CBRE presents refinancing cost indicator
Real estate service provider CBRE has developed a new indicator identifying the refinancing costs of banks.
The indicator is to be published on a quarterly basis going forward. “In the current capital market environment, interest rates are approaching historic lows,” said Dirk Richolt, Head of Real Estate Finance Germany at CBRE. Combined with an increasingly competitive situation in bank lending and the concomitant erosion in credit spreads, the parameters for commercial real estate financing are probably more affordable than at any other time in recent history. “Analogously, our new indicator shows that the strain on the refinancing market has clearly eased. At less than 40 basis points, it even undercuts the score reported at the beginning of the year by around ten basis points, and the average level of early 2012 by around 80 basis points,” as Richolt elaborated. “At this level, conditions are not about to improve substantially any time soon, because they are already very close to what they used to be prior to the financial crisis. Instead, it is more likely that another banking or sovereign debt crisis may push up the spreads.”
CBRE developed its refinancing indicators in order to give real estate investors active in Germany a better idea of the way borrowing costs are developing here. “When the VDP Association of German Mortgage Credit Banks decided to discontinue its mortgage bond index in April 2014, it deprived the capital market of a valuable guidance tool for determining benchmark yields in real estate financing,” elaborated Jan Linsin, Head of Research Germany at CBRE. In an effort to fill this information gap, CBRE makes its refinancing cost indicator available to real estate investors as a new market performance indicator that appraises the refinancing terms of covered bonds and thereby casts light on the pricing of standard loans. The assumption underlying the index is that loans more or less match their mortgage lending value to 100 percent, which may reflect between 60 and 80 percent of the fair market value or LTV, depending on the type and occupancy of the property at hand. Accordingly, the index considers credit spreads from the money market and CDS market for senior and subordinated bank debt in addition to covered bond terms.
Head of Real Estate Finance
+49 69 1700 77 628
CBRE Group, Inc. (NYSE: CBG) is a Fortune 500 and S&P 500 company domiciled in Los Angeles, California. It is the global leader in commercial real estate service by 2013 financial year revenues. With around 44,000 employees operating out of more than 350 branch offices worldwide (not including private equity partnerships and affiliate offices), CBRE provides services for commercial real estate owners, investors, and occupiers. The company's services focus on the areas capital markets, letting, valuation, corporate services, research, retail, investment management, property and project management, as well as building consultancy. Formed in 1973, CBRE Deutschland has its headquarters in Frankfurt am Main, and maintains branch offices in Berlin, Düsseldorf, Cologne, Hamburg, and Munich. www.cbre.de