A Bloomberg article today predicted a 15% drop in commercial real estate prices as a result of the increased costs of debt. The article cites the delayed Archstone-Smith transaction and the failed Mission West transaction as evidence that deals are beginning to fall apart. Of course this is true and a lot of money in the form of deposits has surely been lost as the markets saw a tightening of credit.

The article continues on to give an example of the repriced debt:

About six months ago, a 30-year commercial loan with 5 to 10 years of interest-only payments would have cost the borrower about 120 basis points more than the yield of the 10-year Treasury note. A similar loan would now cost about 160 to 200 basis points more than the 10-year Treasury’s yield of 4.6 percent, data compiled by New York-based Cushman & Wakefield Sonnenblick Goldman show.

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