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Yet another market test: real estate company CB Richard Ellis just announced that it has priced $450 million of Senior Sub Notes due 2017 at 96.873% of par, with a 11.625% annual interest, yielding around 12%.

The Notes will be issued by the Company’s wholly-owned subsidiary, CB Richard Ellis Services, Inc. and guaranteed by the Company and the subsidiaries that guarantee its senior secured credit facility, on a full and unconditional basis.

CBRE (CBG) recently raised $100 million in a targeted equity offering to John Paulson, and another $50 million was sold to the general public. The combined proceeds of about $575 million will be used almost exclusively to pay down debt.

The bulk of the offering, of course, are the notes: In a nutshell, in order to get a maturity extension on its upcoming debt maturities by 7 years, the company had to pay a substantial premium to existing interest rates. And if CBRE, which has the implicit backing of Paulson still has to pay up for the maturity extension privilege, woe to the 999 other REITs that are in a much less enviable position. Of course, if indeed ML is no longer able to raise equity into a declining market, investors should prepare to see some nicely jumping spreads in REIT credit instruments (not to mention dropping equity prices). Heaven forbid the fundamentals finally catch up with ungodly bloated CRE valuations: it is mildly ironic that it was CBRE itself that had some very choice harsh language to describe the upcoming commercial real estate collapse.

Source: CB Richard Ellis Prices $450 Million Sub Notes Due 2017 at 11.625%