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Announcement:

Moody's/RCA CPPI shows US commercial real estate price recovery decelerating

Global Credit Research - 24 May 2012

New York, May 24, 2012 -- US commercial real estate prices, as measured by Moody's/RCA Commercial Property Price Indices (CPPI) national all-property composite, were flat in March. After recovering 28.2% since the January 2010 pricing trough and retracing approximately 47% of its peak-to-trough decline, price appreciation has decelerated, advancing only 1.8% over the last three months.

"Commercial property price appreciation decelerated during the last three months following a series of strong gains after the trough roughly two years ago," says Tad Philipp, Moody's Director of CRE Research. "The increased cost and decreased availability of capital market debt in the wake of ongoing Euro area sovereign stress has filtered its way into the prices of recently closed transactions."

Composed of a suite of 20 indices, the Moody's/RCA Commercial Property Price Indices is a new series that measures price changes in US commercial real estate through advanced repeat-sale regression (RSR) analytics. The indices use transaction data from Real Capital Analytics (RCA) and a methodology developed by David Geltner, a professor at MIT, in conjunction with Moody's and RCA.

The new report "Moody's/RCA CPPI: Recovery Decelerates: May 2012" is the first monthly report on the new Moody's RCA CPPI.

Among the national all-property composite segments of the CPPI, the growth in apartment prices has significantly outpaced that in the core commercial property types over the past twelve months, with apartment prices rising 18.0% against 10.0%. Improving apartment fundamentals and the continuous supply of attractively priced debt capital made available by the GSEs have led to the better performance.

Apartment prices in major markets have shown the strongest recovery, according to Moody's. The prices in this sector are down just 2.8% from the new peak pricing level that they achieved in February of this year.

Central business district (CBD) offices in non-major markets have been the worst performing category of commercial real estate. During the recession their prices fell 52.9% from peak to trough and remain 45.6% below peak levels.

The Moody's/RCA CPPI shows major markets recovering more quickly than non-major ones. For example, major market CBD office has led the price recovery of the core commercial component of the national all-property index. Major market CBD office is up more than 50% since the trough, roughly double the 24% recovery of the core commercial sector as a whole.

In all, properties in the major markets have appreciated 37.5% since the January 2010 price trough as compared with 21.4% for properties in non-major markets. In the past three months, however, non-major markets outpaced the major markets slightly in their price improvement, 2.5% versus 0.9%, as capital moves beyond the gateway cities in search of higher yields.

From 2007 through 2011 Moody's published the first RSR index for commercial real estate, the groundbreaking Moody's/REAL CPPI, which was optimized for derivatives trading. Derivatives trading failed to develop and REAL elected to discontinue the series. Moody's/RCA CPPI has been optimized for information and makes important advances in accuracy and transparency.

Moody's research subscribers can access this report at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF286091

***

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Tad Philipp
Senior Vice President
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Nick Levidy
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's/RCA CPPI shows US commercial real estate price recovery decelerating
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