HFF Research Update for October 13, 2016: Sacrifice Fly

Thursday, October 13, 2016

Weekly insights on current research in the commercial real estate industry from HFF Managing Director of Research Jimmy Hinton. View Daily Rates on the HFF website.

On Tuesday night, David Ross started Game 4 of the National League Division Series as the Chicago Cubs catcher. At 39 years of age, Ross is a dinosaur in the game. But his age doesn’t prevent him from contributing in significant ways.

In the top of the third inning, Ross hit the first strike he saw for a solo home run to left field, evening the score 1-1 against the San Francisco Giants. Then, in the top of the fifth inning, on an 0-2 count, Ross hit a sacrifice fly to right field, allowing his teammate Javier Baez to score from third base.

Ross contributed two RBI’s in two plate appearances but only one at bat. When a batter contributes to the offense of the team without recording a hit (getting walked, being hit by a pitch, being interfered with by the catcher, etc.), they are not charged an at bat so as not to unfairly damage their hitting percentage. There is no greater example of this rule than the sacrifice fly (or bunt). Having helped to secure another run for his team, Ross returned to the Chicago bench and was greeted with fist bumps and high fives.

Without his offensive production (and sacrifice), the three-run lead the Chicago Cubs surmounted in the top of the ninth with a playoff record four-run-come-from-behind-lead would have resulted in a loss and a dramatic Game 5 in Chicago this evening. Instead, the Cubs move on to the National League Championship Series and look to break a 108-year desert of World Series championships. Good luck to them.

Sacrifice flies aren’t as stimulating as home runs but they are important “small ball” tactics that can help win games. The record holders in this obscure category are some of the most legendary names in the game: Cal Ripken, Hank Aaron, Frank Thomas and George Brett.

The mild correction in pricing the real estate industry is enduring feels much like a sacrifice fly. Sure, you’d rather hit that home run, or at least experience a sustained rise in property values with little worry in economics. But for the small sacrifice, the team is ultimately advancing with greater footing in the short term.

Meanwhile, the 10-year UST has been creeping higher. Earlier this morning, a Chinese exports report surprised to the downside. Bond yields have since gravitated, a day after the 10-year UST hit its highest yields since June, driven by FOMC minutes which demonstrated a very high probability of a hike in its Target Fed Funds Rate in the last three months of the year.

Corporate bond spreads remain very stable as the 10-year UST see-saws. The value of the stock markets and U.S. Dollar may start to fluctuate as we begin 3Q earnings season. Keep an eye on interest rates.

About Jimmy Hinton

Jimmy Hinton serves as Managing Director of HFF, responsible for the firm’s national research efforts. Mr. Hinton works with the executive management team to assist in investor relations and to inform both HFF staff and firm clients with in-depth analysis of economic, property and capital market trends. He is also responsible for providing extensive market reports, client presentations and deal-specific analysis for debt placement and investment sales assignments. Mr. Hinton’s responsibilities include substantial interaction with pension funds, life insurance companies, regional and CMBS lenders, REITs, foreign investors and private equity funds.

During his tenure at HFF, Mr. Hinton has supported the execution of more than 150 commercial real estate transactions totaling more than $4.5 billion in 20 states. Mr. Hinton has experience in fixed- and adjustable-rate debt, mezzanine debt, construction loans and joint venture executions on behalf of clients engaged in the acquisition, development and recapitalization of property types including multi-housing, industrial, office, retail, medical office and storage properties.

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