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Category

Economic and Market Commentary

The Government Shutdown and the Impact to Commercial Real Estate

As the government shutdown nears its fourth week, what can investors in commercial real estate expect from the second longest shutdown in U.S. history?
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Have the Fundamentals Changed?

As of October, and into November, the equity markets have experienced a wide spread sell-off due to several factors. In this post, we take a look at corporate fundamentals to gain insight into what is taking place in the market and why.
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What is Driving the Shape of the Yield Curve?

The Treasury yield curve is close to inverting when looking at the 2-year to 10-year spread. Is this signaling a recession within 24 months? Is this the appropriate measure? Or is the Funds Rate or T-Bills to 10-year spread a better indicator of curve “flatness”? A brief look back at past curve inversions can provide...
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Take What the Market Offers

Our belief is that investment returns are significantly driven by macro factors such as inflation, economic growth, credit cycles, the level and direction of interest rates, equity multiples, and cap rates. We, at times, need to make minor adjustments to our strategies to ensure we are making the most of what the market offers.
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With Interest Rates Expected to Rise, Will Cap Rates Follow?

Long term interest rates have been moving higher and the Fed is guiding to more rates hikes. Is this going to lead to higher cap rates and lower valuations, or will the large amount of uninvested capital keep a lid on cap rates?
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Longer-Term GSA Leases May Increase Property Values

Longer-term leases tend to benefit both GSA tenants and property owners. A typical GSA tenancy is more than two decades long whereas an average lease is 10 years, with 5-year extension options being typical. Structuring a longer-term lease that more closely matches GSA tenancy can result in cost savings through lower rents. Property owners, in...
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LIBOR-OIS: Time to Re-visit an Old Topic

Recently, there has been a widening in the spread relationship between LIBOR (London Interbank Offered Rate) and OIS (Overnight Interest Swap Rate). This prompts the question: Should this be of concern? Is it a “canary in the coal mine” signaling possible problems with overall bank credit, or is there some other viable explanation?
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Income Likely to Dominate Future Core Real Estate Returns

In our view, high-quality income generation—and not capital appreciation—will be the primary determinant of real estate returns over the next few years.
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Higher Volatility, Lower Returns Likely in the 2018 Bond Market

Given the surprisingly solid bond market performance of 2017, what might fixed income investors expect in 2018? Unfortunately, lower returns. Despite favorable risk asset performance expected from strong earnings growth and ongoing demand, in our view investors should not expect to earn a return higher than the yield of the Bloomberg Barclays Aggregate Index, which...
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