Comments on: Treasury Yields and Commercial Real Estate http://blog.pmaclennan.com/2008/12/11/treasury-yields-and-commercial-real-estate/ Inside commercial hard money lending. Fri, 08 Jan 2010 23:29:45 -0500 http://wordpress.org/?v=2.8.6 hourly 1 By: Regan http://blog.pmaclennan.com/2008/12/11/treasury-yields-and-commercial-real-estate/comment-page-1/#comment-903 Regan Fri, 12 Dec 2008 15:26:58 +0000 http://blog.pmaclennan.com/?p=345#comment-903 Great post. I work in the defeasance/commercial real estate finance industry and frequently provide cost estimates for both defeasance and yield maintenance transactions to commercial property owners/buyers. Borrowers routinely contact us to find out how much their defeasance or yield maintenance will cost and unfortunately in the current treasury yield environment these figures often become deal breakers. However, there are still deals with the provisions being completed. I did want to comment on your statement that "With US Treasury yields at low levels, investors have to purchase massive amounts of Treasuries in order to generate a yield to replace their interest payments." This is not entirely true. The "amount" of treasuries purchased or "par amount" remains the same regardless of the yield environment. It is the price you pay for this amount that rises with falling yields. I would be more than happy to answer any further questions on this topic. Thanks again for the post! Great post. I work in the defeasance/commercial real estate finance industry and frequently provide cost estimates for both defeasance and yield maintenance transactions to commercial property owners/buyers. Borrowers routinely contact us to find out how much their defeasance or yield maintenance will cost and unfortunately in the current treasury yield environment these figures often become deal breakers. However, there are still deals with the provisions being completed.

I did want to comment on your statement that “With US Treasury yields at low levels, investors have to purchase massive amounts of Treasuries in order to generate a yield to replace their interest payments.” This is not entirely true. The “amount” of treasuries purchased or “par amount” remains the same regardless of the yield environment. It is the price you pay for this amount that rises with falling yields. I would be more than happy to answer any further questions on this topic. Thanks again for the post!

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