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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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October 20, 2008 2:26 PM ET
The commercial real estate industry continues to face its most difficult period in years, and the worst may be yet to come, according to a new report from Moody’s Investors Service. Commercial property prices were almost unchanged for the second consecutive month, posting a 0.1% decrease in August, as measured by the Moody’s/REAL commercial property price index (CPPI). The index recorded 149 repeat sales transactions in August, which represented a 25% decrease from July’s transaction total and was the lowest volume of transactions since the end of 2004. Although the price index has not declined substantially since June, Moody’s analysts are not yet ready to declare that the market has hit bottom. “Rather, the low transaction volume suggests that the flattening of prices is more likely the result of loss avoidance on the part of sellers,” said the Moody’s report released Monday. “At some point, with increased pressure on sellers and more distressed assets in the marketplace, it is expected that volume will pick up and prices will continue to drop.” The CPPI now stands 11.5% lower than in October 2007. It has fallen 11.2% since August of 2007 but is 1% higher than in August 2006. “The continuing upward adjustment of risk premiums generally will result in further increases in property cap rates and an ongoing deleveraging process will lead to lower loan proceeds for a given value,” according to the report. “Both of these factors suggest that commercial real estate prices have further to fall.” The CPPI measures the change in actual prices for commercial real estate assets based on repeat sales of the same assets at different points in time. Since the terms of a commercial real estate deal are often determined as much as 90 days in advance of the actual closing, completed transactions tend to reflect the credit environment of a few months earlier.
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