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SPECIAL REPORT
COMMERCIAL MBS JUNE 12, 2012
Table of Contents:
HIGHLIGHTS 1 NOTABLE OBSERVATIONS AND THEMES 2 MOODY’S/RCA CPPI 3
Price Changes by Sector and Market Type – Value Weighted Composite Tiers5 3 Moody’s/RCA CPPI Tiers 1 & 2: National, Apartment and Core Commercial 4 Moody’s/RCA CPPI Tier 3: Components of Core Commercial 5 Moody’s/RCA CPPI Tier 4 Indices: Sector Components in Major Markets 6 Moody’s/RCA CPPI Tier 4 Indices: Sector Components in Non-Major Markets 7 Moody’s/RCA CPPI Tier 5 Indices: Composite Major and Non-Major Markets 8
FROM THE LAB – PRICES OF DISTRESSED PROPERTIES ON UPSWING IN MAJOR MARKETS 9 APPENDIX I: TIER 4 INDICES AND SUPPLEMENTAL DATA BREAKOUTS 10 APPENDIX II: RECOVERY PROFILE OF 20 SUB-INDICES 13 APPENDIX III: REPEAT-SALES TRANSACTION VOLUME 14 APPENDIX IV: DISTRESSED TRANSACTION VOLUME 15 APPENDIX V: SCHEDULE OF CPPI REPORT RELEASES 16 APPENDIX VI: CPPI HIERARCHY 17 MOODY’S RELATED RESEARCH 18
Analyst Contacts
Tad Philipp Director – CRE Research +1.212.553.1992 [email protected]
Kevin Fagan Analyst +1.212.553.7833 [email protected]
Nick Levidy Managing Director – Structured Finance +1.212.553.4595 [email protected]
» contacts continued on the last page
Moody’s/RCA CPPI: Commercial and Apartment Prices Stall June 2012
Highlights
The Moody’s/RCA Commercial Property Price Indices (CPPI) national all-property composite was down 0.6% in April, with broad price recovery effectively stalled since Fall 2011.
All property sectors saw flat to down prices in April except for industrial, which gained 1.1%. Apartment prices in both major and non-major markets have leveled off after leading in price recovery since the financial crisis.
EXHIBIT 1
Moody’s/RCA CPPI – National All-Property Composite Index
Recent Historical
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
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00
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Mar
12
National All-Property
-0.6% -0.1%
9.1%
-22.6%
26.0%
43.7%
-40%
-20%
0%
20%
40%
60%
-10%
-5%
0%
5%
10%
15%
Month 3-Month 12-Month Peak Trough Inception
(Apr 12) (Jan 12) (Apr 11) (Dec 07) (Jan 10) (Dec 00)
COMMERCIAL MBS
2 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
The Moody’s/RCA Commercial Property Price Indices measure price changes in US commercial real estate, based on completed sales of the same commercial properties over time, known as the “repeat-sales methodology.”1
Notable Observations and Themes
« Apartment prices were down 1.2% in April after increasing by 37.4% from their January 2010 trough. Apartments in major markets started their recovery 28 months ago and have since retraced 82.0% of their peak-to-trough decline, the strongest performance among the 20 sub-sectors.
« Industrial saw the only gain among the property sectors in April at 1.1% and was the biggest gainer over the last quarter at 3.9%. However, it still slightly lags the recovery of core commercial, of which it is a component. Industrial has the lowest share of distressed transactions by count among the major sectors, less than 20% over the past year.
« CBD office in non-major markets was the first sub-sector to bottom, 31 months ago, but it has yet to gain traction, retracing only 7.5% of its peak-to-trough decline.
« Suburban office in major markets has seen a significant setback to its nascent recovery, falling by 14.4% over the last 5 months. Suburban office has the highest share of distressed transactions by count among the property sectors, exceeding 30% over the past year.
« In this month’s “From the Lab” section we explore price trends for distressed and non-distressed transactions in major and non-major markets. We note that prices of non-distressed properties in major markets have recovered to 90.9% of peak levels in nominal terms. Distressed transactions are showing price recovery in major markets, up 27.8% from the trough 19 months ago, while distressed transaction prices in non-major markets continue to languish, essentially flat since Q4 2009.
1 More information about the index, including the “2012 Moody's/RCA CPPI release paper”, is available in the “Moody’s Related Research” section at the end of this
report and at www.moodys.com.
COMMERCIAL MBS
3 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Moody’s/RCA CPPI
Price Changes by Sector and Market Type – Value Weighted Composite Tiers5
EXHIBIT 2
Summary – Moody’s/RCA CPPI Index Changes to April 2012 from Earlier Periods
Tier Index Month 3-Month 12-Month Higher Tier Composite1
Share of Higher Tier Composite2
1 National All-Property -0.57% -0.07% 9.11% N/A 100%
2 Apartment -1.22 -1.48 12.98 National / T1 27.0 2 Core Commercial -0.34 0.46 7.58 National / T1 73.0
3 Retail -0.02 1.88 13.43 Core Comm / T2 26.8 3 Industrial 1.07 3.86 11.92 Core Comm / T2 20.0 3 Office CBD -1.07 0.53 2.71 Core Comm / T2 26.7 3 Office Suburban -1.04 -3.73 2.87 Core Comm / T2 26.5 3 Office3 -1.06 -1.57 3.07 Standalone -
5 Major Markets4 -0.57 -0.07 9.11 Standalone 46.8 5 Non-Major Markets -1.22 -1.48 12.98 Standalone 53.2 Notes: 1 The “Tier” is the hierarchical level of the index, with the National All-Property CPPI defined as Tier 1. Tiers 1-3 and 5 are value-weighted composite
indices. Tier 4 consists of the underlying, “building block” indices, estimated as equal-weighted regressions of sector repeat-sales. 2 Composite indices in the Moody’s/RCA CPPI system are all value-weighted, based on the segments’ long-term, 10-year rolling average dollar share
of the defined composite market, similarly to typical stock market indices, which are weighted by the market capitalization of the constituent stocks. This weight is adjusted monthly according to relative returns and rebalanced yearly. Weights show are most recent rebalanced weights.
3 The “Office” segmentation is a mezzanine level index tier; in other words, the Core Commercial composite is made up of the CBD and Suburban segments.
4 The “Major Markets” (MM) are the six gateway metropolitan areas: Boston, Chicago, Los Angeles, New York, San Francisco and Washington DC. For composite Tier 5, we show major and non-major markets (NMM) as a percentage of national, for reference purposes only. They do not contribute directly to the calculation of the National All Property composite index; however, we show their respective shares of the national index.
5 Historical data for these indices is available in Excel format by clicking here. Data on the 10 building block indices are available to Moody’s or RCA subscribers by clicking here.
Source: RCA and Moody’s Investors Service
COMMERCIAL MBS
4 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Moody’s/RCA CPPI Tiers 1 & 2: National, Apartment and Core Commercial
« Price recovery has cooled off for the national composite index, as it has for its two underlying components, apartment and core commercial.
« While both apartment and core commercial saw their post-financial crisis troughs in early 2010, apartment has recovered by 37.4%, well above the 21.9% pace of core commercial.
EXHIBIT 3
Moody’s/RCA CPPI Apartment and Core Commercial Composite Indices2
Recent Historical
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
2 Peak and trough dates shown in report exhibits are the prior pre-financial crisis peak and post-financial crisis trough months for the highest tier index in a given exhibit.
E.g., peak and trough dates shown in exhibit 3 refer to peak and trough of the national all-property index.
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National Apartment Core Commercial-1
.2%
-1.5
%
13.0
%
-0.3
%
0.5%
7.6%
-14.
9%
37.4
%
59.1
%
-25.
4%
21.9
%
37.9
%-40%
-20%
0%
20%
40%
60%
80%
-10%
-5%
0%
5%
10%
15%
20%
Month 3-Month 12-Month Peak Trough Inception
Apartment Core Commercial National
(Apr 12) (Jan 12) (Apr 11) (Dec 07) (Jan 10) (Dec 00)
COMMERCIAL MBS
5 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Moody’s/RCA CPPI Tier 3: Components of Core Commercial
« CBD office has been the engine driving the recovery of core commercial, and is up by 51% since its trough. However, CBD office prices have gained only 0.5% over the last three months.
EXHIBIT 4
Moody’s/RCA CPPI - Core Commercial Sector Composite Indices
Recent Historical
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
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220D
ec 0
0M
ar 0
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n 01
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01D
ec 0
1M
ar 0
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n 02
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ec 0
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ar 0
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n 03
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03D
ec 0
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ar 0
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n 04
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ec 0
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ar 0
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n 05
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ec 0
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ar 0
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n 06
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ec 0
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ar 0
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ar 0
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ar 0
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n 11
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11D
ec 1
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ar 1
2
Core Commercial Retail Industrial Off-CBD Off-Sub
-40%
-20%
0%
20%
40%
60%
80%
-10%
-5%
0%
5%
10%
15%
20%
Month 3-Month 12-Month Peak Trough Inception
Retail Industrial Off-CBD Off-Sub Core Comm
(Apr 12) (Jan 12) (Apr 11) (Dec 07) (Jan 10) (Dec 00)
0.0%
1.1%
-1.1
%
-1
.0%
1.9%
3.9%
0.5%
-3.7
%
13.4
%
11
.9%
2.9%
-2
8.2%
-28.
2%
-2
3.2%
-21.
8%
-3
4.3%
20.1
%
15
.0%
51.0
%
16
.5%
36.1
%
33
.7%
64.9
%
8.
8%
COMMERCIAL MBS
6 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Moody’s/RCA CPPI Tier 4 Indices: Sector Components in Major Markets
« Major market apartments, which had set a new peak level two months ago, have since declined by 4.1%.
« Suburban office in major markets has seen a significant setback in its nascent recovery, falling by 14.4% over the last 5 months.
EXHIBIT 5
Moody’s/RCA CPPI – Major Market Sector Indices
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
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240
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00
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01
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Major Markets Aggregate Major Apt Major Ret
Major Ind Major Off-CBD Major Off-Sub
9.6%
-4.1
%
23.7
%
112.
6%
16.7
%
-18.
0%
30.6
%
83.5
%
17.8
%
-15.
9%
25.1
%
51.1
%
4.5%
-16.
0%
67.3
% 81.7
%
-0.2
%
-31.
9%
28.5
%
18.2
%-40%
-20%
0%
20%
40%
60%
80%
100%
120%
12-Month Peak Trough Inception
Major Apt Major Ret Major Ind Major Off-CBD Major Off-Sub Major Markets
(Apr 11) (Dec 07) (Jan 10) (Dec 00)
COMMERCIAL MBS
7 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Moody’s/RCA CPPI Tier 4 Indices: Sector Components in Non-Major Markets
« The recovery of individual property sectors in non-major markets lags that of their counterparts in major markets and remains more tightly clustered
« While apartments set the pace in non-major markets with 31.7% cumulative appreciation since December 2000, they considerably lag the gains of apartments in major markets, which are up by 112.6% over the same time period.
EXHIBIT 6
Moody’s/RCA CPPI – Non-Major Market Sector Indices
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
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Non-Major Markets Aggregate Non-Major Apt Non-Major Ret
Non-Major Ind Non-Major Off-CBD Non-Major Off-Sub
15.0
%
-22.
6%
45.8
%
31.7
%
12.0
%
-33.
0%
16.9
%
16.1
%
7.8%
-29.
0%
17.6
%
21.6
%
-3.0
%
-46.
7%
7.6%
7.1%
5.0%
-37.
3%
10.7
%
-0.8
%
-60%
-40%
-20%
0%
20%
40%
60%
12-Month Peak Trough Inception
Non-Major Apt Non-Major Ret Non-Major Ind Non-Major Off-CBD Non-Major Off-Sub Non-Major Markets
(Apr 11) (Oct 07) (Mar 10) (Dec 00)
COMMERCIAL MBS
8 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Moody’s/RCA CPPI Tier 5 Indices: Composite Major and Non-Major Markets
« Prices in both major and non-major markets have been essentially flat for the last month and quarter.
« Since the post-crisis trough, prices in major markets have recovered more than twice as quickly as those in non–major markets, up 37.1% compared to 17.5%.
EXHIBIT 7
Moody’s/RCA CPPI - Major Markets Lead Non-Majors in Recovery
Recent Historical
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
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National Major Markets Non-Major Markets-0
.4%
-0.1
%
8.3%
-0.7
%
-0.1
%
9.8%
-13.
9%
37.1
%
76.0
%
-29.
8%
17.5
%
19.9
%-40%
-20%
0%
20%
40%
60%
80%
100%
-10%
-5%
0%
5%
10%
15%
20%
25%
Month 3-Month 12-Month Peak Trough Inception
Major Non-Major National
(Apr 12) (Jan 12) (Apr 11) (Dec 07) (Jan 10) (Dec 00)
COMMERCIAL MBS
9 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
From the Lab – Prices of Distressed Properties on Upswing in Major Markets
« Prices of non-distressed properties in major markets have recovered to 90.9% of peak levels in nominal terms.
« Major markets have seen a lower share of distressed transactions on a dollar volume basis than non-major markets, peaking at 15% versus 19% and presently at 12% versus 14%. The disparity is much greater on a count basis, with major markets seeing about half the level of distress of non-major markets (16% versus 33%).
« Distressed transactions are showing price recovery in major markets, up 27.8% after hitting a trough in September 2010, while distressed transaction prices in non-major markets continue to languish, essentially flat since Q4 2009.
EXHIBIT 8
Moody’s/RCA CPPI – Distressed Transactions in Major Markets Show Price Recovery3
Based on data through the end of March 2012. Source: RCA and Moody’s Investors Service
EXHIBIT 9
Moody’s/RCA CPPI – Distressed Transaction Prices Languish in Non-Major Markets
Based on data through the end of March 2012. Source: RCA and Moody’s Investors Service
3 Percentage distressed shown in exhibits in this section are 12-month rolling averages of the dollar volume of distressed transactions. Note that a different methodology is
used for these distressed indices than for the Moody’s/RCA CPPI composites due to data limitations. Also, because of the few distressed transactions in the run-up to the peak, the distressed indices begin in March 2008.
0%
2%
4%
6%
8%
10%
12%
14%
16%
75
100
125
150
175
200
225
Mar
08
May
08
Jul 0
8
Sep
08
Nov
08
Jan
09
Mar
09
May
09
Jul 0
9
Sep
09
Nov
09
Jan
10
Mar
10
May
10
Jul 1
0
Sep
10
Nov
10
Jan
11
Mar
11
May
11
Jul 1
1
Sep
11
Nov
11
Jan
12
Mar
12 D
istre
ssed
% o
f Tra
sanc
tion
Dol
lar
Volu
me
Inde
x (D
ec 2
000
= 10
0
Distressed % of Dollar Vol [R] MM Non-Distressed Index [L] MM Distressed Index [L]
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
75
100
125
150
175
Mar
08
May
08
Jul 0
8
Sep
08
Nov
08
Jan
09
Mar
09
May
09
Jul 0
9
Sep
09
Nov
09
Jan
10
Mar
10
May
10
Jul 1
0
Sep
10
Nov
10
Jan
11
Mar
11
May
11
Jul 1
1
Sep
11
Nov
11
Jan
12
Mar
12
Dist
ress
% o
f Tra
nsac
tions
Dol
lar
Volu
me
Inde
x (D
ec 2
000
= 10
0)
Distressed % of Dollar Vol [R] NMM Non-Distressed Index [L] NMM Distressed Index [L]
COMMERCIAL MBS
10 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Appendix I: Tier 4 Indices and Supplemental Data Breakouts
EXHIBIT 10
Tier 4 – Moody’s/RCA CPPI Index Changes from to April 2012 from Prior Year4
Tier Index 12 Month Mar 2011
Major/Non-Major5 Ratio from Incept.
Higher Tier Composite
Share of Higher Tier Composite
4 Apartment – Major 9.60% 1.61 Apartment / T2 37.7%
4 Apartment – Non-Major 14.96 Apartment / T2 62.3
4 Retail – Major 16.65 1.58 Retail / T3 31.6
4 Retail – Non-Major 11.96 Retail / T3 68.4
4 Industrial – Major 17.83 1.24 Industrial / T3 41.4
4 Industrial – Non-Major 7.80 Industrial / T3 58.6
4 CBD Office – Major 4.49 1.67 Office CBD / T3 76.3
4 CBD Office – Non-Major -2.97 Office CBD / T3 23.7
4 Suburban Office – Major -0.22 1.19 Office Sub / T3 47.2
4 Suburban Office – Non-Major 4.99 Office Sub / T3 52.8
5 Major Markets Aggregate 8.34 1.48 Standalone 46.8
5 Non-Major Markets Aggregate 9.78 Standalone 53.2
Property Sector Performance History by Major and Non-Major Markets
EXHIBIT 11
Moody’s/RCA CPPI – Major Market Apartments Pull Back From Recent Peak Level
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
4 The building block indices below represent the actual experiences of investors during the reference periods but are more subject to idiosyncratic dispersion of property
prices than the composite indices over a short horizon. We expect this effect to dissipate over the 12 month horizon as additional observations have been included in the data set, as reflected in the table above.
5 This metric is the ratio of the current major markets index level to the current non-major markets index level. All indices in the CPPI suite are set to a value of 100 at Dec 2000 inception.
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240
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01
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p 01
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Apartment Major Apt Non-Major Apt
COMMERCIAL MBS
11 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
EXHIBIT 12
Moody’s/RCA CPPI - Retail by Market Classification
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
EXHIBIT 13
Moody’s/RCA CPPI - Industrial by Market Classification
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
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05Se
p 05
Dec
05
Mar
06
Jun
06Se
p 06
Dec
06
Mar
07
Jun
07Se
p 07
Dec
07
Mar
08
Jun
08Se
p 08
Dec
08
Mar
09
Jun
09Se
p 09
Dec
09
Mar
10
Jun
10Se
p 10
Dec
10
Mar
11
Jun
11Se
p 11
Dec
11
Mar
12
Retail Major Ret Non-Major Ret
80
100
120
140
160
180
200
Dec
00
Mar
01
Jun
01Se
p 01
Dec
01
Mar
02
Jun
02Se
p 02
Dec
02
Mar
03
Jun
03Se
p 03
Dec
03
Mar
04
Jun
04Se
p 04
Dec
04
Mar
05
Jun
05Se
p 05
Dec
05
Mar
06
Jun
06Se
p 06
Dec
06
Mar
07
Jun
07Se
p 07
Dec
07
Mar
08
Jun
08Se
p 08
Dec
08
Mar
09
Jun
09Se
p 09
Dec
09
Mar
10
Jun
10Se
p 10
Dec
10
Mar
11
Jun
11Se
p 11
Dec
11
Mar
12
Industrial Major Ind Non-Major Ind
COMMERCIAL MBS
12 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
EXHIBIT 14
Moody’s/RCA CPPI - Office CBD Results Driven by Major Markets
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
EXHIBIT 15
Moody’s/RCA CPPI - Suburban Office by Market Classification
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
EXHIBIT 16
Moody’s/RCA CPPI – CBD Office Outpaces Suburban
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
80
100
120
140
160
180
200
220
240
Dec
00
Mar
01
Jun
01Se
p 01
Dec
01
Mar
02
Jun
02Se
p 02
Dec
02
Mar
03
Jun
03Se
p 03
Dec
03
Mar
04
Jun
04Se
p 04
Dec
04
Mar
05
Jun
05Se
p 05
Dec
05
Mar
06
Jun
06Se
p 06
Dec
06
Mar
07
Jun
07Se
p 07
Dec
07
Mar
08
Jun
08Se
p 08
Dec
08
Mar
09
Jun
09Se
p 09
Dec
09
Mar
10
Jun
10Se
p 10
Dec
10
Mar
11
Jun
11Se
p 11
Dec
11
Mar
12
Off-CBD Major Off-CBD Non-Major Off-CBD
80
90
100
110
120
130
140
150
160
170
180
Dec
00
Mar
01
Jun
01Se
p 01
Dec
01
Mar
02
Jun
02Se
p 02
Dec
02
Mar
03
Jun
03Se
p 03
Dec
03
Mar
04
Jun
04Se
p 04
Dec
04
Mar
05
Jun
05Se
p 05
Dec
05
Mar
06
Jun
06Se
p 06
Dec
06
Mar
07
Jun
07Se
p 07
Dec
07
Mar
08
Jun
08Se
p 08
Dec
08
Mar
09
Jun
09Se
p 09
Dec
09
Mar
10
Jun
10Se
p 10
Dec
10
Mar
11
Jun
11Se
p 11
Dec
11
Mar
12
Off-Sub Major Off-Sub Non-Major Off-Sub
80
100
120
140
160
180
200
220
Dec
00
Mar
01
Jun
01Se
p 01
Dec
01
Mar
02
Jun
02Se
p 02
Dec
02
Mar
03
Jun
03Se
p 03
Dec
03
Mar
04
Jun
04Se
p 04
Dec
04
Mar
05
Jun
05Se
p 05
Dec
05
Mar
06
Jun
06Se
p 06
Dec
06
Mar
07
Jun
07Se
p 07
Dec
07
Mar
08
Jun
08Se
p 08
Dec
08
Mar
09
Jun
09Se
p 09
Dec
09
Mar
10
Jun
10Se
p 10
Dec
10
Mar
11
Jun
11Se
p 11
Dec
11
Mar
12
Office Off-CBD Off-Sub
COMMERCIAL MBS
13 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Appendix II: Recovery Profile of 20 Sub-Indices
The following is a rank order of all 20 CPPI sub-indices by percentage of the nominal peak-to-trough value loss that has been recovered.
« Apartment in major markets started its recovery 28 months ago and has since retraced 82.0% of its peak-to-trough decline, the strongest performance among the 20 sub sectors.
« CBD office in non-major markets was the first to bottom, 31 months ago, but has yet to gain traction, retracing only 7.5% of its peak-to-trough decline.
EXHIBIT 17
Moody’s/RCA CPPI – Sub-Indices Peak / Trough Detail6
Index Peak-to-Trough
Peak-to-Current
Percent Peak-to-Trough Loss
Regained 7 Peak
Month Trough Month
Months Since Recovery Start
Apartment – Major -22.5% -4.1% 82.0% (Dec 07) (Dec 09)
CBD Office – Major -49.8 -16.0 67.9 (Jul 08) (Nov 09)
Major Markets Aggregate -37.2 -13.9 62.6 (Dec 07) (Jan 10)
Apartment -38.0 -14.9 60.9 (Nov 07) (Dec 09)
Office CBD -48.2 -21.8 54.8 (Dec 07) (Nov 09)
Apartment – Non-Major -46.9 -22.6 51.7 (Oct 07) (Nov 09)
Retail – Major -37.2 -18.0 51.7 (Oct 07) (May 10)
Industrial – Major -32.7 -15.9 51.5 (Nov 07) (Jan 10)
National All-Property -38.6 -22.6 41.4 (Dec 07) (Jan 10)
Office -44.6 -27.3 38.8 (Dec 07) (Nov 09)
Core Commercial -38.8 -25.4 34.5 (Dec 07) (Jan 10)
Suburban Office – Major -47.0 -31.9 32.1 (Dec 07) (Apr 10)
Industrial -33.2 -23.2 30.1 (Nov 07) (Jun 11)
Retail -40.2 -28.2 29.9 (Aug 07) (Nov 10)
Industrial – Non-Major -39.6 -29.0 26.8 (Mar 08) (Jun 11)
Non-Major Markets Aggregate
-40.2 -29.8 26.0 (Oct 07) (Mar 10)
Retail – Non-Major -42.7 -33.0 22.6 (Jun 07) (Jun 11)
Office Suburban -43.6 -34.3 21.4 (Dec 07) (Apr 10)
Suburban Office – Non-Major -43.4 -37.3 14.0 (Oct 07) (Aug 11)
CBD Office – Non-Major -50.5 -46.7 7.5 (Jan 08) (Sep 09)
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
6 In this table, peaks and troughs are pre-crisis peaks (2007-2008) and post-crisis troughs (2009-2010). Major market apartments set a new peak level in Feb. 2012. 7 The “Percent Peak-to-Trough Loss Regained” column is the percentage of the nominal post-crisis loss of value that has since been recovered, calculated as: % Recovered
= Peak-to-Current / Peak-to-Trough - 1.
28
29
27
28
29
29
23
27
27
29
27
24
10
17
10
25
10
24
8
31
COMMERCIAL MBS
14 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Appendix III: Repeat-Sales Transaction Volume
EXHIBIT 18
Moody’s/RCA CPPI - Quarterly Volume by Count
Based on data through the end of April 2012.
Source: RCA and Moody’s Investors Service
EXHIBIT 19
Moody’s/RCA CPPI - Quarterly Volume by Dollar
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
0
100
200
300
400
500
600
700
800
900
1000
2000
Q4
2001
Q1
2001
Q2
2001
Q3
2001
Q4
2002
Q1
2002
Q2
2002
Q3
2002
Q4
2003
Q1
2003
Q2
2003
Q3
2003
Q4
2004
Q1
2004
Q2
2004
Q3
2004
Q4
2005
Q1
2005
Q2
2005
Q3
2005
Q4
2006
Q1
2006
Q2
2006
Q3
2006
Q4
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
Apartment Retail Industrial Office CBD Office Sub
$0
$5
$10
$15
$20
$25
$30
2000
Q4
2001
Q1
2001
Q2
2001
Q3
2001
Q4
2002
Q1
2002
Q2
2002
Q3
2002
Q4
2003
Q1
2003
Q2
2003
Q3
2003
Q4
2004
Q1
2004
Q2
2004
Q3
2004
Q4
2005
Q1
2005
Q2
2005
Q3
2005
Q4
2006
Q1
2006
Q2
2006
Q3
2006
Q4
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
Billi
ons
Apartment Retail Industrial Office CBD Office Sub
COMMERCIAL MBS
15 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Appendix IV: Distressed Transaction Volume
EXHIBIT 20
Moody’s/RCA CPPI – Percentage Distressed of Market Types by Count
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
EXHIBIT 21
Moody’s/RCA CPPI – Percentage Distressed of Property Types by Count
Based on data through the end of April 2012. Source: RCA and Moody’s Investors Service
0%
5%
10%
15%
20%
25%
30%
35%
40%
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
National All-Property Major Markets Non-Major Markets
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
National All-Property Apt Ret Ind OffC OffS
COMMERCIAL MBS
16 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Appendix V: Schedule of CPPI Report Releases
The Moody’s/RCA CPPI is based on repeat-sales (RS) transactions that occurred at any time up through the month, two calendar months prior to the current report. This June CPPI report covers RS transactions on or before the final day of April, and we process the data from such transactions through the end of May.
Because CPPI allows for backward revisions and incorporates any new data we receive subsequent to publishing, future indices will reflect adjustments due to additional transaction data.
Future CPPI releases will be during the second week of each month.
COMMERCIAL MBS
17 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Appendix VI: CPPI Hierarchy
Construction of the CPPI Suite
We calculate the CPPI suite with a repeat-sales regression methodology using a “Two-stage Annual-to-Monthly Frequency Conversion” (ATM) technique.8 ATM enhances accuracy and versatility given the comparatively small datasets typical of commercial real estate transactions.
This first step in the process is to generate the most granular underlying indices in the index suite, which we have labeled as Tier 4 in Exhibit 22 Tier 4 indices are equal-weighted, meaning each verified repeat-sale constitutes the same contribution to the index calculations. The higher-tier indices, Tiers 1 through 3, are based on value-weighted roll-ups of the underlying indices. The value-weighting of Tiers 1-3 is similar to that in a buy-and-hold portfolio in which each component is weighted annually by the dollar share of total stock outstanding.9
The CPPI methodology makes advantageous use of both equal- and value-weighting. Equal-weighting at the underlying/Tier 4 level is important, primarily to prevent any singular property sale or small market segment from skewing the CRE market picture. The value-weighted roll-up of the underlying/Tier 4 indices to the higher Tier 1-3 levels appropriately allows a market segment to influence composite indices in correct proportion to its market share of dollar-based transaction volume.
EXHIBIT 22
Moody’s/RCA CPPI Suite - Hierarchy of Composite Indices
*Note: We also report CBD and Suburban Office as an “Office” composite roll-up. Tier 5 is for information only. Source: RCA and Moody’s Investors Service
8 More information about the index, including the 2012 Moody's/RCA CPPI announcement paper, is available in the “Moody’s Related Research” section at the end of
this report and at www.moodys.com. 9 For the CPPI, the annual weighting of the index segments is based on a 10-year rolling average share. Most actively traded commercial properties typically turn over
within 10 years; thus, we infer that the 10-year rolling average of total trading volume as tracked by Real Capital Analytics is an appropriate proxy for the relative value of the outstanding stock of the corresponding sub-index properties.
COMMERCIAL MBS
18 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Moody’s Related Research
Below are links to publications from Moody’s related to the indices and underlying trends:
CPPI Related:
« US CMBS: Moody's to Publish State-of-the-Art Commercial Property Price Indices, May 2012 (SF285594)
« Prior month report: Moody's/RCA CPPI: Recovery Decelerates - May 2012 (SF286091)
Commercial Real Estate Related:
« “US CMBS: Moody's Delinquency Tracker”, June 2012 (SF287489)
« US CMBS Q1 2012 Review: Q2 Poised to See More Highly Leveraged Collateral Pools, Increased Subordination Levels (SF281819)
« “CMBS: Red – Yellow – Green® Update, First Quarter 2012 Quarterly Assessment of U.S. Property Markets”, April 2012 (SF281858)
« “US CMBS Loss Severities, Q1 2012 Update”, March 2011 (SF285658) To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. All research may not be available to all clients.
Moody’s publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.
COMMERCIAL MBS
19 JUNE 12, 2012 SPECIAL REPORT: MOODY’S/RCA CPPI: COMMERCIAL AND APARTMENT PRICES STALL – JUNE 2012
Report Number: SF287734
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