4 posts tagged “pricing”

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."

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CoStar published an article today investigating the pricing trends for commercial mortgage-related investments, finding the conditions not so separate from those in play on the property side -- even with funding available for debt and mortage investments, there's still a disconnect between what buyers are willing to pay and what sellers are willing to accept. Several industry experts weighed in on the issue, including Michael Singh, managing director of Jones Lang LaSalle Americas in LA: "If notes are available at the right price, investors are ready to move... pricing has been a big sticking point as seen in the continued wide bid-ask spread. Lenders generally seek to recover 80% or more on performing notes while investors typically bid sub 60%."

David S. Akeman, director of capital markets of Stan Johnson Co. in Tulsa, OK, told CoStar Group: "There is a market, but I hear that most lenders or note holders typically aren't discounting the performing commercial real estate notes enough to attract buyers. Many I have personally spoken with are still trying to discount less than 10%. One life company is trying to hold out for par on a vacant Stock Building Supply (property) that is no longer paying rent. This will change in the future, but right now the lenders are stressed, not distressed."

For more news and information, visit Blumberg Capital Partners.