MARKET INSIGHTS
September 10, 2018

Richmond, Va. – John B. Levy & Company has published its Giliberto-Levy Monitor for the second quarter of 2018, posting a 0.61% total return for commercial mortgage investments during the period.

That figure represented a nearly 100-basis point (bp) turnaround from the first quarter’s -0.38% outcome. Income return at 1.09% was 1 bp higher than the prior quarter, while capital values continued to fall in response to rising Treasury yields, dropping 0.47%.

Over the last four quarters, commercial mortgage investments have returned 1.67%.

The report also showed that a flattening of the yield curve continued during the second quarter. Yields for issues with three years or less to maturity showed an average 22-bp increase. Intermediate-term rates, those in the five to ten-year range, increased by a more moderate 14 bp, while the long end of the curve showed low, single-digit yield increases.

The Giliberto‐Levy Monitor is released quarterly, highlighting the results of the Giliberto‐Levy Commercial Mortgage Performance Index (G-L 1) and offering 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.

Other statistics tracked 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.

Complementing the Giliberto-Levy Monitor is 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 the 12-month period ending June 30, 2018, the G-L 2 notched a return of 9.4% which is slightly higher than the 9.0% return posted since its 2010, and a whopping 773 basis points more than the G-L 1 for the same period. Of note, investment-grade CMBS, as measured by Bloomberg Barclays indices, showed a total return of 0% for the same 12 months with slightly more volatility than the G-L 2.

Subscribers to the Giliberto‐Levy Monitor 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 using data collected over the past 35 years.

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