Greer Advisors, LLC

 Innovators in Real Estate Analytics
   Wall Street & Commercial Real Estate

The purpose of the "Wall Street Newsletter & Commercial Real Estate" newsletter is to provide Yield Rates, Capitalization Rates and other key information from Wall Street (i.e. REITS and CMBS/CMBx) on a weekly basis with the "freshest" information from the "street." Though Ackerson and Ellwood brought sophisticated formulas to build up capitalization rates, the usefulness of such formulas diminished during periods with "less than ideal" sales activity; therefore, Greer Advisors brings you various REIT Dividend Yield (aka Capitalization Rates) and the "Greer CMBS/CMBx Build-Up Yield Rate" TM. Prior methods to build up capitalization rates were inherently flawed because of their reliance upon debt assumptions that did not reflect the debt market of today. For example:
       Do you use the "start rate", fully-indexed (index+margin) or "underwriting" interest rate?
       What if points were paid to drive down the interest rate?
       How do you account for credit-constrained markets?
       What if many buyers can't get financing?
       How do you account for interest rate swaps?
       How do you account for credit default swaps or LOCs to "credit enhance" the debt?

Many of these issues did not exist when some of the old methods were created. The bottom line is that the real estate industry needed new tools to add to the arsenal; hence, this newsletter was created to serve the commercial real estate community. Within the REIT world, the Dividend Yield is the closest approximation to a capitalization rate. The yield is "post debt service", which means it is a leveraged yield. Though leverage and debt costs vary widely, most bond covenants prevent leverage above 40-60% of total assets. Lastly, many investors emphasize the importance of FFO (Funds from Operations), which is Dividend Yield with Depreciation added back. Other investors emphasize the importance of AFFO (Adjusted Funds From Operation), which is Dividend Yield plus the difference between Depreciation and Maintenance Costs. Nevertheless, Dividend Yield could be thought of as a "leveraged" capitalization rate.

If your focus is debt, in addition to the yields noted in the Greer CMBS/CMBx Build Up Yield Rate TM other notable resource include the Carlton Exchange (, Keepe Bruyette & Woods (, (, ( the various Fed programs.

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Greer Advisors, LLC
633 West Fifth St., US Bank Tower, Suite 2600
Los Angeles, CA 90071

Tel.:           213.985.3800
Fax:           213.985.3900

New York:  646.867.1600   /   San Francisco:  415.233.6300   /   Los Angeles:  213.985.3800   
   Dallas:  214.347.7500   /   Miami:  786.629.9600   /   San Diego:  619.618.2500

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