The Ground Floor

Learning from Los Angeles

Editor's note: This post was written by Ed McMahon, ULI Senior Resident Fellow for Environmental Policy. He is a panelist at ULI's Developing Green conference underway this week in Los Angeles. This event is focusing on green issues related to the Western and Southwestern regions of the U.S. ULI is hosting a second Developing Green conference June 23 in Washington, D.C., that will focus on green issues related to the Northeast, Mid-Atlantic, and South.  

While driving from the Los Angeles airport to the Beverly Hilton yesterday, it occurred to me that Los Angeles was the perfect city to host ULI's Fifth Annual Developing Green Conference. Los Angeles is of course the world capital of America's car culture, but it is also in the state that has become the national leader in developing innovative solutions to the inter-related problems of sprawl, green house gas emissions and energy consumption.

The Developing Green conference began with presentations by two California public officals: Mary Nichols, Chairman of the California Air Resources Board and Darrel Steinberg, President protempore of the California Senate. Both speakers focused on California's precedent-setting Global Warming Solutions Act (AB 32).  This act requires a 25 percent reduction in CO2 emissions from 1990 levels by 2020. To achieve this goal California is pursuing three strategies: 1) Better (more fuel efficient) cars; 2) Better (less carbon intensive) fuel; and 3) Better (more walkable and transit friendly) development. The last strategy is of course the one with the greatest relevance to the real estate industry.

For the first time in American history, California is requiring all local goverments to coordinate their transportation and land use stratgies to reduce VMT (vehicle miles travaled). This idea will eventually ripple through the entire country setting the stage for a fundamental shift toward infill development, transit-oriented development and mixed-use development, as well as walkable suburban development. Sometime soon I can see a new book entitled Learning from Los Angeles.

Monday's Numbers and Noteworthy News

Newsworthy News

Signs of the Times? For as many who say that the capital markets crises is easing or ending or whatever, there is daily evidence that things are not quite that rosy as shoe after shoe continues to drop.  A number of this week’s shoes included the following:

Real Estate Investment Trusts Rebound But Good!
The patient proved it is both alive and kicking, with the equity REIT index rising 31.02 percent in the month of April.

	Total Returns		Dividend Yield
	April	Year-to-Date
Industrial	+35.26%	-21.40%	8.98%
Office	+32.46%	-11.33%	6.94%
Office/Industrial	+38.26%	+2.36%	8.47%
Shopping Centers	+39.57%	-18.52%	8.92%
Regional Malls	+59.06%	+0.35%	3.13%
Free Standing Retail	+15.98%	+1.40%	8.22%
Multifamily	+23.14%	-14.56%	8.93%
Manufactured Homes	+8.72%	+6.10%	5.62%
Diversified	+39.69%	-18.58%	3.95%
Hospitality	+67.52%	+3.52%	1.55%
Healthcare	+18.27%	-14.64%	8.08%
Self-Storage	+21.93%	-17.37%	4.35%
Speciality	+20.32	+7.12%	5.23%
Equity REIT Index	+31.02%	-10.73%	6.65%
Source: FTSE Group, National Association of Real Estate Investment Trust

Monday’s Numbers

Year-to-Date Equity Market Performance (as of May 8, 2009):

DJIA⁽¹⁾: -2.30%
S & P 500⁽²⁾: -2.88%
NASDAQ⁽³⁾: +10.27%
Russell 2000⁽⁴⁾: +2.48%
MSCI U.S. REIT⁽⁵⁾: -9.48%

(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 May 8, 2009)

3-month: 0.17%
6-month: 0.30%
2-Year: 0.98%
5-Year: 2.14%
10-Year: 3.92%

Pricing of Various Tranches of Commercial Mortgage-Backed Securities

Due to the “dormant” nature of the securitized commercial mortgage and commercial mortgage-backed securities markets, we have decided to “suspend” temporarily reporting pricing of various tranches of CMBS.

Indicated Spreads for Conventional Fixed and Floating Commercial Mortgages (as of April 30, 2009)

Beginning with this week’s update, we will include rates for floating-rate, 3 to 5 year mortgages.

Property Type	Mid-Point of Commercial Mortgage Rate Spreads for 5-10 Year Fixed-Rate Mortgages
	2/4/09	2/23/09	3/12/09	4/2/09	4/30/09
Multifamily	+400	+388	+388	+350	+350
Regional Malls	+513	+513	+513	+513	+513
Strip/Power Centers	+525	+575	+575	+575	+575
Multi-Tenant Industrial	+513	+625	+513	+500	+475
CBD Office	+500	+550	+500	+500	+513
Suburban Office	+500	+550	+500	+525	+525
Full-Service Hotel	+575	+600	+600	+600	+600
Limited-Service Hotel	+550	+650	+650	+600	+600
5-Treasury	1.74%	1.79%	1.87%	1.76%	1.89%
10-Year Treasury	2.94%	2.95%	2.90%	2.69%	3.10%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.

Property Type	Mid-Point of Floating Rate Commercial Mortgage Rate Spreads for 3-5 Year Fixed-Rate Mortgages
	2/4/09	2/23/09	3/12/09	4/2/09	4/30/09
Multifamily	--	--	--	+475	+475
Regional Malls	--	--	--	+550	+550
Strip/Power Centers	--	--	--	+575	+575
Multi-Tenant Industrial	--	--	--	+500	+500
CBD Office	--	--	--	+550	+525
Suburban Office	--	--	--	+600	+600
Full-Service Hotel	--	--	--	+650	+675
Limited-Service Hotel	--	--	--	+710	+725
1-Month LIBOR	--	--	--	0.50%	0.43%
3-Month LIBOR	--	--	--	1.19%	1.04%
Source: Cushman & Wakefield Sonnenblick-Goldman, LLC.