CoStar Commercial Repeat Sales Indices (CCRSI) Copyright 2011 CoStar Group, Inc. All Rights Reserved. This news release includes "forward-looking statements" including, without limitation, statements regarding CoStar's expectations, beliefs, intentions or strategies regarding the future. These statements are subject to many risks and uncertainties that could cause actual results to differ materially from these statements. More information about potential factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to, those stated in CoStar's filings from time to time with the Securities and Exchange Commission, including CoStar's Form 10-K for the year ended December 31, 2010, and CoStar's Form 10-Q for the quarter ended March 31, 2011, under the heading "Risk Factors." In addition to these statements, there can be no assurance that the commercial real estate market is recuperating; that commercial real estate sales volume will continue to increase; that the volume of bubble era transactions will continue to increase; that larger, better capitalized lenders will continue to finance larger, investment-grade properties; that total commercial real estate volume will continue to trend upward; that the upward trend in pair volume will continue; that January 2009 will turn out to be the low point in the downturn in terms of pair volume; that pair dollar volume and average deal sizes for both general and investment grade will continue to increase; that the trends represented or implied by the indices will continue; and that the CCRSI will be released on the date and updated on the frequency set forth in the release. All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update such statements, whether as a result of new information, future events or otherwise. 1331 L Street, NW Washington, DC 20005 USA 20814 (800) 204-5960 www.costar.com NASDAQ: CSGP
Today s Presenter 19 years of commercial real estate experience Development Acquisitions Leasing Financing Chris Macke Senior Real Estate Strategist CoStar Group
CoStar Commercial Repeat Sales Indices (CCRSI) What is a repeat sales index? The CoStar Commercial Repeat Sales Indices April 2011 index results Key drivers of April 2011 results Questions
What Is A Repeat Sales Index? The repeat sales index methodology used by CoStar is similar to the methodology used by the Case-Shiller residential pricing index A repeat sales index attempts to minimize the impact of changes in the mix of properties sold each month. The index consists of sale pairs: A property s previous sale transaction ( First Sale ) Its current sale transaction ( Second Sale ) The difference in prices paid between these two is what is used to calculate the index results
What Is A Repeat Sales Index? The CCRSI is an equal weighted index The size of a transaction does not determine its influence on the index results This ensures that a few large transactions do not determine the index results Complete methodology can be found at www.costar.com/ccrsi
The CoStar Commercial Repeat Sales Indices (CCRSI) The CCRSI is the industry s broadest measure of commercial real estate pricing The index draws its sales pairs from CoStar s proprietary sales database In 2010 alone CoStar tracked more than $215B in sales, this was almost $100B more than any other data provider
The CoStar Commercial Repeat Sales Indices (CCRSI) CoStar has three national pricing indices Produced monthly The National Composite Index tracks pricing changes for all properties sold each month The Investment Grade Index tracks pricing changes among the larger, higher-quality properties. These generally account for 60% of each period s sales volume The General Grade Index tracks pricing changes for the balance of properties On average these account for 85% of each period s number of transactions
The CoStar Commercial Repeat Sales Indices (CCRSI) CoStar also tracks 32 sub indices Produced quarterly The sub indices are broken down by: Region Property sector Market size
April 2011 Results April 2011 sale pair volume was up 81% from April 2010 a bullish sign for the market April 2011: $3.5B April 2010: $1.7B April 2011 sale pair counts were up 18% from April 2010 April 2011: 793 sale pairs April 2010: 672 sale pairs
April 2011 Results CoStar s Composite Commercial Repeat Sales Index declined by 1.7% in April 2011. It is now 13% below the same period last year and 38% below its peak in August 2007. CoStar s General Grade Commercial Repeat Sales Index declined by less than one percent in April, but is also 13% below the same period last year and 37% below its peak in July 2007. CoStar s Investment Grade Commercial Repeat Sales Index declined by 5.3% in April, and is now 9% below its year-ago level and off 44% from its August 2007 peak.
April 2011 Results Source: CoStar Group
April 2011 Results National level indices mask significant variations in pricing performance There were three April 2011 sale pairs that recorded price increases of more than $50M, all of which had a pricing gains of more than 50% Comparatively, there were only two April 2011 sale pairs with price decreases of more than $25M, both of which had pricing losses of less than 50%
Key Drivers of April 2011 Results Timing matters More than 3 out of every 4 sale pairs whose First Sale occurred between 2005 and 2007, were subsequently sold in April 2011 at a lower price Comparatively, 46% of sale pairs whose First Sale occurred before or after 2005-2007 were subsequently sold in April 2011 at a lower price 40% of the April 2011 sale pairs had a First Sale date between 2005 and 2007 While we believe the sale of bubble era transactions is a necessary step in the market recovery process, the sale of these properties is weighing on the CCRSI in the interim.
April 2011 Pricing Highlights The percentage of distressed sales this year has remained steady at 31% on average year-to-date for the composite index The percentage of distressed sales has risen for larger properties as 42% of Investment Grade sales this year were distressed compared to 35% in 2010. This increase is likely the result of the healthier financial position of the larger, better capitalized lenders who typically finance these bigger, higher quality properties and their ability to liquidate the distressed assets underlying their loans.
April 2011 Results 32% 30% Percent distressed by property type 30.8% 29.5% 28% 26% 26.3% 25.9% 24% 24.5% 22% 20% Hospitality Office Multifamily Retail Industrial Source: CoStar Group
April 2011 Pricing Highlights The market is clearing at an accelerated rate 59.8% of this year s sale pairs were sold at a lower price than their First Sale price 56.9% of 2010 sale pairs were sold at a lower price than their First Sale price 46.5% of 2009 sale pairs were sold at a lower price than their First Sale price
Next CCRSI Webinar 2 nd Quarter Pricing Register now to learn more about next month s findings which will cover second quarter pricing including regional and property sector specific results Thursday, July 14, 2011 3:00 PM ET https://www1.gotomeeting.com/register/571118833
Additional Questions: cmacke@costar.com 2011 CoStar Realty Information, Inc. Presented by Chris Macke