The Ground Floor

ULI Receives Contribution to Establish ULI Daniel Rose Center for Public Leadership

On Wednesday, ULI announced that real estate industry legend Daniel Rose has committed $5 million to the creation of the Urban Land Institute (ULI) Daniel Rose Center for Public Leadership.

The mission of the ULI Daniel Rose Center for Public Leadership is to empower leaders in the public sector to envision, build and sustain successful 21st century communities by providing access to information, best practices, peer networks and other resources to foster creative, efficient and sustainable land use practices.

Rose’s gift is among the largest individual contributions ever made to the Institute. Rose is chairman of New York City-based Rose Associates, Inc., which operates throughout the East Coast as developer and manager of more than 30 million square feet of major office towers, commercial retail centers, mixed-use complexes, and high-rise residential buildings.

The guiding principles of the center will be 1) leadership in a regional context; 2) integrated problem solving; 3) public/private collaboration; and 4) experiential and peer-to-peer learning.

The ULI/Daniel Rose Center will initially undertake three programs: 1) the Daniel Rose Fellowship program; 2) workshops for public officials on sustainable development; and 3) public-private forums on key land use issues; with the fellowship serving as the flagship program of the center. The purpose of the fellowship will be to provide city leaders with the information, insights, peer-to-peer learning, best practices and experience they need to successfully build and sustain their cities. The fellowship will incorporate three over-arching themes: real estate finance and development; the interdependencies and respective roles of the public and private sectors; and the roles and importance of the public realm, its relationship to private property, and how the public sector can use the public realm as leverage to create viable communities.

The ULI Daniel Rose Fellowship will bring together high-level agency officials from a small group of select cities with top experts and development industry leaders to learn about real estate development and finance, land use concepts and best practices. These city leaders will be able to draw upon the knowledge and expertise of the experts and industry leaders to solve actual problems faced by their cities. Each fellowship, which will last one year, will be a prestigious honor, providing the highest quality learning experience for those who receive it.

The Economy: Lots of Speculation, Very Few Answers

This post was written for The Ground Floor by Trisha Riggs communications director at the Urban Land Institute, from the "Spring Council Forum" in Dallas.

The only certainty for the economy is uncertainty -- which could mean an extended period of rocky times for the U. S. real estate industry. That’s the message being delivered in numerous meetings and real estate sessions at ULI’s spring council forum this week in Dallas. As a result, real estate professionals need to be prepared for “rain or shine,” according to one industry analyst.

Some observations from one panel:

Not so bright: 2008 and 2009 will be slow for most sectors of real estate, as the ramifications of the housing market collapse work through the rest of the industry

Not so bright: Consumer spending will continue to drop, reflecting the loss of confidence due to home price declines and equity losses. Retailers are responding by cutting back drastically on expansions.

Could be worse: Commercial vacancies are rising, but are still in the healthy range. New supply in all categories is balanced, with construction at less than 2 percent of existing inventory.

A view from Europe: The farther West one moves (as in closer to the U.S.),  the worse the economy in each country seems. The farther East, the better it seems. Still, many overseas investors consider the U.S. economy to be resilient, all things considered, and the real estate industry ripe for investment (due to the weak dollar)

Some good news: Job losses may not be too dramatic, because job growth did not soar during the recent economic boom. Minimal losses means a quicker return to job gains, which is key to an economic turnaround.   

Some advice for those looking to buy: Focus on quality assets. The yield for quality real estate is still better than that for other assets. "Quality wins," concluded a panelist.

ULI Joins Green Building Finance Consortium

We are pleased to announce that ULI has become a Sustaining Member of the Green Building Finance Consortium (GBFC), which is comprised of leading real estate companies and industry trade groups and organizations who have joined together to support independent research and analysis of investment in "green" or energy efficient buildings.

The GBFC's mission is to develop metrics and measures that recognize and quantify the value and risk of investment in green buildings. The GBFC is tasked with developing the underwriting practices, tools, and valuation methodologies required to assess investment in or lending green buildings and lending secured by green buildings. The GBFC is committed to widely distributing the results of its research process and programs and expects to become an industry-wide resource.

The GBFC's 2008 operations plan includes the development of the following work product and is divided into three phases:

1. Underwriting sustainable property investment;
2. Special reports on sustainable property underwriting; and
3. Special considerations in underwriting by property type.

GBFC members include a wide array on real estate industry participants including, but not limited to, the follow: BOMA International, Cherokee Investment Partners, EPA Energy Star Division, Kennedy Associates Real Estate Counsel, National Association of Realtors, Mortgage Bankers Association, Pension Real Estate Association, and Principal Real Estate Investors.

ULI's membership will benefit from our association with the GBFC by publishing and make available on its web site the results of the GBFC's program of work, thereby providing our members with the models, tools, knowledge, and technology developed by the GCFC and the ability to independently assess the cash flows, values, risks, and benefits associated with an investment in green buildings.

Higher Learning

America's schools are registering at one school a day for the Washington, D.C.-based U.S. Green Building Council's (USGBC) LEED certification program for green schools, signaling their intent to build and operate schools that are more energy and water efficient.

Michelle Moore, senior vice president, USGBC, noted that there are about 100,000 public and private schools in the U.S., and that fully one-third of their facility costs are in heating/cooling buildings, providing water, electricity, and other energy/utility functions.

"Pennsylvania, Michigan, New Jersey, Oregon, and Virginia have the most LEED certified schools to date, and many local school districts and state departments of education are beginning to develop and implement policies that require schools to be built green," according to Moore.

As part of its school design standards, Ohio is one state that's leading the way with hundreds of new and renovated schools set to meet higher energy efficiency and environmental standards through the Ohio School Facilities Commission’s adoption of the LEED for Schools Rating System. When the Commission did the math, it determined it could save $1,415,529,914 in taxpayer money over the next 40 years by reducing the energy consumption of school buildings.

The newly-formed Green Schools Caucus in the U.S. House of Representatives has lent a federal voice to the green schools agenda. Created by co-chairs Rep. Darlene Hooley, D-Ore.; Rep. Michael McCaul, R-Texas; and Rep. Jim Matheson, D-Utah, the goals of the caucus are to raise awareness of the benefits of green schools, lead the policy discussion on the topic in various forums, create legislative opportunities for the collective efforts of the caucus members, and provide members of Congress with constituent outreach resources.

Real Estate Capital Markets Update

The most recent edition of ULI's Real Estate Capital markets Update is available by clicking one of the following links: HTML | PDF.

Deteriorating Infrastructure? How about a social security tax holiday?

This post was written for The Ground Floor by Robert Dunphy, senior fellow of Transportation at the Urban Land Institute.

The recent flap over whether to declare a "gas tax holiday" to give relief to drivers coping with astronomical gas prices illustrates how badly we have lost a national consensus on transportation policy.

Just last week, ULI’s new Infrastructure 2008: A Competitive Advantage listed the well known statistics on the poor state of infrastructure -- roads, bridges, levees, etc. and pointed out that the U.S. is coasting on prosperity, headed toward third world nation status. So why reduce the gas tax? State and federal combined is about $0.40 per gallon compared to European country’s levy of $4 or more.

This public dust up confirms what transportation analysts have been saying, that the days of the gas tax, the cornerstone of financing federal highway and transit programs, are numbered. Since there is no longer a political consensus on a national transportation program, it is hard to gain consensus for increased funding other than for pork barrel projects, which are also losing their luster.

During the glory days of the Interstate Highway System, it would have been inconceivable to call a delay in the completion of these roads that were connecting America like never before. The last increase in the federal gas tax was in 1993, so every year it loses buying power to increased costs of construction and operating costs. The transportation community hopes that the gas tax will hold up for one more federal transportation program, scheduled to expire in 2009.

So far, the technological fix seems to be a tax on actual miles traveled, a so called VMT (vehicle miles traveled) tax, which has been tried in an Oregon experiment. Getting the technology in place will require some time, but the politics could take even longer. It is an elegant solution that could also be adapted to special prices during peak or off peak hours.

Meanwhile, how about a holiday on social security taxes?

Monday's Numbers and Noteworthy News

Newsworthy News

Signs of the times, courtesy of Commercial Mortgage Alert:

"Prudential [Mortgage Capital] Pulls Plug on CMBS Operation;" say it will no longer write loans for securitization.

"Centerline Lays Off 8% of staff;" the B-piece buyer and lender, has laid off 8% of its workforce while certain senior executives have taken pay cuts.

CMBS Year-to-Date Issuance:

U.S.  $9.9 billion (versus $81.0 billion in 2007)
Non-U.S. $5.3 billion (versus $25.2 billion in 2007)

Total  $15.2 billion (versus $106.2 billion in 2007)

"What a difference a year makes"

	April 30, 2008	One Year Ago	Change
Prime Rate	5.00%	8.25%	-3.25%
Federal Funds Rate	2.00%	5.25%	-3.25%
3-Month LIBOR	2.87%	5.36%	-2.49%
3-month Treasury	1.45%	4.86%	-3.41%
10-year Treasury	3.80%	4.67%	-0.87%
30-year Treasury	4.53%	4.84%	-0.31%

Monday’s Numbers

Year-to-Date Equity Market Performance:

DJIA⁽¹⁾: -1.56%
S & P 500⁽²⁾: -3.71%
NASDAQ⁽³⁾: -6.61%
Russell 2000⁽⁴⁾: -5.26%
MSCI U.S. REIT⁽⁵⁾: -9.12%

(1) Dow Jones Industrial Average.
(2) Standard & Poor’s 500 Stock Index.
(3) NASD Composite Index.
(4) Small Capitalization segment of U.S. equity universe.
(5) Morgan Stanley REIT Index.

U.S. Treasury Yields: (as of March 22, 2008)

3-month: 1.50%
6-month: 1.68%
2-Year: 2.45%
5-Year: 3.18%
10-Year: 3.86%

Pricing of Various Tranches of Commercial Mortgage-Backed Securities (as of March 12, 2008)

Rating; Term; Spread to U.S. Treasury Bonds

AAA; 5 years; +272 basis points
AAA; 10 years; +244 basis points
AA; 10 years; +662 basis points
A; 10 years; +862 basis points
BBB; 10 years; +1512basis points
BBB-; 10 years; +1812 basis points
BB; 10 years; +2100 basis points
B; 10 years; +2500 basis points

Source: Various Investment Banking firms such as Lehman Brothers, JP Morgan, and Morgan Stanley

Private Infrastructure

Attracting more private capital within the next ten years is critical for the United States' infrastructure problems, which could reach crisis proportions, according to a key finding in Infrastructure 2008: A Global Perspective, a report published jointly by New York-based Ernst & Young LLP and ULI.

Currently, the U.S. has a US$170 billion annual funding gap for infrastructure projects, the report estimates. However, the gap is widening every year and the gap could balloon over the next few years as local and state governments experience "revenue shrink," particularly from lower property tax collections.

The report concludes that infrastructure funds -- private vehicles set up to invest in infrastructure assets -- currently hold an estimated US$400 billion in capital for investment. This, combined with broader adoption of the public/private partnership model, could alleviate much of the current strain on public coffers caused by the need for radical improvement in local, state and regional infrastructure, says the report. However, the report also questions whether the U.S. has the political will and determination to take a long term approach to the infrastructure issue.

The EY/ULI report provides a snapshot of current and planned infrastructure investment in a variety of categories across the globe, with an in-depth look at the United States, China, Japan, India, and Europe.

For more information on the report and to view a press briefing, go to ULI's webcast of the release.

Sky Gardens

In 2007, 30 percent more green roofs were installed in North America, the Green Roofs for Healthy Cities' 3rd Annual Green Roof Market Industry Survey said. According to corporate members of Green Roofs for Healthy Cities, the finding represents a five percent increase over 2006's annual market growth rate of 25 percent. The survey is based on square footage of green roof projects installed by GRHC's corporate members in 2007.

The top three cities on the Top 10 U.S. Cities list includes: No 1: Chicago, No. 2: Wilmington, D.E., and No. 3: Baltimore.

The city of Chicago remains the number one city for the fourth year in a row with over half a million new square feet of green roofs installed in 2007, evidence of the city's commitment to becoming America's greenest city through green roof policies and incentives that support green roofs, walls and other forms of living architecture.

Newcomers to the list include: Brooklyn, N.Y.; Virginia Beach, Va.; Royersford, Pa.; Philadelphia, Amery, Wisc.; and Germantown, Md.

NYC and One Million Trees

MillionTreesNYC, a public/private partnership between the New York City Department of Parks & Recreation and New York Restoration Project (NYRP), aims to plant and care for one million new trees in New York City by 2017.

Through a mix of public and private plantings, MillionTreesNYC, an important initiative of Mayor Bloomberg's PlaNYC, will expand New York City's urban forest by 20 percent. MillionTreesNYC partners and citizen volunteers are planting in places such as schoolyards and playgrounds, public housing campuses, business districts, commercial and residential developments, front yards, and other private lands.

During MillionTreesNYC Month in April, MillionTreesNYC launched a campaign encouraging all New Yorkers to "think globally and plant locally" enlisting community, corporate and youth volunteers from all five boroughs to roll up their sleeves and plant trees. Throughout the month, parks, New York Restoration Project, and MillionTreesNYC partners have hosted free citywide events for the public including tree education seminars, tree stewardship workshops, tree pruning instructional courses, Urban Park Ranger tree identification hikes, and large scale volunteer tree plantings.