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Last week we saw the 10-year yield break through the downside support level of 2.3%.  I wanted to see how this compared to the German 10-year, so I pasted that graph below.  I did not notice anything too startling there.  It appears that global unrest is spooking the bond markets which really is not a surprise.  The bond market has so many factors that affect it; and instability will usually trump all else.

Just enjoy the lower interest rates while they are here.  Visit with your clients to see if they have been putting off the refinancing of outstanding debt.  None of us know how long this low rate environment will last.

The Retail sector continued to take up most of my readings this week.  From my interactions with clients, it is quite clear that apprehension in Retail continues to grow.  As clients search for opportunities, there is more and more fear in acquiring Retail assets.  This is surely affecting the price of these properties.  With that stated, there will be investors who develop game plans to take advantage of the fear that exists.

As the anchor stores close, more and more of the secondary tenants will be affected by the foot traffic lost.  And, some of those leases will allow the secondary tenants to modify their lease payments downward or allow early terminations.  This will put additional pressure on the owners to cover their debt payments.  This will result in some fire sales.  This is just where we are in Retail at the moment.

That is it for this week.  As always, I welcome any of your strategic financing questions.

Articles of Interest:

NREI reported “Vornado’s Roth Sees Chance to `Feed on the Carnage’ in Retail.

The Atlantic reported “What in the World Is Causing the Retail Meltdown of 2017?”  This is worth the read to better understand the problem.

NREI also reported “As Some Retailers Stumble, Dollar Stores Continue to Show Strength.”

Commercial Property Executive reported “Typically a Turtle, Industrial Could Be Real Estate’s New Hare.”

NREI reported “Report: Silicon Valley CRE markets starting to cool.”

See the table below for approximate interest rates.

Type Rate Fixed Term
Apartments 3.815% – 5.285% 3 to 10 year (30 yr amortization)
Commercial 4.155% – 4.960% 3 to 10 year (25 yr amortization)
Construction Call for Rate Call for Rate
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