The Ground Floor

"Sidewalks are as Sexy as Hybrids"

If you missed our "Industry Insider" webinar this morning, don't panic. We'll be featuring an archive of the event on our web site.

The event discusses findings of Growing Cooler: the Evidence on Urban Development and Climate Change, a publication from ULI, such as the connection between efficient land use, reducing vehicle miles traveled, and lowering greenhouse gas emissions.

You'll hear firsthand from co-authors Reid Ewing, Research Professor at the National Center for Smart Growth, University of Maryland; and Steve Winkelman, Manager of Adaptation and Transportation at the Center for Clean Air Policy. Their online presentations,show that curbing auto dependency through walkable development is an effective way to mitigate climate change.

Institutional Investing in Infrastructure

Are you an investor in infrastructure or just interested in the subject? If so, Institutional Real Estate, Inc., (IREI) a well regarded source of information and analysis of what institutional investors are investing in, has recently started to cover the subject through a new publication, "Institutional Investing In Infrastructure." 

The initial issue included information about a wide array of subjects including defining investment strategies, global infrastructure investment, investment news including offerings, research, and mergers and acquisitions, and a market focus on Western Europe.

Hermes' View on Responsibile Proeprty Investment

After distributing Kennedy Associates Real Estate Counsel's Responsible Property Investing Agenda, a number of you requested that we distribute additional examples of how real estate investment managers have implemented Responsible Property Investment strategies.

Hermes, a U.K. based institutional investment manager, provides significant insights regarding how it implements its RPI strategies on its web site .

Once on the site, click on "Responsible Investment", then click on "Real Estate". Hermes makes available a number of publications (in PDF format) including "Responsible Property Investment - Defining the Challenge" and "Responsible Property Investment - Annual report 2007." We think you will find these insightful.

Have something you would like to share with readers interested in Responsible Property Investment. Send it to blank@uli.org and we would be pleased to distribute it.

REMINDER: We look forward to seeing you at our next meeting on May 9 at 7:30 am at the ULI Spring Council Forum in Dallas. The meeting is being held at the Hyatt Regency, Pryor A (Atrium Level).

Philip Payne, Babcock & Brown Residential

Roger Platt, The Real Estate Roundtable

Kirk Sykes, Urban Strategy America Fund

Geoffrey Dohrmann, Institutional Real Estate

Ron Robert, Kennedy Associates

Touring the ICC

This post was written by The Ground Floor by Brandon Sedloff of the Gerson Lehrman Group (Asia).

With the sun setting on another Hong Kong day, a group of 56 participants stepped aboard 2 oversized orange construction lifts en route to the 77th story of the International Commerce Center (ICC). An iconic West Kowloon property, the ICC is being developed by Sung Hung Kai and when completed will stand at 118 floors and 490 meters (1,608 ft). It will be the tallest building in Hong Kong and the third tallest in the world.

Hosted by N. Asia's Young Leaders Group, this property tour was the first in a series of "first look" events, which consist of a site visit followed by a cocktail reception. This format gives participants the opportunity to learn about the design and construction concepts, "walk" the property and see construction's progress, as well as network with other young leaders.

As a chair of the Young Leaders Group for N. Asia, I was especially excited to witness the enthusiasm among Hong Kong's Young Real Estate professional. I look forward to watching ULI and the Young Leaders Group expand throughout Asia.

Real Estate Capital Markets Update

We have posted the next edition of ULI's Real Estate Capital Markets Update to the Web site. The PDF and HTML links are featured below: PDF | HTML

Maybe the Government Should Build the Cars

Is transportation like education, a communal service that works best through heavy general funding that pays off down the road in a community's overall prosperity, or is it best delivered by targeting users, especially road users through congestion pricing to reduce demand and increase revenues?

That question was posed by Alex Marshall, in a Governing magazine piece "King of the Road," April 2008. He blasts conservative- and libertarian-oriented think tanks for embracing roads as a solution to traffic congestion, "an expression of the free market and American individualism, and a rail line as an example of government meddling and creeping socialism." Marshall even catches Robert Poole, Reason Foundation's founder and former president, in a philosophical inconsistency.

Asked to square Reason Foundation's support for roads with its general dislike of government involvement, Poole replied, "I'd never thought about it that way." He insists that Reason doesn't want to eliminate government from transportation. "We aren't going to have competing companies putting roads in where they like, and letting the chips fall where they may. We aren't anarchists."

This is a surprising lapse from one trying to offer a different view, the premise, "that transportation infrastructure would work better if it were market-driven, that infrastructure should be run in a business-like manner with users paying full cost."

Playing with Dirt

Tom Ward, a principal at Ward + Blake Architects in Jackson, Wyoming, is taking sustainable building a bit literally; he’s built a structure out of plain old dirt. Holding the patent to EarthWall, a seismically-stable rammed earth construction process for sustainable building.

In 1999, Ward recognized an opportunity during news coverage of the aftermath of an earthquake in Turkey, where some of the homes -- those built from the region's indigenous rammed earth technique -- sustained less damage than the structures built with more modern methods. Ward eventually developed an innovative method of stabilizing the earthen walls with reinforced steel rods in a "rational structural post tensioning system" -- that effectively creates earthquake resistance in rammed earth structures.

"Fifty percent of the world's population lives in earthen houses, many of them in seismically active parts of the world," says Ward.  "This strong, low-tech method could allow for the rebuilding of structures in areas ravaged by earthquakes -- or even for replacing existing structures to prevent future damage-without resorting to expensive, culturally foreign building systems."

Tests by the University of Wyoming's Civil Engineering Department confirmed that Ward’s technique worked as the first seismically stable rammed earth wall. In 2006, he received a patent on the eco-friendly building system that could help people in Third World countries construct earthquake-resistant homes. His innovative new-yet-old building technology won Ward + Blake a Newton Foundation research grant.

"The aspect that is most exciting to me," Ward adds, "is the potential for the worldwide application of EarthWall.  Perhaps if the process is one day adopted in Third World countries, it will save not only homes from collapsing -- but lives as well."

Using the EarthWall process, Ward + Blake designed a 3000-square-foot residence, called the TK Pad Residence, which combines the earthen process with natural materials, applying specific roof design, addressing water runoff issues, and the house's placement on the land.

The forms of the house are generated by the EarthWall rammed earth walls that utilize a unique system of post-tensioning steel that was patented by the architects. The base material for these walls is native soil and crusher fines cohesively joined with Portland cement. The walls are 18 inches thick, and provide passive thermal resistance as well as acoustic properties, tempering the house from cold as well as pervasive highway noise.

The envelope of the house is simple and natural. The concrete has no color while the earthen walls are unadorned, with the natural stratification as the only embellishment. Exterior and interior wood are native species, treated with water borne sealers only. Concrete interior floors and exterior patios are natural color, and control joints are strips of slate.

Rail Transit Not A Greenhouse Saver, Cato Institute Says

A new Cato Institute study reports that in the last 15 years, cities across the United States has spent $100 billion on new rail transit projects with claims that rail will reduce greenhouse gas emissions, but these projects fail to meet their promised reductions, the study says.

Randal O'Toole, senior fellow at the Cato Institute and author of "Does Rail Transit Save Energy or Reduce Greenhouse Emissions?" demonstrates that rail transit is ineffective at reducing carbon dioxide emissions. "While most rail transit uses less energy than buses, rail transit does not operate in a vacuum: transit agencies supplement it with extensive feeder bus operations," O'Toole analyzes. "Those feeder buses tend to have low ridership, so they have high energy costs and greenhouse gas emissions per passenger mile. The result is that, when new transit lines open, the system as a whole can end up consuming more energy, per passenger mile, than it did before."

"Only a handful of rail systems are more environmentally friendly than a Toyota Prius, and most use more energy per passenger mile than the average automobile," O'Toole adds. He suggests technical alternatives that reduce energy use and Co2 outputs than rail transit, at a far lower cost. Such alternatives include the following: powering buses with hybrid-electric motors, biofuels, and -- where it comes from non-fossil fuel sources -- electricity; concentrating bus service on heavily used routes and using smaller buses during offpeak periods and in areas with low demand for transit service; building new roads, using variable toll systems, and coordinating traffic signals to relieve the highway congestion that wastes nearly 3 billion gallons of fuel each year; encouraging people to purchase more fuel efficient cars. O’Toole notes that getting 1 percent of commuters to switch to hybrid-electric cars will cost less and do more to save energy than getting 1 percent to switch to public transit.

"There may be places in the world where rail transit works," O'Toole says. "There may be reasons to build it somewhere in the United States. But saving energy and reducing greenhouse emissions are not among those reasons."

Monday's Numbers and Noteworthy News

It was sort of a dull week…spreads remained wide, activity remained muted…nobody closed up shop or stopped redemptions. The only news was the non-news that Goldman Sachs, Morgan Stanley, and Lehman Brothers still had billions of Level 3 -- hard to value assets on their balance sheets.

"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	3.50%	4.60%	-1.10%
30-year Treasury	4.33%	4.80%	-0.47%

Monday’s Numbers

Year-to-Date Equity Market Performance:

DJIA⁽¹⁾: -7.80%
S & P 500⁽²⁾: -9.23%
NASDAQ⁽³⁾: -10.17%
Russell 2000⁽⁴⁾: -10.17%
MSCI U.S. REIT⁽⁵⁾: 2.46%

(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: 1.19%
6-month: 1.39%
2-Year: 1.74%
5-Year: 2.57%
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; +401 basis points
AAA; 10 years; +354 basis points
AA; 10 years; +890 basis points
A; 10 years; +1165 basis points
BBB; 10 years; +1565 basis points
BBB-; 10 years; +1865 basis points
BB; 10 years; +2250 basis points
B; 10 years; +2550 basis points

Indicated Spreads for Conventional Commercial Mortgages (as of February 12, 2008)

	Commercial Mortgage Rate Spreads for 5-10 Year Fixed-Rate Mortgages
Property Type	<65% LTV	>65% LTV
Multifamily	+225 - 250	+240 - 275
Regional Malls	+225	+250 - 350
Strip/Power Centers	+225 - 250	+250 - 450
Multi-Tenant Industrial	+250 - 300	+250 - 300
CBD Office	+250 - 300	+350 - 500
Suburban Office	+250 - 300	+350 - 500
Full-Service Hotel	+300 - 400	+350 - 500
Limited-Service Hotel	+300 - 400	+350 - 500
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

How Kennedy Associates Does It

Kennedy Associates Real Estate Counsel, LP has forged a leadership position in the area of Responsible Property Investing as evidenced by its track record in the areas of "sustainable development/re-development, property operations, and adherence to economic fairness and worker health standards". A visit to the firm's web site will prove both instructive and enlightening

Bob Ratliffe, executive vice president of Kennedy Associates, and his colleagues at the firm have graciously agreed to allow us to share the firm's Responsible Property Investing "Agenda" with interested parties. If you would like a copy, send an e-mail to blank@uli.org with the "Kennedy" in the subject line.

We look forward to seeing many of you in Dallas at our meeting on Friday, May 9, from 7:30 to 9:00 am. The meeting will be held in the Pryor A room, Atrium Level, Hyatt Regency Hotel.

Regards, Steve Blank

Philip Payne, Babcock & Brown Residential

Roger Platt, The Real Estate Roundtable

Kirk Sykes, New Boston Fund

Geoffrey Dohrmann, Institutional Real Estate, Inc.

Ronald Roberts, Kennedy Associates Real Estate Counsel, LP