The Real Estate Capital Scoreboard - September 2006

Chicago, September 1, 2006 - During the past month, steady rate declines helped borrower’s take advantage of favorable rates. No monetary policy changes returned more confidence into the bond markets. The yield curve tightened as five-year treasury notes are nearly the same as compared to ten-year paper. While short-term rates (LIBOR, Prime) dropped slightly, the most favorable yields remain on the long-end of the curve.

Realty capital markets remain extremely competitive. Overall debt spreads across all property types dropped by about 5 basis points. As for equity markets, if interest rates remain steady, office-property capitalization rates, in particular, should prove stable over the next 12 months because of improving space market fundamentals -- including rental growth, and persistent investor demand.

Lenders continue seeking yields at all ends of the risk spectrum. Open-ended construction loans without preleasing are readily supplied. Construction loan recourse guarantees are frequently reduced to completion-only. Higher yields are in the 250 bps-or-more range over LIBOR for such risk profiles.

The Real Estate Capital Institute’s research director, Nat Zvislo, notes "with so much competition among lenders, almost nothing is sacred from negotiations. Borrowers have the upper hand today"

The Real Estate Capital Institute is an independent research organization following commercial realty debt and equity markets. Current and historical mortgage and capitalization-rate data is available at the Institute’s website -- www.reci.com. The Institute also sponsors the nation’s only telephone-based, hourly interest rate reporting service known as the Real Estate Capital Rateline at 7RE-CAPITAL (773-227-4825.

###

Contact Information

Nat Zvislo

Research Director

The Real Estate Capital Institute

Contact via E-mail