Market Update Overview of Market Conditions & California Land- Secured Sector Update. February 17, 2017

Transcription

1 Market Update Overview of Market Conditions & California Land- Secured Sector Update February 17, 2017

2 Overview of Market Conditions 2

3 Treasury Rate History February Present 5.00% 4.00% 3.25% 3.00% 2.75% 2.50% 2.25% 2.00% 1.75% 1.50% Nov 16 Dec 16 Jan 17 Feb % 2.00% 1.00% 0.00% 3 2/15/2012 4/15/2012 6/15/2012 8/15/ /15/ /15/2012 2/15/2013 4/15/2013 6/15/2013 8/15/ /15/ /15/2013 2/15/2014 4/15/2014 6/15/2014 8/15/ /15/ /15/2014 2/15/2015 4/15/2015 6/15/2015 8/15/ /15/ /15/2015 2/15/2016 4/15/2016 6/15/2016 8/15/ /15/ /15/2016 2/15/2017 Treasury Rates Source: Municipal Market Data. Treasury 5 year Treasury 10 year Treasury 30 year

4 AAA MMD Rate History 3.50% February Present 3.00% 2.50% 2.00% 5.00% 4.00% 1.50% 1.00% Nov-16 Dec-16 Jan-17 Feb % 2.00% 1.00% 0.00% 4 2/15/2012 4/15/2012 6/15/2012 8/15/ /15/ /15/2012 2/15/2013 4/15/2013 6/15/2013 8/15/ /15/ /15/2013 2/15/2014 4/15/2014 6/15/2014 8/15/ /15/ /15/2014 2/15/2015 4/15/2015 6/15/2015 8/15/ /15/ /15/2015 2/15/2016 4/15/2016 6/15/2016 8/15/ /15/ /15/2016 2/15/2017 MMD Rates AAA MMD 5 year AAA MMD 10 year AAA MMD 30 year Source: Municipal Market Data. MMD Detail Date 5-Year 10-Year 30-Year 11/1/ % 1.74% 2.56% 12/1/ % 2.58% 3.35% 2/15/ % 2.43% 3.17%

5 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 5 1/15/2016 2/15/2016 3/15/2016 4/15/2016 5/15/2016 6/15/2016 7/15/2016 8/15/2016 9/15/ /15/ /15/ /15/2016 1/15/2017 2/15/2017 1/15/1987 1/15/1989 1/15/1991 1/15/1993 1/15/1995 1/15/1997 1/15/1999 1/15/2001 1/15/2003 1/15/2005 1/15/2007 1/15/2009 1/15/2011 1/15/2013 1/15/2015 1/15/2017 Overview of Municipal Interest Rates 10-Year AAA G.O. MMD January 15, February 15, 2017 Avg. last 10 yrs: 2.62% As of February 15, 2017: 2.43% 10 Year AAA G.O. MMD Average last 10 years Source: Municipal Market Data. 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 10-Year AAA G.O. MMD January 15, February 15, 2017 Avg. since January 1987: 4.19% Avg. last 20 yrs: 3.38% Avg. last 10 yrs: 2.62% 10 Year AAA G.O. MMD Average since 1987 Average last 20 years Average last 10 years

6 30-Year General Obligation Tax-Exempt Credit Spreads February Present Nov-16 Dec-16 Jan-17 Feb /15/2012 4/15/2012 6/15/2012 8/15/ /15/ /15/2012 2/15/2013 4/15/2013 6/15/2013 8/15/ /15/ /15/2013 2/15/2014 4/15/2014 6/15/2014 8/15/ /15/ /15/2014 2/15/2015 4/15/2015 6/15/2015 8/15/ /15/ /15/2015 2/15/2016 4/15/2016 6/15/2016 8/15/ /15/ /15/2016 2/15/2017 Basis Points AA GO 30 year vs. AAA GO 30 year A GO 30 year vs. AAA GO 30 year BAA GO 30 year vs. AAA GO 30 year Source: Municipal Market Data.

7 $25,000 $20,000 $15,000 $10,000 $5,000 $0 7 Total Supply ($ millions) 2/15/2015 3/15/2015 4/15/2015 5/15/2015 6/15/2015 7/15/2015 8/15/2015 9/15/ /15/ /15/ /15/2015 1/15/2016 2/15/2016 3/15/2016 4/15/2016 5/15/2016 6/15/2016 7/15/2016 8/15/2016 9/15/ /15/ /15/ /15/2016 1/15/2017 2/15/2017 Municipal Market Flows & 30-Day Visible Supply $2,500 $1,500 $500 -$500 -$1,500 -$2,500 -$3,500 2/8/2015 3/8/2015 4/8/2015 5/8/2015 6/8/2015 7/8/2015 8/8/2015 9/8/ /8/ /8/ /8/2015 1/8/2016 2/8/2016 3/8/2016 4/8/2016 5/8/2016 6/8/2016 7/8/2016 8/8/2016 9/8/ /8/ /8/ /8/2016 1/8/2017 2/8/2017 Municipal Mutual Weekly Fund Flows February 2015 Present Source: Lipper. 30-Day Visible Supply February 2015 Present Source: Municipal Market Data. Fund Flows ($ millions)

8 General Interest Rate Outlook Bloomberg Bond Yield Forecast As of February 15, % 3.50% 3.00% 2.50% 3.03% 3.06% 2.44% 2.46% 3.17% 2.57% 3.26% 2.68% 3.35% 2.77% 3.43% 2.85% 3.55% 2.99% 2.04% 2.00% 1.50% 1.00% 1.20% 1.22% 1.04% 0.99% 0.75% 0.80% 1.36% 1.17% 1.00% 0.74% 1.51% 1.32% 1.10% 0.86% 1.67% 1.52% 1.35% 1.09% 1.81% 1.68% 1.50% 1.24% 1.89% 1.70% 1.46% 0.50% 0.50% 0.53% 0.00% As of 02/13/2017 US 30-year Q Q US 10-year Q Q Q US 2-year Q US 3-month Libor Federal Fund Target Rate (Upper Range) Federal Fund Target Rate (Lower Range) Source: Bloomberg. 8

9 California Land-Secured Sector Update 9

10 California Land-Secured Primary Market Annual California Land-Secured Issuance Since 2000 By $ Amount Issued Par Issued ($ in Billions) $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.8 $1.3 $1.6 $1.6 $2.0 $2.9 $2.4 $1.8 New Money Refunding $2.7 $1.6 $1.7 $1.6 $0.9 $0.4 $0.3 $0.4 $ Annual California Land-Secured Issuance Since 2000 By Number of Issues Number of Issues New Money Refunding volume below 2015, but significantly higher than most post-recession years volume Annual average volume since 2000 is $1.5 billion Strength in California real estate driving up the number of new money issuance Source: SDC; As of 12/31/

11 2016 New Money Issuance Volume Legend Par < $10mm $10mm < Par < $25mm Par > $25mm 2016 new money 1 volume (par) surpassed $1 billion Comparable to 2007 new money volume 56 separate issues Highest year post-recession Issuance concentrated in Counties of Riverside, San Bernardino, Orange and Sacramento Sector statistics Median par: $8 million Max par: $136 million Min par: $810,000 Max Term: 33 years 1. Only includes New Money issuance classified by SDC; excludes financings with both new money and refunding components. Source: SDC. As of 12/31/

12 Issuance Volume by Region and County Since 2000 Land-Secured bonds issued in 38 out of 58 California counties 69% of issues and 67% of par issued by Southern California issuers Par Issued ($ in Billions) California Land-Secured Bonds by County of Issuer From Top 5 Southern California Counties Top 5 Northern California Counties Orange Riverside San Source: SDC. As of 12/31/2016. Diego Los Angeles San All Other Sacramento Placer San Bernardino Joaquin San Francisco Yolo All Other 12

13 2017 Market Appetite for Land-Secured Bonds Institutions represent mix of top tier and middle market bond funds High-yield funds experienced outflows starting in October 2016 through year-end In 2017 net inflows into bond funds have stabilized demand after several weeks of net outflows Size, then VTL are primary considerations True retail remains engaged, but less cash to put to work compared to summer 2016 Confidence in California real estate continues to be strong Location still a big factor in pricing; costal is best followed by employment hubs Focus tends to be inside of 10 years and highest yielding maturity Demand from both institutions and retail keeping spreads low relative to historic levels Development story is important Investors carefully evaluate strategic advantages of projects Location, financial wherewithal of developer, competing projects William S. Hart Union High School District Community Facilities District No Special Tax Bonds Sale Date: 1/24/2017 Par Amount: $24,930,000 Final Maturity: 9/1/2047 County: Los Angeles Rating: Non-rated VTL: 8 to 1 Developed: ~40% (FY Sp. Tax) TIC: 4.60% Order Summary: 7 Institutions ($54mm), 193 Retail ($15mm) 13

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