SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Pastimes : Clown-Free Zone... sorry, no clowns allowed
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: LLCF who wrote (166845)5/28/2002 3:03:26 PM
From: reaper  Read Replies (7) of 436258
 
DAK and others -- maybe you can help me with something here.

Was looking through a research report from a major WS shop this morning, which had a table comparing commercial mortgage-backed security spreads to the spreads on REIT debt. What I noticed that was interesting was that spreads on CMBS have narrowed markedly in the last 12 months, while spreads on REIT debt have moved higher.

So it got me to thinking, and looking for further back historical data. Here's what I found:

CMBS Rate Spreads to the 10-year Treasury
(using BBB CMBS)

June 1998 140 bps
Apr 1999 200
Apr 2000 240
Apr 2001 233
Apr 2002 165

(note: the overall trajectory of the spread is the same no matter what rating class you use; for example the AA series is 96-120-173-143-122)

REIT Debt Rate Spreads to the 10-year Treasury
June 1998 140 bps
Apr 1999 193
Apr 2000 309
Apr 2001 287
Apr 2002 349

So my question is this. We all know that debt spreads (across all kinds of debt classes) were at basically generational lows in 1998. Spreads then widened considerably, which is shown in the action in the tables above but again also occurred across the broad cross section of debt classes.

However, TODAY we are looking at CMBS spreads that are nearly back at their 1998 levels. BUT, at the same time we are looking at debt spreads on REITs (which own commercial real estate) at levels never before seen (at least not in this 5-year-ish data set). This seems like an insane dis-connect to me. Could somebody please explain to me what I'm missing?

Also, why in the world are REIT equities going up when the spreads on their debt are blowing out??

Cheers
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News