Moody's partners with REAL on price indices.

Moody's Investors Service announced that it is teaming with REAL (Real Estate Analytics LLC) to publish a series of commercial property price indices, the first in the sector to use the repeat sale methodology. Moody's published two reports dated September 20 related to the new indices--one that reviews the current results and another that provides details on the methodology.

The Moody's/REAL Commercial Property Price Indices are calculated using a methodology developed by The Center for Real Estate at MIT and transactional data licensed by REAL from Real Capital Analytics (RCA). Moody's will calculate and publish the indices on an ongoing basis and will provide supporting research and commentary. "These indices will provide a timely and accurate indication of price changes for the commercial property market as a whole and for its most important sectors," said Moody's Managing Director Tad Philipp.

"The Moody's/REAL indices track same-property price changes based on transactions executed in the marketplace," said Moody's Senior Vice President Sally Gordon. "This method avoids the lags and distortions that can occur with other commercial property value measurements using appraisals or average prices," she added.

REAL will develop and trade derivatives based on the suite of indices that will enable investors to efficiently manage portfolio risk and more immediately participate in the commercial real estate market. "The US commercial property market currently lacks the tools and products needed to effectively measure and manage property value risk. The Moody's/REAL indices and derivatives contracts based on them will allow market participants to manage and control their exposure at minimal transaction cost," said Neal Elkin, founding principal of REAL.

Altogether, the Moody's/REAL suite will include 29 indices: one monthly national aggregate index for all property types; 12 quarterly indices covering four major property types (multifamily, retail, office and industrial) nationally, for the western US, and an aggregate of the 10 largest metropolitan statistical areas (MSAs); and 16 annual indices that cover the four major property types for the eastern US, southern US, southern California and some sectors in other selected markets.

The indices are based on data for all US commercial property sales transactions greater than $2.5 million that are captured by RCA. RCA has the most extensive and well documented data base of US commercial property prices.

Moody's Investors Service is a leading provider of credit ratings, research and risk analysis. Moody's commitment and expertise contributes to stable, transparent and integrated financial markets, protecting the integrity of credit.

Real Estate Analytics LLC (REAL) was formed with the purpose of designing and commercializing a unique set of transaction-based indices, derivative products, and asset management vehicles. By bringing together the resources, expertise, and institutional relationships of Moody's Investor Services, Real Capital Analytics, and the Center for Real Estate at MIT, REAL has created a dedicated team that can address the growing needs of institutional participants in the real estate capital markets across public and private debt and equity markets.