MARKET INSIGHTS
December 3, 2018

Richmond, Va. – John B. Levy & Company released the Giliberto-Levy Monitor for the third quarter of 2018, reporting that commercial mortgage investments posted a 0.17 percent total return for the period.

Published quarterly, the Giliberto‐Levy Monitor highlights the results of the Giliberto‐Levy Commercial Mortgage Performance Index (G-L 1) and offers in‐depth market analysis and commentary on important aspects of the commercial mortgage industry. It provides income, price, total returns and spreads for office, apartment, retail, industrial and other property after adjusting for credit loss.

The third quarter’s report also revealed that capital values fell by 92 basis points (bp) as Treasury yields moved up. It marked the fourth quarter in a row in which negative capital value changes caused total return to be less than return from coupon income, which was 1.08% for the period. As a result, over the last four quarters, the G-L 1 Index has returned just 0.76%.

Other highlights of the report included the continued flatting of the yield curve, with the yield on two-year Treasury notes moving up 29 bp while the ten-year increased by 20 bp. The report noted that the flattening has affected commercial mortgage term premiums, the difference in spreads for loans with different terms to maturity that are identical in all other ways.

Importantly, the term premium for five-year loans, which had been running at 25 bp, and was down to 20 bp in 2Q 2018, went to zero during the third quarter.

Additional statistics outlined each quarter in the Giliberto‐Levy Monitor include capitalization, duration, coupon rate, maturity and loan‐to‐values, and comparison of relevant returns and spreads to other debt classes such as investment grade and U.S. Treasury bonds.

Giliberto‐Levy Monitor subscribers also receive access to the Giliberto‐Levy Analyzer – a powerful custom query tool that enables users to analyze total return by property on a long‐term historical basis, leveraging data collected over the past 35 years.

John B. Levy & Company also now offers the Giliberto‐Levy High Yield Real Estate Debt Index (G-L 2), a first-of-its-kind report that measures rates of returns from high-yield commercial real estate debt such as second mortgages, mezzanine loans and preferred equity.

For more information or to subscribe to the Giliberto-Levy Commercial Mortgage Performance Index or other products, visit jblevyco.com/index/.