3 posts tagged “moody's”
The Moody’s/REAL Commercial Property Price Index (CPPI) has been released by Real Capital Analytics showing a 7.6% decline in May 2009, leaving the index 34.8% below the peak measured in October 2007. And, as reported on Bloomberg.com, about $2.2 trillion of U.S. commercial properties bought or refinanced since 2004 are now worth less than the original price, raising the threat of more foreclosures.
The CPPI measures the change in actual transaction prices for commercial real estate assets based on the repeat sales of the same assets. RCA notes that large commercial real estate price declines in the last two months suggest that a bottom may be starting to form, although higher transaction volumes would be necessary in order to draw any more definitive conclusions. There were 282 transactions in May, 52 of which were repeat-sales transactions, passing the old low set in the early 2000’s.
"We have evidence that prices have fallen over 30% and the leverage you can get is 50-60% of value, so for owners holding on to properties, they're going to have to come up with a big check," Dan Fasulo, managing director with RCA, told CPN. "On non-healthy properties, lenders are foreclosing on those assets; they're throwing in the towel, and on development sites, as well. There's no income anyway, so they might as well take it back."
For more news and information, visit Blumberg Capital Partners.
Reuters spoke with Philip Blumberg in an article titled "Equity in US commercial property may evaporate" about US commercial real estate at risk of being completely wiped out by price collapses. An excerpt: "By the end of 2010 you'll have begun to see terrible, terrible capital structure disintegration," said Philip Blumberg, chairman and chief executive of Blumberg Capital Partners. "The first thing to go is the equity." About $165 billion of commercial mortgages this year will mature and need to be refinanced or sold. Some $11.8 billion matured in June, according to mortgage data analysis provider First American CoreLogic. The number of distressed properties in the top 10 markets topped 5,000 in March, the most recent recording period, for the first time since CoreLogic began keeping record in January 2003. "The maturities haven't really gotten into full play yet," Blumberg said. "We are seeing the early edge of the hurricane of debt in real estate." To read the full article, visit Blumberg Capital Partners.
The Moody's/REAL Commercial Property Index (CPPI) results are in for April, showing a return of negative 8.6% for the all properties national index. The index now sits 25.3% below its level from this time last year, and 29.5% below the peak prices measured in October 2007. "Unlike other areas where people are comfortable that the pace of change is positive, in commercial real estate pricing the pace of change is negative," Neal Elkin, REAL president, told CPN. "January was one of the largest changes in pricing ever seen before, but in April prices are deteriorating faster."
The CPPI is a periodic same-property round-trip investment price change index of the U.S. commercial investment property market based on data from MIT Center for Real Estate industry partner Real Capital Analytics, Inc (RCA). Moody's observes that April's negative return partly reflects that most deals closed during this time were negotiated at the end of 2008 and beginning of 2009 when securities markets plunged. "Primary markets are outperforming compared to the others. If you look at the Southern region, industrial properties are down 28.8 percent," said Elkin. "When you look into the numbers you see a return to the premium of primary markets. Prices are falling much faster and farther in secondary and tertiary markets and you're seeing that in other property types."
For more news and information, visit Blumberg Capital Partners.
