Disparity in Treasury Rate Reactions

June 11, 2013

What I am seeing today is a broad based response to the recent uptick in treasury. We expected the upward movement, and of course that shift has increased pricing for most lenders across the board. What we did not expect to see is the stark disparity between lenders, and their respective reactions to the steep rate change.

Although rates in general are higher with insurance companies, CMBS, and banks we are starting to see a fairly large margin between the three lending categories. For example, a recently priced retail property was submitted for pricing to a bank, multiple CMBS, and life company lenders. The results were eye opening. The CMBS lenders all quoted within a range of 5 basis points from each other, the life company priced the same deal nearly 25 basis points inside the CMBS lenders, and the one bank providing a quote was 50 and 25 basis points inside the other lenders respectively.

What does this mean? The market landscape is treacherous right now, but these inconsistencies within the financing market can be taken advantage of. With the volatility in rates and limited supply of product, there are opportunities to secure debt from lenders that have not yet reacted to the uptick in rates, or who see an opportunity to put money out on core assets at slightly lower returns than the masses.

Michael Kaplan, COO