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Moody's issued its March REAL Commercial Property Price Indices ("CPPI") last week. The All Property Type Aggregate CPPI was down 5.5% in January, 19.1% below the level seen a year ago and 21% below the peak measured in October 2007. Moody's report states that, "Transaction volume does not appear to have hit bottom yet." The transaction volume has fallen to levels not seen since October 2003, 80% below the level measured one year earlier. CoStar's COMPs transaction data shows Class A (top quality) capitalization rates from: office 6.1% to 7.9%, warehouse 7.1% to 8.6%, and apartments 5.9% to 6.8%. Citigroup Global Markets Inc. research issued its CMBS Real Estate Update. Given the March 3rd national unemployment rate rise from 7.6% to 8.1%, the CITI report ran some stress analysis based on different levels of unemployment. The results indicated that office and hospitality would be most impacted. More importantly, the report indicates that CMBS is so oversold, that values imply a very high 19% unemployment rate. Therefore, this current mismatch between value and cash flow provides a dramatic buffer for potentially more severe economic conditions. As of December 2008, the below table shows national average historical rent and value changes over the previous five years from the CITI report. The numbers represent all quality levels of property and percentage change will vary based on individual markets.

Potential good news for borrowers struggling with the "credit crunch" is an announcement by Real Estate Alert that identified 73 active or planned debt funds, up from 54 a year ago. These funds are seeking to raise $48.4 billion of total equity, up from $28.8 billion. As announced in CMA, the "pace of investments has been slow." The debt funds have only invested $4.4 billion of the $23.8 billion currently raised for investment. By comparison, $20 billion of CMBS matures in 2009, which is fractional to the $200+ billion of CMBS financed in each 2006 and 2007. The funds will acquire distressed debt and/or originate new loans. CMA states that many of the fund operators are cautious, fearful that the real estate hasn't hit bottom, as well as the uncertainty about federally sponsored programs to spur loan sales and origination. Another fairly atypical commercial real estate debt source, credit unions have stepped into the commercial real estate market over the past 18 months to take advantage on traditional commercial real estate lender illiquidity, especially on smaller loan transactions.