(Adds derivatives forecast in seventh paragraph, hotel profit
drop in ninth)
NEW YORK May 19 Retail properties are leading
a drop in U.S. commercial real estate prices, which in March
posted their steepest one-month decline since at least 2000,
Moody's Investors Service said on Monday.
Moody's said prices of retail properties have dropped 5.7
percent from their peak in 2007, compared with declines of 3.4
percent for apartment buildings and 2.3 percent for industrial
real estate, respectively. Office property prices are down 2
percent from their peak, according to quarterly data.
On a monthly basis, commercial property prices fell 2.3
percent in March, the most since Moody's began collecting the
data in 2000. Values were 2.6 percent below their October 2007
level, but still up 0.9 percent from a year ago, Moody's said,
citing its commercial property price index.
Slowing U.S. economic growth and the ailing housing market
have begun to take their toll on retailers.
Lowe's Cos Inc (LOW.N), the second-largest home improvement
chain, said on Monday its first-quarter profit declined by 18
percent and cut its sales growth forecast for 2008. Home goods
retailer Linens 'n Things earlier this month filed for
bankruptcy and announced plans to shutter 120 stores.
The impact of a slowing economy and forecasts of a 20
percent drop in commercial property prices from their peak by
Moody's and JPMorgan Chase & Co in the first quarter led to
steep price drops on securities backed by commercial real
estate. However, prices on commercial mortgage-backed
securities have since climbed amid expectations the selling
overstated the losses that would occur.
According to property derivatives traders, average
commercial property prices are set to fall by 8 to 9 percent in
the next 12 months and by double that over two years. The
nascent over-the-counter market follows the appraisals-based
NCREIF property index, which is calculated by the National
Council of Real Estate Investment Fiduciaries and is a
benchmark used by U.S. pension funds.
Fitch Ratings said delinquencies on CMBS rose slightly, to
0.35 percent in April from 0.33 percent in March. Fitch said it
was most concerned with retail and hotel properties even though
delinquencies in those sectors decreased marginally.
At least four gaming companies with big hotels, including
MGM Mirage Inc (MGM.N) and Las Vegas Sands Corp (LVS.N), have
recently reported eroding quarterly earnings.
(Reporting by Al Yoon in New York and William Kemble-Diaz in
London; Editing by Dan Grebler)