The relationship of a Commercial Real Estate’s Cap Rate and a Federal Reserve’s 10-Year Treasury Rate

Commercial Real Estate’s Cap Rate is average 436 bps over 20 years reference to Federal Reserve’s 10-Year Treasury Rate.  In fact, its average from 1990 to 2000 is 450 bps and its average from 2002 to 2015 is 425 bps.

Transactions in 2015 are on course to exceed pre-recession peak levels, and most property sectors continue to see inflows of equity and disciplined underwriting by debt providers. With positive economic trends lifting gauges of property performance, commercial real estate remains a favored asset class on a risk-adjusted basis.

10YR Treasury Rate and CRE CAP

Another words, the sophisticate and savvy CRE’s investor are studying and analyzing carefully its Federal Reserve’s 10-Year Treasury Rate in order to make an informed decision on his next acquisition.  It would help reduce his risk significantly.

Fed Reserve 10 Year Treasury Rate from 1990 thru 2015 2

CRE-CAP rate-spread-to-10-year-treasury-large

Commercial property sectors continue to perform well amid this extended period of low interest rates and the Federal Reserve’s decision will not disrupt property performance

  • The Federal Reserve opted Thursday 9/17/15 to maintain its benchmark lending rate at or near zero percent. While acknowledging that the U.S. labor market continues to improve, the central bank also heeded softer conditions in foreign economies in reaching its decision to defer the first hike in the Federal Funds rate in approximately nine years. Fed Chair Janet Yellen and voting members of the policy committee will proceed cautiously, monitoring for contagion risks from other countries that could adversely affect U.S. economic performance.
  • The Fed’s next opportunity to take up the rate hike question comes at its meeting next month, but it may wait until December to act. Until the next meeting, the Fed will scrutinize incoming data on economic momentum, inflation trends, and international volatility. Mortgage spreads widened during the summer in anticipation of a rate increase, and little appreciable effect on spreads is likely to occur in the near term.
  • The central bank’s decision to hold will likely spark a new round of questions about the strength of the U.S. economy in spite of relatively strong underlying fundamentals. Through August, the labor market had added an average of 212,000 jobs per month, an amount less than the pace set in 2014 but sufficient to support a forecast of 2.7 million positions this year. Factors weighing on the U.S. economy, however, include soft exports stemming from the strong U.S. dollar and anemic inflation principally related to low gas prices. Core inflation, which strips out volatile food and energy, rose only 1.8 percent year over year, below the Fed’s target threshold of 2.0 percent.
  • Commercial property sectors continue to perform well amid this extended period of low interest rates and the Federal Reserve’s decision will not disrupt property performance. With job growth generating new commercial space demand that dramatically outpaces construction levels, vacancy in the primary property segments remains on track to decline this year and support additional rent gains. Apartment construction has ramped up, but favorable demographic trends and challenging conditions for first-time homebuyers will continue to sustain extremely low vacancy in the multifamily sector.
  • Low-interest rates, steady performance gains, and competitive yields are supporting investment in a wide array of commercial properties. Transactions in 2015 are on course to exceed pre-recession peak levels, and most property sectors continue to see inflows of equity and disciplined underwriting by debt providers. With positive economic trends lifting gauges of property performance, commercial real estate remains a favored asset class on a risk-adjusted basis.

Learn more of investment in Net lease CRE

Should you have further clarification, please sign-up for our free 30-minutes confidential consultation.


Related blogs:

  1. Big Buyer of Net Lease Report – March 2015
  2. Top 6 Terms You Should Know Before Investing in net lease commercial real estate
  3. First Key selection of net lease Commercial Real Estate investment…?
  4. Net Leased Commercial Real Estate (NNN CRE): Step #2
  5. Should you invest in Net leased commercial Property? Or Multifamily or Self-Storage?
  6. How much McDonald invests in net lease commercial real estate?
  7. TOP Net Lease CRE Investment Books – April Selection! **Additional 10% discount!
  8. Case Study: Sale-Leaseback Technique of Wendy’s and McDonald
  9. What is an alternative investment real estate versus vacation home…?
  10. In Hong Kong, the “Mosquito Apartments” sells for $US 2,872 per square foot
  11. Net lease or Triple-net Lease is an Alternative Solution for Removing 12 Headaches in Real Estate Rental
  12. Net Lease Case Study: Family Dollar

If you would like to inquire about our Concierge Services, please sign-in our free consultation


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Decade of Peace sculpture: “The Sporting Chances for Peace”

This limited edition #1 is no longer available for sale.  However, the remaining of Edition 1799 sculptures is available for pre-order.  Please note we are also seeking for:

  1. Art Collectors/Investors
  2. Sponsors
  3. Long-term Lease

We are processing and engaging with our investor regarding Limited Edition #1.  When it’s finalized in 4Q 2015, the press conference will be announced the owner of this Edition #1.  Our investor has committed to the purchase price of $US 50 million.

Once this public announcement is scheduled, our remaining editions’ price will be raised at a minimum of $US 500,000.

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DAJK GROUP is the place where investors, business owners, and entrepreneurs can research and find useful information, insight, resources, advice, guidance, and inspiration for acquiring funds for their project, acquisition for their net lease commercial real estate, increasing their assets and running their profitable business.

Our group of expert Oil Trader, Commercial Real Estate Specialist, Asset Management, and Business & Financial Analyst, can help to answer all your questions and to provide you with investment alternative and options catered to your investment strategy.  Sign-up for a free 30-minute consultation with us now!

Growing, Evolving and Pushing Forward!

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Saatchi Art – A Sporting Chance for Peace

saatchiart.com-art-Sculpture

We have successfully arranged for our partner/client Mr. Brown with Saatchi Art, London.  His sculpture can be viewed at http://www.saatchiart.com/art/Sculpture-A-Sporting-Chance-for-Peace/800455/2546001/view

His artwork sculpture titled “A Sporting Chance for Peace”.  The sculptures promote peace and positive principles for life, such as respect, disciplinepatience, humility, forgiveness, and healing.  The sculpture tells a very deep story for the inspiration of all people.

Sculpture: Bronze on Bronze.

Size: 50 H x 84 W x 10 in

The Global Gallery and Saatchi Art are proud to present three exceptional offers. Individuals who pre-order the A Sporting Chance for Peace bronze sculpture, by Award Winning British artist Donald Brown, would receive the following:

1. A 85% discount from $200,000 to $30,000 (Price will be raised accordingly once the Edition #1 is scheduled its press conference.  It will be scheduled at 4Q 2015).

2. Global recognition as Founding Patrons for purchasing at this time and thereby helping to fund the launch of the Global Peace Initiative and worldwide sale of the official prints of the said sculpture

3. A 50% THANK YOU refund of $15,000 after the initial 100,000 lithographic prints of the sculpture have been sold worldwide

After three and a half years of intense design and creativity, the A Sporting Chance for Peace sculpture is completed. It will be the universal image for the Global Peace Initiative.

By 2016, up to 207 countries of the United Nations would have received a 4ft x 6ft lithographic print of this sculpture. On the 21st September 2016, all of the countries would be invited to unveil their print on the same day and precise time to complete the largest, simultaneous, print unveiling ceremony in history. The event would promote peace and positive principles such as respect, discipline, patience, humility and forgiveness to all people.

In recognition of 2019 there will be 2,016 bronze replicas of the sculpture in the limited edition. The three promotional offers outlined above will only apply to edition numbers 1,809 to 1,709. They may be pre-ordered at this time.

A percentage of revenue from the sale of the 100 sculptures, would go towards funding the launch of the Global Peace Initiative in 207 countries and marketing the worldwide sale of the official lithographic prints of the sculpture.

Another percentage of revenue from the sale of the 100 sculptures would fund Project AIRWAVES. This is a division of the Global Peace Initiative that would employ artists around the world to conduct residencies in schools to promote peace and positive principles. They would work with students to create works of art that deal with overcoming violence in order to elevate society.

AIRWAVES is the acronym for – Artists In Residence Working Against Violence Elevates Society.

The 50% refund of $15,000 to the buyers of the 100 sculptures would be The Global Gallery’s way of saying THANK YOU for purchasing the sculpture at this time and helping them to fund and launch the Global Peace Initiative, market the prints worldwide and expand Project AIRWAVES internationally.

After the sale of the 100 sculptures, the 85% discount might no longer apply and there would be no 50% refunds to buyers thereafter.

CLICK OR CUT & PASTE THIS LINK FOR VIDEO OF THE SCULPTURE. http://youtu.be/xUi0FLskRBc (A MUST SEE)

Timeline: The bronze casting process should be completed by November and shipping to buyers would begin shortly thereafter. Projected time for the 50% ($15,000) refund would be approximately 12 months.

We welcome all questions regarding any of the above information.

Art Collectors/Investors (“Buyer”)

Limited Edition #1:  $US 50 million (RESERVED)

50 Million Reserved for Sporting Chance for Peace

Please note this Limited Edition 1 is no longer available for sale.  However, the remaining of Edition 1699 sculptures is available.  Please note we are seeking for:

  1. Art Collectors/Investors
  2. Sponsors
  3. Long-term Lease

We are processing and engaging with our investor regarding Limited Edition #1.  When it’s finalized in 4Q 2015, the press conference will be announced the owner of this Edition #1.  Our investor has committed to the purchase price of $US 25 million.

Once this public announcement is scheduled, our remaining editions’ price will be raised at a minimum of $US 500,000.

If you are interested, please contact us.

Global Brand Recognition’s Benefit

Historic Unveiling Ceremony 2019
By 2019, up to 207 countries of the United Nations would have received a bronze replica of the A Sporting Chance for Peace sculpture lithographic print featuring this sculpture.  All 207 countries would be invited to unveil their sculpture on the same day and precise time to complete the largest, simultaneous, sculpture unveiling ceremony in history.  Both unveiling ceremonies would take place on September 21st, recognized by the United Nations as International Day of Peace.Worldwide Merchandise
The global marketing campaign will include the release of the official 33 x 23 inch lithographic print of this sculpture for members of the public in 207 countries to purchase.  The price of the prints will be $US 65.  Our initial and conservative target will be the sale of 1 million prints worldwide, an average of just 4,830 print sales per country.Time is of an essence.  Our offer will accept a buyer on a first comes first gets basis.  Please contact us

 

Related Blogs:

The Best Way Creating Liquidity Value of Your Art Collection – Borrow

Fine Artwork Can Leverage for Additional Liquidity – Creative Finance


If you would like to inquire about our Concierge Services, please sign-in our free consultation


DAJK GROUP is the place where investors, business owners, and entrepreneurs can research and find useful information, insight, resources, advice, guidance, and inspiration for acquiring funds for their project, acquisition for their net lease commercial real estate, increasing their assets and running their profitable business.

Our group of expert Oil Trader, Commercial Real Estate Specialist, Asset Management, and Business & Financial Analyst, can help to answer all your questions and to provide you with investment alternative and options catered to your investment strategy.  Sign-up for a free 30-minute consultation with us now!

Growing, Evolving and Pushing Forward!

Fine Artwork Can Leverage for Additional Liquidity – Creative Finance

Art Collection 3


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Our recent study showing creative investors especially net lease commercial real estate have increased using their art collections as collateral loan.  The question is WHY?

The value of their art collection has increased significantly for last several years now.  However many art collectors do not want to sell their arts because of too expensive when they sell as mentioned in our previous blog, “The Best Way Creating Liquidity Value of Your Art Collection – Borrow

There are more willingness banks and smaller art lenders are aggressively offering loan secured by art collector.

For art collector (borrower), it depends on what type of loan, the loan-to-value (LTV), annual interest rate and terms.


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There are two types of secured art-loans

  1. Recourse
  2. Non-recourse.

Recourse loan where art is required as collateral for the loan but the borrower also has to provide a personal guarantee of payment.  That means if the borrower defaults and the bank can’t recover the full amount of the loan by selling the art, it can make a claim on the borrower’s other assets.

Non-recourse loan where it does not require borrower’s personal guarantee.  The artwork is the only asset that is the security for the loan.

Because of the low risk associates with the recourse loan, lender offer much lower rates.  It’s also a part of an overall relationship with a wealthy client.  Borrowers may be able to get rates as low as prime plus 2% or 3%.  Conversely, the non-recourse loan, annual interest rates vary largely but typically range from prime plus 6% to 13%.

The minimum loan is $US 5 million for an art-secured loan.  Since loans typically are around 50% of the appraised value of the art, the borrower’s collection would need to be worth around $10 million or more. Also the minimum value of each piece is $200,000.

These are typical requirements for these art-loans.

Borrower requires proof of authenticity such as purchase document, exhibition history, sale history and inclusion in a catalog.

Borrowers also need to prove that they own the art outright, with no possibility of anyone else claiming it in situations like divorce or a disputed inheritance.

In addition, certain lender prefer a certain type of art collections.  They make better collateral than other.  For instance, some lender prefers artworks from ancient civilization; other lender prefers artworks between 19th century impressionist painting and postwar or contemporary art.

Where the money goes are stated in our previous blog: ““The Best Way Creating Liquidity Value of Your Art Collection – Borrow

CONTACT US… Collectors interested in arranging financing should contact us for free consultation.  We will assist to identify the borrowing need, determine what type of financing makes the most sense, and facilitate the appropriate lender.  Please note minimum appraisal report is at $US 5 million.  There is no maximum amount.

Related resources at Amazon Corner:

  1. Structured Finance and Insurance: The ART of Managing Capital and Risk
  2. The Art of Buying Art: An Insider’s Guide to Collecting Contemporary Art
  3. The Art Business
  4. Art as an Investment
  5. Risk and Uncertainty in the Art World
  6. The Explosion of the Art Market in the 21st Century
  7. Fine Art and High Finance: Expert Advice on the Economics of Ownership

If you would like to inquire about our Concierge Services, please sign-in our free consultation

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DAJK GROUP is the place where investors, business owners and entrepreneurs can research and find useful information, insight, resources, advice, guidance and inspiration for acquiring funds for their project, acquisition for their net lease commercial real estate, increasing their assets and running their profitable business.

Our group of expert Oil Trader, Commercial Real Estate Specialist, Asset Management, and Business & Financial Analyst, can help to answer all your questions and to provide you with investment alternative and options catered to your investment strategy.  Sign-up for a free 30-minute consultation with us now!

Growing, Evolving and Pushing Forward!

The Best Way Creating Liquidity Value of Your Art Collection – Borrow

Art Collection 2


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Unlocking the Value of Your Art Collection

Art collectors have high value inaccessible in their art collections.  If they need to access of this value, they do not have to sell their art to create liquidity – Borrow.  They can borrow funds and retain possession for their art.

There are big advantages to borrowing – avoiding selling cost, capital gain and taxes.  It could be up to 65+ percent.  These combination can make it VERY expensive to sell.

What is the alternative to access its liquidity?  Borrow.

For example:  A collector sells his art for $US 10 million. Assuming selling costs of 20 percent (20 percent of $US 10 million = $2 million) and an original cost of $US 1,000,000 for the art.

  • Funds realizes a before-tax profit: $US 7 million.
  • Net to collector:  $US 4.2 million  (this profit is subject to capital gains tax. Assuming a rate of 40 percent (28 percent federal plus 12 percent state), the collector pays $2.8 million in capital gains tax, and nets $4.2 million.
  • Net to heirs:  $US 2.1 million (these net proceeds are subject to estate taxes at the collector’s death. Assuming a 50 percent rate, the heirs receive only $2.1 million — on art sold for $US 10 million! This represents a loss of 79 percent across a single generation, and underscores the cost of selling art.)

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By selling during his lifetime, the collector pays 2 levels of tax: capital gains and estate. By borrowing to create liquidity, the collector can keep the art during his lifetime and have his estate benefit from a step-up in tax basis. This enables collectors to pay just one level (estate tax) rather than two. In this example, the collector could borrow as much as $US 5 million (up to half the art’s value) and keep his art. Art collector would be responsible for debt service on the loan, but he would also benefit from any appreciation on his art.

What art collectors do with the proceeds?  These are few:

  • Entrepreneurs frequently borrow against their art to invest in their existing businesses or new ventures
  • People also borrow against their art to make charitable contributions, pay medical expenses, and fund divorce settlements.
  • An art-based loan is a low-cost option for art collectors in need of cash flow who can enjoy their art while making scheduled payments.
  • In these uncertain economic times, art collectors also borrow to avoid the risk of having their art “bought in” (or “burned”) at auction, which makes it difficult to sell for years to come.
  • Faced with estate taxes that must be paid within a short time frame, executors frequently liquidate art collections quickly. But borrowing funds to pay estate taxes and administration costs makes it possible for executors to maximize the value of the estate’s assets by selling the art over time, thus avoiding a “fire sale.”
  • Many arrange lines of credit and term loans to invest more art.
  • Some whose wealth is concentrated in art borrow funds to invest in other asset classes, such as stocks, bonds, real estate, oil, gas, private equity, and hedge funds, thereby diversifying their holdings.

Consult your financial adviser, accountant, attorney, or estate planner while making these decisions.

  • Does art collector want the flexibility of a line of credit or a term loan of 3-10 years?
  • Does art collector want a six-month loan to fund short-term liquidity needs?
  • Or an advance against art that art collector plans to sell later this year?

CONTACT US… Collectors interested in arranging financing should contact us for free consultation.  We will assist to identify the borrowing need, determine what type of financing makes the most sense, and facilitate the appropriate lender.  Please note minimum appraisal report is at $US 5 million.

Related resources at Amazon Corner:

  1. Fine Art and High Finance: Expert Advice on the Economics of Ownership
  2. Structured Finance and Insurance: The ART of Managing Capital and Risk
  3. The Art of Buying Art: An Insider’s Guide to Collecting Contemporary Art
  4. The Art Business
  5. Art as an Investment
  6. Risk and Uncertainty in the Art World
  7. The Explosion of the Art Market in the 21st Century

If you would like to inquire about our Concierge Services, please sign-in our free consultation

Concierge Services  2


BuildingFinancePlan 30pcOFF

Building a Finance Plan Geared to Growth *** 30% OFF for our subscribers!
To optimize your success as a small business owner, create a blueprint for financing—before you need it to drive growth. 


DAJK GROUP is the place where investors, business owners and entrepreneurs can research and find useful information, insight, resources, advice, guidance and inspiration for acquiring funds for their project, acquisition for their net lease commercial real estate, increasing their assets and running their profitable business.

Our group of expert Oil Trader, Commercial Real Estate Specialist, Asset Management, and Business & Financial Analyst, can help to answer all your questions and to provide you with investment alternative and options catered to your investment strategy.  Sign-up for a free 30-minute consultation with us now!

Growing, Evolving and Pushing Forward!