The Ground Floor

Hybrid Hype

Car makers across the world are taking initiatives to design hydrid cars for all class segments. Danish designer Henrik Fisker created the Karma sports sedan using Irvine, Calif.-based Quantum Fuel Systems Technologies Worldwide, Inc.’s "Q-Drive" -- a fully electronic-powered system with zero-emissions, no compromise in power, and achieves a shocking 100 miles per gallon.

The Q-Drive is a hybrid propulsion system configured with a small gasoline engine used solely to power an electric generator that charges the lithium-ion battery pack. The advanced propulsion system can take the Karma from 0 to 60 mph in 5.8 seconds, reaching speeds in excess of 125 mph -- an exciting proposition for all of us gear heads.

In addition to supplying the Q-Drive, the Fisker Karma will incorporate Asola's solar roof, produced a German-based solar module manufacturer. The photovoltaic technology assists in energy management in the vehicle. Fisker expects to deliver 100 of the luxury hybrids by the end of 2009 with full production commencing in 2010.

Not only will you see hybrids on city streets but also in the backcountry. The self-described carbon-neutral ecotour Natural Habitat Adventures based in Boulder, Colo., unveiled the first hybrid safari vehicle.

The four-wheel-drive hybrid Toyota Highlander was retrofitted for optimal off-the-beaten-path wildlife viewing, the Hybrid Safari One includes such custom features as beefier suspension, a new roof with sliding canvas top and specialized flip-up photography windows.

Hybrid Safari One accommodates only four guests and is only projecting to get eye-brow raising 25 miles per gallon on safari -- more than double the mileage of a typical safari truck of the same size, the company said. 

Meanwhile, drivers must have some way of charging their cars. DONG Energy of Denmark and Palo Alto, Calif.-based Project Better Place will establish an electric car network in the Scandinavian nation with about 20,000 recharging stations using wind power. The Danish recharging stations will use power from DONG Energy's wind turbines. Most people will plug their cars in to charge overnight, at a time when wind turbines are spinning but demand for power is low.

Working together through the initiative, Better Place Denmark, the companies are planning to build the US$42.3 million project with a start date in 2011. Through a partnership between Project Better Place and Renault-Nissan Alliance, Renault will provide Better Place Denmark with the electric vehicles. Nissan, through its joint venture with NEC of Japan, created an advanced lithium-ion battery pack that meets the requirements of the electric vehicle and will be mass-produced.

Validating Green

Confirming what the green building community has supported all along, studies released by the New Buildings Institute (NBI) in White Salmon, Washington, and CoStar Group in Bethesda, Maryland, prove that energy use of new buildings certified under the U.S. Green Building Council’s LEED certification system are performing nearly 25 percent to 30 percent better than non-certified buildings, while Gold and Platinum LEED certified buildings show an average energy savings approaching 50 percent.

Likewise, Green Building in North America: Opportunities and Challenges, a report issued by the Commission for Environmental Cooperation (CEC) based in Montréal, reiterated that it is common for advanced green buildings to routinely reduce energy usage by up to 50 percent over conventional buildings, with the most efficient buildings performing more than 70 percent better than conventional properties. However, today green buildings account for only 2 percent of the new non-residential building market, less than half of 1 percent of the residential market in the United States, Canada, and less than that in Mexico.

CoStar’s study also proved that green buildings are sound financial investments. CoStar reported LEED buildings command rent premiums of $11.24 per square foot over non-LEED structures and have 3.8 percent higher occupancy. Rental rates in ENERGY STAR buildings command a $2.38 per square foot premium over comparable non-ENERGY STAR buildings and have 3.6 percent higher occupancy.

Institutional investors are being shown an eye-opening trend, ENERGY STAR buildings sell for an average of $61 per square foot more than their peers, while LEED buildings command a remarkable $171 more per square foot.

CoStar analyzed more than 1,300 LEED Certified and ENERGY STAR buildings representing about 351 million square feet in CoStar’s commercial property database of roughly 44 billion square feet, and assessed those buildings against nongreen properties with similar size, location, class, tenancy and year-built characteristics to generate the results.

Belleview Place Takes the Top Spot

The winning entry, “Belleview Place,” captivated the jury members of ULI's sixth annual Gerald D. Hines Student Urban Design Competition with its integration of the Dallas-based Cedars neighborhood to the downtown area, and its use of ground leases to retain public ownership of land allowing the change of uses in the future.

The winning team received the top prize of $50,000; the three finalist teams each received $10,000.

The winning development scheme:

University of Pennsylvania, School of Design: Belleview Place harnesses Cedars’ assets to bridge neighborhoods divided by physical, economic and cultural differences by connecting open space, transit, and institutional resources. This planned-unit development orients Cedars along mass transit and creates vibrant, safe, and walkable corridors using urban design guidelines centered on streets as an integral part of the public realm. Civic amenities and commercial installations along these corridors strengthen connections between area neighborhoods by providing equitable standards of social and physical infrastructure.

The entries from the three runner-ups:

Moving Beyond 'Drive until you Qualify'

In a joint effort by the Chicago-based Center for Neighborhood Technology (CNT) and Washington, D.C.-based the Brookings Institute, an interactive mapping web tool -- the Housing + Transportation Affordability Index -- was developed to measure the true affordability of housing by applying transportation costs.

The tool provides housing and transportation costs as a percentage of income on a neighborhood-level basis for 52 metropolitan areas using 2000 U.S. Census data and analysis of household transportation costs.

Urban planners, policy-makers, and transportation and housing advocates measure housing affordability as 30 percent or less of household income. However, housing affordability is not always what it seems.

As Scott Bernstein, president for CNT explained during a presentation today at the Brookings Institute, the old adage of "drive until you qualify" is really no longer an appropriate measure of housing affordability. As gas prices increase along with suburban sprawl, much of the population is paying as much for transportation as they are housing.

Build Green Or Build Obsolete

ULI Chairman Todd Mansfield opened the ULI’s Fourth Annual Developing and Investing Green conference with an observation that sustainable development has "entered the mainstream" of the land use industry, and is no longer viewed as a "passing fad." His comments set the theme for a highly informative opening day of the two-day event, held April 7-8 in Charlotte, N.C.

Speaker after speaker conveyed the benefits of development that is not just environmentally sustainable, but sustainable from an economic, social, and green standpoint. Keynoter speaker Peter Calthorpe, principal of Calthorpe and Associates (and 2006 laureate of the ULI JC Nichols Prize for Visionaries in Urban Development) explained to roughly 700 attendees, "Where you choose to develop is more important than what you develop."

Monday's Numbers and Newsworth News

Equity REITs are finally in positive territory for 2008!

Total Returns

	March 2008	YTD	Dividend Yield
Industrial	+8.78%	-4.79%	4.19%
Office	+1.90%	-4.04%	5.09%
Office/Industrial	+3.15%	-1.95%	7.72%
Shopping Centers	+11.07%	+4.94%	4.77%
Regional Malls	+9.22%	+2.16%	4.65%
Freestanding Retail	+5.55%	-6.42%	5.82%
Multifamily	+6.34%	+11.48%	4.91%
Manufactured Homes	+4.77%	+5.02%	4.55%
Diversified	+2.86%	+0.42%	4.88%
Hospitality	-2.04%	-6.79%	7.16%
Healthcare	+10.49%	+2.47%	5.52%
Self-Storage	+9.82%	+20.23%	3.17%
Specialty	+1.32%	-7.71%	4.37%
Equity REIT Index	+6.23%	-1.40%	4.99%

"What a difference a year makes"

	March 28, 2008	One Year Ago	Change
Prime Rate	5.25%	8.25%	-3.00%
Federal Funds Rate	2.25%	5.25%	-3.00%
3-Month LIBOR	2.67%	5.35%	-2.68%
3-month Treasury	1.35%	5.05%	-3.70%
10-year Treasury	3.33%	4.80%	-1.47%
30-year Treasury	3.50%	4.60%	-0.47%

Monday’s Numbers

Year-to-Date Equity Market Performance:

DJIA⁽¹⁾: -4.94%
S & P 500⁽²⁾: -6.67%
NASDAQ⁽³⁾: -10.61%
Russell 2000⁽⁴⁾: -6.83%
MSCI U.S. REIT⁽⁵⁾: -+6.85%

(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: 1.37%
6-month: 1.52%
2-Year: 1.82%
5-Year: 2.62%
10-Year: 3.47%

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; +405 basis points
AAA; 10 years; +349 basis points
AA; 10 years; +917 basis points
A; 10 years; +1167 basis points
BBB; 10 years; +1567 basis points
BBB-; 10 years; +1867 basis points
BB; 10 years; +2550 basis points
B; 10 years; +2750 basis points

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

Recent Real Estate Capital Markets Surveys

CohenFinancial Survey of Conduit Lenders:

5-Year term: 5-year Treasuries (2.51%) plus 550 basis points, or 8.00% “All-in”

10-Year term: 10-year Treasuries (3.44%) plus 527 basis points, or 8.71% “All-in”

CBRE Capital Markets “Market Watch” (March 12, 2009)

	Spread over Treasuries	Average Coupon Rate
Commercial Mortgage-Backed Securities	395 to 440 Basis Points	7.68%
Conventional Mortgage	250 to 310 Basis Points	6.30%
Government Sponsored Entities	240 to 250 Basis points	5.95%
Floating Rate Mortgage	290 to 365 Basis Points	6.14%
Based upon 10 year, 75% loan-to-value, commercial loan.

Indicated Spreads for Conventional Commercial Mortgages (as of March 13, 2008)

	Commercial Mortgage Rate Spreads for 5-10 Year Fixed-Rate Mortgages
Property Type	<65% LTV	>65% LTV
Multifamily	+200 - 220	+220 - 250
Regional Malls	+225	+250 - 350
Strip/Power Centers	+225	+250 - 350
Multi-Tenant Industrial	+225 - 300	+250 - 400
CBD Office	+225 - 275	+250 - 400
Suburban Office	+225 - 300	+250 - 400
Full-Service Hotel	+300 - 400	+350 - 500
Limited-Service Hotel	+300 - 400	+350 - 500
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

Responsible Property Investing Council Update

A quick progress report and an invitation:

We continue to make progress on the formation of a Responsible Property Investing Council. We have provided required information to the ULI's Council Counselors and expect to be ready to go by the Fall meeting in Miami in October.

Now the invitation: please join us in Dallas on Friday, May 9th from 7:30 to 9:00 am to share experiences and the best practices and discuss the organizational structure and programming for the RPI Councils first meeting in Miami.

Please e-mail either Philip Payne or Steve Blank with comments and questions.