Source: Freddie Mac, U.S. Census Bureau, Mortgage Bankers Association

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Bloomberg Brief | Real Estate

DATA: CAP RATES BY PROPERTY TYPE

Bloomberg Brief Real Estate Supplement

WHY THE DROP IN RESIDENTIAL LENDING WILL

Newsletter Nick Ferris

Advertising Adrienne Bills

CMBS/CRE Product Cheryl Lopez-Collins

Graphic Designer Lesia Kuziw

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Bloomberg Brief | Real Estate

Richard Fry, a senior economist at the Pew

Comments have been edited and condensed.

construction, vacancy rates are rising in

Office of the Comptroller of the Currency,

We need to step on the housing accelerator again because there is widespread

There is still a shortage of overall housing supply in the U.S. Pent-up

Brian Chappelle, a former FHA official and

Nadeem Meghji, a managing director at New

Melvin Watt, FHFA Director, in a prepared

The very top, the north of $10 million

Donna Olshan, president of Olshan Realty Inc.,

Given the Great Recession and the

The CRE vacancy recovery under way

Frank Nothaft, chief

The fundamentals that drive new

David White, chief financial officer at Choice

Our fundamental view on the recovery

EXPLORE THE WORLD

Francis Blake, chief executive officer at Home

Bloomberg Brief compiled recent remarks from

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Bloomberg Brief | Real Estate

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