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US & Intl Real Estate investments 2008
 

US & Intl Real Estate investments 2008

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Investment Exposure and trends reviewed 2008

Investment Exposure and trends reviewed 2008

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    US & Intl Real Estate investments 2008 US & Intl Real Estate investments 2008 Presentation Transcript

    • ULI Fall Meeting – Miami Beach, FL The Credit Crunch Get Over It October 2008 Jason Spicer Managing Director Page 0
    • “Too Much” Building in the ’80s…Not a Concern Today US New Construction Completions by Property Type 10.0% Retail Office Industrial Apartment 9.0% 8.0% As % of Inventory 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 Page 1 Source: REIS, DTZ
    • Tech Firms Spurred “Too Much” Office Absorption in the ’90s…Not This Time Office Absorption vs. Office Employment Growth 5% 4% 3% 2% 1% 0% 1995 1998 2001 2004 2007 -1% -2% -3% -4% Office Employment % Growth Absorption As % of Inventory Page 2 Source: REIS, DTZ
    • “Too Much” Commercial Leverage in the ‘00s? Looks that Way!... US Commercial Mortgages Outstanding $2,500 19% 17% $2,000 15% $1,500 13% $1,000 11% 9% $500 7% $0 5% 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 Source: US Federal Reserve, BEA, DTZ Total in $ Blns ( L ) As % of GDP ( R ) Page 3
    • …A Uniquely American Problem… Asia Pacific $2.9 trillion US $4.1 trillion Europe excluding UK  $3.87 trillion UK $1.35 trillion Page 4 Source: DTZ
    • …Thanks, America: REITs, Listed Property Shares Drop In Global Lockstep… Index (Jan 2006 = 100) 160 150 140 Credit  130 Crunch 120 110 100 90 80 70 60 Oct-06 Oct-07 Mar-06 Mar-07 Mar-08 Jan-06 Jun-06 Jan-07 Jun-07 Jan-08 Jun-08 Jul-06 Jul-07 Jul-08 May-06 Nov-06 Dec-06 May-07 Nov-07 Dec-07 May-08 Sep-06 Sep-07 Apr-06 Aug-06 Apr-07 Aug-07 Apr-08 Feb-06 Feb-07 Feb-08 EU - European Public Real estate Association INDEX US - Bloomberg US REIT Australian S&P/ASX 200 Property Trusts Index UK - FTSE ASX Real Estate Japan - TSEREIT Index Source: Bloomberg, DTZ Research Page 5
    • $50,000 $100,000 $150,000 $200,000 $250,000 $0 2001.1 Source: DTZ ,RCA 2001.2 2001.3 2001.4 2002.1 Asia 2002.2 2002.3 2002.4 2003.1 Europe 2003.2 2003.3 2003.4 US 2004.1 2004.2 2004.3 2004.4 2005.1 2005.2 2005.3 Global Investment/Sales Transaction Activity, $ Mlns 2005.4 2006.1 …As Have Investment Sales Transactions… 2006.2 2006.3 2006.4 2007.1 2007.2 2007.3 2007.4 2008.1 2008.2 Page 6
    • …Though Volume Only Now Beginning to Fall in Asia.. Property Investment Transaction Volume, 1H08 vs. 1H07 Beijing Singapore Moscow Hong Kong Tokyo New York MSA Greater London Warsaw Region Paris/Île-de-France Los Angeles MSA Washington DC MSA Greater Berlin Prague -100.00% -50.00% 0.00% 50.00% 100.00% 150.00% Source: DTZc Page 7
    • US Cap Rates Have Moved Up 50-75 bps, Equating to a 10-15% Value Decline… US Cap Rates by Property Type 10.5% 10.0% Apt. Office (CBD) Retail (Open-Air Ctrs) 9.5% 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 01Q1 01Q2 01Q3 01Q4 02Q1 02Q2 02Q3 02Q4 03Q1 03Q2 03Q3 03Q4 04Q1 04Q2 04Q3 04Q4 05Q1 05Q2 05Q3 05Q4 06Q1 06Q2 06Q3 06Q4 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 Page 8 Source: DTZ, RCA
    • …Similar to Pricing Corrections in Europe, Asia… Representative European, Asian Office Markets, Current Office Yields and Increase Since Peak 9.0 175 Yield Increase in BPs Increase Office Yield 150 2Q08 Office Yield 8.0 7.0 125 100 6.0 75 5.0 50 4.0 25 3.0 - ) e) E) n ue m o g ) ity BD rli sl ijin ac da (W ag (C Be O Be (C Pl er Pr on on st s ris fle nd Am nd Pa af Lo Lo (R e or ap ng Si Page 9 Source: DTZ
    • 2008-2010 Construction Completions As % of Inventory 0% 5% 10% 15% 20% 25% Moscow Beijing Bangalore Hong Kong Barcelona 115% 50% 28% London (City) Paris (IDF) Houston Singapore Atlanta Chicago Brussels Madrid Amsterdam Dallas Vienna Tokyo (5-ku) Frankfurt Construction/Inventory London (WE) Munich Hamburg San Major Global Office Markets, Construction vs. Vacancy, 2Q08 Boston Los Angeles The US Can Spell “Schadenfreude”, Too… Milan Rome …While Construction Overseas Is Far Worse: Stockholm Avail/Vac Rate New York Berlin Source: DTZ 0% 5% 10% 15% 20% 25% Page 10 Current Availability or Vacancy Rate
    • “Please Look Closely” Jane Jacobs, 1916 - 2006 Page 11
    • A Very Large Number $1.2 Trillion 8x Annual US Federal Govt Budget Deficit in 2007 6x All (inflation-adjusted) losses from S&L crisis, 1986 - 92 5x Interest Payments on US Govt Debt, 2007 4x Value of all real estate captured by the NCREIF Index 3x Value of Manhattan Commercial Property Stock, 2008 2x All Bank Write-Downs Since 2006 (Through Sept. 2008) 2x Direct Costs of War in Iraq (2002 – present) 1x All Sub-prime Mortgages Outstanding Pre-Crunch ???????????? Page 12
    • The Cost of Our Crude Oil Imports Since 9-11 Crude Oil Net Exports (Imports) By Country in Total $ Blns, Since 2002 $1,750 $1,000 $ Blns $250 ($500) ($1,250) Russia + Caspian Norway Venezuela Canada EU Remainder China Japan Eurozone 15 Persian Gulf States African OPEC Four Mexico USA India Korea States Source: JODI, DTZ Page 13
    • A Coincidence? 1.2 Trillion Remaining Barrels of Proven Oil Reserves Worldwide Page 14
    • …. Crude Oil Reserves May Have A Limited Horizon… Time Bomb? Oil Reserves and Production By Year , 2007 - Nations With Largest Reserves 4.5 Russian Federation 4 Current Production Per Year, Blns Saudi Arabia 3.5 3 Barrels 2.5 US Canada + 2 OIL SANDS Iran China 1.5 Canada Mexico United Arab Emirates Nigeria 1 Libya Kuwait Algeria Iraq Norway 0.5 Brazil Venezuela Angola Qatar Kazakhstan 0 0 20 40 60 80 100 120 140 160 180 Years of Reserves Left At Current Production Rate Source: JODI, BP Page 15
    • And While We Are Shifting Closer To Home For Oil… US Oil and Petroleum Products Imports: Persian Gulf Countries vs. Canada, Mexico 2,750 Persian Gulf Canada Mexico 2,550 2,350 Thousands of Barrels Per Day 2,150 1,950 1,750 1,550 1,350 1,150 950 750 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: EIA Page 16
    • …We May Not Be Able To Look South of the Border For Help Much Longer… October 22, 2008 “Mexico's oil output for September was 2.72 million barrels a day, the lowest monthly level since 1995, Pemex said this week. For the year's first nine months, Mexico's output fell 10% from the year-earlier period and exports plunged 18%. Mexico's ability to stem the slide in oil production carries important consequences for its financial stability, the U.S. and the global oil market. Mexico has been one of the world's top 10 producers since the late 1970s, and has long been one of the top three sources of foreign oil for the U.S. Its decline will aggravate the U.S.'s reliance on the Middle East for oil. Mexico also relies on oil export money for nearly 40% of government spending. Like many world oil producers, Mexico has aging oil fields. The country is believed to hold vast untapped fields in the deep waters of the Gulf of Mexico, but Pemex lacks the technology to access them. At current rates of decline, Mexico could become a net oil importer within four or five years.” (emphasis added) Page 17
    • ….Asian Trading Partners Rely Heavily On Middle East Oil… % of Net Oil Imports Coming from Persian Gulf/Middle East, 2006 or 2007 (where available) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% China Japan US India Korea Page 18
    • ….Which They Use To Make Things To Sell to the USA… Balance of Trade (Net Exports), 2007 South Korea +33b ( #2) +13b (#2) +48b (#1) Japan +83b (#1) USA China +32b (#3) +256b Sources: National Trade Ministries, CIA, World Bank (#1) Page 19
    • …Hence the Geography of Sovereign Wealth Funds: Resource-Rich Nations and Asian Savers Sovereign Wealth Funds and National Savings Funds, $ Blns UAE Singapore Norway Saudi Arabia Kuwait China Russia Canada Australia Libya Qatar Alaska Korea $0 $200 $400 $600 $800 $1,000 Page 20 Source: WSJ, Forbes, Morgan Stanley, DTZ
    • .. Both Groups Buying Up Pieces of Western Banks… SWF Corporate Equity/Debt Infusions To Banks, Last 12-18 Months: Country Target Singapore UBS, Standard Chartered, Merrill Lynch, Barclays Abu Dhabi Citigroup China Morgan Stanley, Barclays Oman UBS Dubai HSBC, Deutsche Bank Kuwait Citigroup, Merrill Lynch Qatar CSFB, Barclays Libya Fortis, Unicredit Source: DTZ, compiled from publicly available information Page 21
    • To Date, Asians Have Been Strongest Holders of US Debt Obligations, In All Forms… % US Securities Held by Foreigners, 1994 - 2007 60 2007 Foreign Securities Ownership Excl. 50 % of Tax $ Mils Total Havens Asian quot;Saversquot; 2,690,629 28% 34% Tax Havens 1,953,032 20% 40 UK 920,630 9% 12% Canada 475,196 5% 6% Belgium 396,431 4% 5% % 30 Ireland 342,028 4% 4% Switzerland 328,982 3% 4% Netherlands 321,378 3% 4% 20 Persian Gulf States 308,394 3% 4% Germany 265,770 3% 3% France 221,164 2% 3% Australia 165,387 2% 2% 10 Russia 147,699 2% 2% Group Subtotal 8,536,720 87% 84% Total 9,771,725 100% 100% 0 1994 2000 2002 2003 2004 2005 2006 2007 Equities Dec. Treasuries JuneUS Govt Agency (MBS) JuneCorporate + Other Debt Mar. June June June June Source: Treasury, Federal Reserve Page 22
    • …And Are The New Class of Real Estate Investors… 10 Nations to Watch in Real Estate 3. Norway – 5. China – Property Adviser CIC Established 2007, Selected 2008, To RE Investment Manager Invest 2009? Search 2008? 6. Russia – FGF Established 2007, To 7. Canada – CPPIB, Invest 2009? AIMCo 9. Qatar - 10. S. Korea – QIA KIC, 4. Kuwait – New RE St. Martin’s (FGF), GRF 1. UAE – Allocations ADIA 2008 8. Australia – FFMA, 2. Singapore – Supers GIC, Temasek Page 23
    • ….As They Buy Into Storied Western Developers, Investors…. SWF Corporate Equity/Debt Infusions, Last 12-18 Months: Carlyle 7.5% Related Companies 20% (Debt) British Land 3% Kor Hotel Group (LA) 50% Apollo 9% Blackstone 10% Chelsfield (London) 20% . Source: DTZ, compiled from publicly available information Page 24
    • ….Not To Mention The US Skyline…. Net Buyers/Sellers of US Property in 1H2008 Offshore $3,878 Opportunity Fund $2,133 Institution $884 Corporate/User -$900 Private -$2,763 REIT/REOC -$3,504 . 00 00 00 00 00 $0 0 0 0 0 00 00 00 00 ,0 ,0 ,0 ,0 ,0 4, 3, 2, 1, $2 $1 $3 $4 $5 -$ -$ -$ -$ Millions Source: DTZ, RCA Page 25
    • …They’re HEERRREEEE…Do The Nationalities Look Familiar At This Point? But Don’t Worry… Top 2008 US Investment/Sales, An International Affair GM 1301 Chrysler One Miami 527 120 Park Bldg Sixth Bldg Sansome Center Madison $2 B $1.45 B $900 M $525 M $370 M $265 M $225 M Middle German Middle Middle Korean Japanese Japanese Eastern Eastern Eastern Source: RCA, DTZ Page 26
    • …Despite The Temptations for Conspiracy Theorists… 2008 Oil SWF US Fleetwide Miles Per Gallon by Marketing Group, MY 2008 Acquisitions 30 28 26 24 22 20 18 16 14 12 10 Toyota Honda HK Nissan BMW VW AVG. GM Ford Chrysler Source: EPA, DTZ, Fox Mulder & Dana Scully Page 27
    • We Aren’t Alone - Sovereign Wealth Funds, Key 2008 Acquisitions in London Chelsea Willis Bldg Kensington London Metropole Barracks Lime Street High St Bridge Tower Whitehall St London London London London London $1.9 Bil $800 M $640 M $300 M $260 M Middle Middle Middle Middle Middle Eastern Eastern Eastern Eastern Eastern Source: DTZ Page 28
    • We Aren’t Alone - Sovereign Wealth Funds, Key 2008 Acquisitions in Europe and Asia Roma Est Iso Omena Menara YNH The Westin Shopping Ctr ”Big Apple” Mall Kuala Tokyo Rome Helsinki Lampur $715 M $630 M $535 M $290 M Singapore Singapore Singapore Middle 50% 40% Eastern Source: DTZ Page 29
    • Oil Nations: Why Build These Vast Cities?... King Abdullah Economic City, Saudi Arabia City of Silk, Kuwait $27 billion, Projected Population 1.5 million $85 billion, Projected Population: 750,000 Dubailand, Dubai UAE $65 billion, Projected “Population”: 2.5 million Page 30
    • …Especially Zero-Carbon and Car-Free Ones? Masdar, Abu Dhabi UAE, $22 billion Projected Population: 30,000 Page 31
    • …To Employ Young Locals For A Post-Oil Future! Arabian Peninsula vs quot;Developedquot; World (G8+), Population by Age Cohort - 2010 Projection 0 to 14 15 to 34 Age Cohort 35 to 54 55 to 74 75+ 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% % of Pop Source: McKinsey, Global Insight, BP, IIF Arabia Developed Page 32
    • …Asians Look Into a Childless Future… North Asia (China, Japan, Korea) Fertility Rate - Children Per Woman 1950-2050 7 6 China Japan Republic of Korea 5 4 Replacement 3 Level = 2.1 2 1 1950-1955 1955-1960 1960-1965 1965-1970 1970-1975 1975-1980 1980-1985 1985-1990 1990-1995 1995-2000 2000-2005 2005-2010 2010-2015 2015-2020 2020-2025 2025-2030 2030-2035 2035-2040 2040-2045 2045-2050 Page 33 Source: UN Population Division
    • …Exacerbated By A Lack of Female Children… North Asia (China, Japan, Korea) Net Reproduction Rate Daughters Per Woman 1950-2050 3 China Japan Republic of Korea 2.5 2 1.5 Replacement Level = 1 1 0.5 0 1950-1955 1955-1960 1960-1965 1965-1970 1970-1975 1975-1980 1980-1985 1985-1990 1990-1995 1995-2000 2000-2005 2005-2010 2010-2015 2015-2020 2020-2025 2025-2030 2030-2035 2035-2040 2040-2045 2045-2050 Source: UN Population Division Page 34
    • …Which Coupled With Limited Migration… North Asia (China, Japan, Korea) Net Migration Rate, 1950-2050 6 US Level = +/- 4 5 Rate Per 1,000 Residents 4 3 2 1 0 -1 -2 1950-1955 1955-1960 1960-1965 1965-1970 1970-1975 1975-1980 1980-1985 1985-1990 1990-1995 1995-2000 2000-2005 2005-2010 2010-2015 2015-2020 2020-2025 2025-2030 2030-2035 2035-2040 2040-2045 2045-2050 China Net migration rate Japan Net migration rate Korea Net migration rate Source: UN Population Division Page 35
    • …Makes for Shrinking and Ageing Societies… North Asia (China, Japan, Korea) Median Age vs. Population Growth Rate 1950-2050 60 3.5 3 Population Growth Rate 2.5 Median Age (Years) 45 2 1.5 (%) 30 1 0.5 0 15 -0.5 -1 0 -1.5 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 China Population growth rate Japan Population growth rate Korea Population growth rate China Median age Japan Median age Korea Median age Page 36 Source: UN Population Division
    • …Which They Must Invest For… 10 Largest Non-US Pension Funds “Big Japanese fund may shift assets Total assets $ Move would create opportunities for absolute- Fund Country Mlns return and active managers” Government Pension Inv. Japan $1,072,429 June 9, 2008 Government Pension Norway $370,985 ABP Netherlands $314,969 Signs that Japanese regulators are seeking ways to National Pension Korea $231,966 boost returns of the country's huge public pension fund could eventually open new opportunities for foreign Local Government Officials Japan $144,447 asset managers in areas such as absolute return Postal Savings Fund Taiwan $129,397 and alternatives. PFZW Netherlands $128,615 Canada Pension Plan Canada $123,903 Executives with foreign and domestic managers alike Pension Fund Association Japan $112,698 said recommendations in May by Japan's Council on Economic and Fiscal Policy for managing the ¥150 Ontario Teachers Canada $110,600 trillion ($1.4 trillion) Government Pension Investment Fund, Tokyo, are early steps in a process that could see more of that fund's assets moved from low-yielding Japanese government bonds to actively managed and absolute-return strategies. Source: Watson Wyatt, P&I Online Page 37
    • Haven’t We Gone Through This Before? Middle Easterners? Germans Russians Japanese Chinese? Asians? The British Are Coming! Page 38
    • …Drop in Oil Prices Doesn’t Change Story That Much… Petrodollar Foreign Assets, $ Trillions, Oil Prices at: $30 pb $50 pb $70 pb $100 pb $14 $12 $10 $8 $6 $4 $2 $0 2007 2008 2009 2010 2011 2012 2013 Source: McKinsey, Global Insight, BP, IIF Page 39
    • …So If You Think This is Merely A Repeat of the 70s… US Oil Consumption and Prices, 1965 - 2007 $100 Consumption Prices Per Barrel, 2007 dollars 21,000 $90 Thousands of Barrels Per Day $80 19,000 $70 Price per Barrel 17,000 $60 $50 15,000 $40 $30 13,000 $20 11,000 $10 1965 1970 1975 1980 1985 1990 1995 2000 2005 Source: EIA, BP, JODI Page 40
    • …Think Again 52% Source: EIA, BP, JODI Page 41
    • …Something *IS* Different “This Time”… Global Oil Consumption: US, China and India, 1965 - 2007 12,000 38% India Daily Consumption 36% Thousands of Barrels Per Day 10,000 China Daily Consumption US % of Total Consumption US Share of Global Oil Consumption 34% 8,000 32% 6,000 30% 4,000 28% 2,000 26% - 24% 1965 1970 1975 1980 1985 1990 1995 2000 2005 Source: EIA, BP, JODI Page 42
    • …All That Oil Is Imported… Net Oil Imports, Ths. Barrels/Day 1990 - 2006 13,000 11,500 China & India Japan US 10,000 8,500 7,000 5,500 4,000 2,500 1,000 -500 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 Source: EIA, BP, JODI Page 43
    • And It Could Get Much Worse…. Page 44
    • A Brief Review of History… 1st Century (AD/CE) - Global GDP PPP Basis Roman Empire 22% China 26% Rest of Asia 8% Africa 9% India 33% All Others Source: Maddison 2% Source: DTZ Page 45
    • Notice Anything Yet? Year 1000 - Global GDP Rest of PPP Basis Poland Asia Africa 11% 7% 12% China All Others 22% 8% India Western 28% Europe Source: Maddison Source: DTZ Japan 9% Page 46 3%
    • A Trend? Year 1500 - Global GDP PPP Basis Poland Rest of 7% Asia 8% All Others 19% Russia 3% China Britain 26% 1% quot;USAquot; 0.3% France 4% India 26% Japan Germany 3% 3% Source: Maddison Page 47
    • See it yet? Year 1820 - Global GDP PPP Basis Rest of Russian Asia Empire Africa 6% 6% 5% Britain 6% China 40% USA 2% France 6.6% India Germany 19% Japan 5% 4% Source: Maddison Page 48
    • UK, US Dominance A Blip In History Year 1913 - Global GDP Year 1950 - Global GDP PPP Basis PPP Basis USA Britain 26% All Others Russian Soviet France 6.5% 17% Empire USA Union 4% 9% 18% 10% Rest of All Others Asia 20% 5% France 5.3% Rest of Germany Asia 5% Eastern 5% Europe Germany Japan 5% British 9% 3% Empire Eastern India 20% China Japan Europe S.+ C. 4% 4% America China 9% 3% 7% 5% Source: Maddison Page 49
    • China, India: Reverting to the Mean/Historic Norms Year 2007 - Global GDP Russia PPP Basis 3.5% United India Japan Kingdom People's 5.1% 7.1% 3.4% Republic Brazil of China 11.7% 3.0% Mexico 2.2% South Eurozone Korea 17.1% 2.0% Canada 1.9% United All Others States 20.1% 22.8% Source: World Bank Page 50
    • The Case For India Largest Fluent English-Speaking Populations Total English Country Speakers United States 251,388,301 India 90,000,000 Nigeria 79,000,000 United Kingdom 59,600,000 Philippines 42,500,000 Germany 36,000,000 Canada 25,246,220 Australia 17,357,833 Pakistan 17,000,000 Source: CIA, Census France 16,000,000 Page 51
    • It’s Payback Time! (London) October 23rd, 2003 “Britain's industrialisation was secured by destroying the manufacturing capacity of India...Throughout the late 18th and 19th centuries, India was forced to supply raw materials to Britain's manufacturers, but forbidden to produce competing finished products...Now the jobs we stole 200 years ago are returning to India. There is a profound historical irony here. Indian workers can outcompete British workers today because Britain smashed their ability to compete in the past. Having destroyed India's own industries, the East India Company and the colonial authorities obliged its people to speak our language, adopt our working practices and surrender their labour to multinational corporations. Workers in call centres in Germany and Holland are less vulnerable than ours, as Germany and Holland were less successful colonists, with the result that fewer people in the poor world now speak their languages.” (emphasis added) Page 52
    • Putting It All Together: Emergence of Industrial China, India + Flat Oil Production = New Floor For Oil Prices ($50? $60?) Massive Wealth Creation in China, India Massive Wealth Transfer to Net Oil Producing Nations and Cities… FOR NOW… Page 53
    • Will Technology Turn These Areas Into New Saudi Arabias? Athabasca Sands Canada 1.7 trillion barrels 10% recoverable =170 billion barrels oil Orinoco Heavy Bakken Formation Sands USA/Canada Venezuela 167 - 300 billion barrels 1.2 trillion barrels 1% - 18% - 50% 22% recoverable recoverable? = 267 billion = 3 billion barrels oil? barrels 150 billion barrels oil? Poor quality, dirty “Orimulsion” Page 54
    • How Much of City Migration Reflects Oil Prices? Urban Population Growth - Key Cities, 2006 vs. 2007 15,000 10,000 New Residents 5,000 - (5,000) (10,000) 2006 2007 (15,000) Manhattan Chicago Francisco Boston Angeles (county) (city) (city) (city) Los (city) San Source: Census Page 55
    • How Much of Driving Decline Is The Economy vs. Oil Prices? US Highway Driving ,1995 - 2008 3,100 10,200 3,000 10,000 Billions of Miles Driven 2,900 9,800 Miles Per Capita 2,800 9,600 2,700 9,400 2,600 9,200 2,500 9,000 2,400 8,800 YOY to July 2008 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Miles Per Capita Total Highway Driving Source: Federal Highway Administration, Census Page 56
    • Will Ridership Reverse Itself If Oil Drops Even Lower? US Public Transit Ridership, # Trips 12,001 10,001 # Public Transit Trips 8,001 6,001 4,001 2,001 1 1H07 1H08 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 BUS COMMUTER PARATRANSIT HEAVY LIGHT TROLLEY OTHER Source: APRA Page 57
    • …Or Will Light Rail Have Lasting Impact on Development Patterns?… Miles of Light Rail Track in Major US Cities 1000 900 938.6 800 814.8 700 600 557.4 500 400 300 200 100 0 2000 Current 2010-2012 Source: DTZ, APRA, Various Local Transportation Agencies Page 58
    • …As We Rebuild “The Greatest Streetcar System in the World”… Jane Jacobs, 1916 – 2006 “Dark Age Ahead”, 2004 “Much has been written about the General Motors campaign that replaced 146 electric-powered mass transit systems with General Motors gasoline-powered buses.” “The [GM] Consortium bought electric streetcar lines, demolished them, and replaced them with buses, then resold the lines, tying up the sales with contracts that specified future suppliers of buses, oil and tires. In the 1930s with this tactic perfected, scores of transit systems were bought by a GM subsidiary called National City Lines….(which) together with two additional puppet subsidiaries, by 1950 controlled transit systems in eighty-three cities.” “In 1946, when these systems were succumbing to the GM vision…a former employee wrote from Florida, where he had been serving as a naval commander, to alert hundreds of mayors…he asked what is still a good question: ”Who will rebuild them for you?” Again, belatedly, Congress and the Department of Justice took notice. Nine corporations and seven of their executives were indicted for illegal acts in restraint of trade, tried and convicted.” (pages 186; 38, 39 and 40) Page 59
    • …Light Rail and Transit-Oriented Development…In Texas? UNT Study Evidences A Value Premium. Lake Renaissance Initiative: a long- Highlands range plan to pave the way for Town Center: transit-oriented development; a new DART a number of infrastructure rail station improvements have been will be built to identified; High Street service the Residential (Trammell Crow) LHTC which hired to develop TOD sites in calls for 1.3 Carrollton msf of residential Cityville at Southwestern space, Medical District: 263 300,000-sf of residential units and 43,000- retail and 50- sf of retail space 100,000-sf of The Butler: 460 apartments office space as well as retail space Broadstone Ambrose: 300 W Dallas – residential units Victory: 252 with retail below; rooms, 61 the development residences is a direct result Victory Tower of the Green Line (Mandarin The House: 28 story expansion Oriental): 120 high-end condo rooms, 90 building designed by residences Phillippe Starck and Source: DART, DTZ Page 60 YOO
    • Or Will We Forget, Again….Until Next Time? “Let this be our national goal, at the end of this decade, in the year 1980, the United States will not be dependent on any other country for the energy we need” Richard M. Nixon, 1974 % of US Oil Imported In 1973 - 35% In 2007- 60% Page 61
    • …Reality Check… US Oil and Petroleum Product Use By Sector, 2007 Industrial 25% Transportation 69% Residential 4% Commercial 2% Source: EIA Page 62
    • …Some Areas More Heavily Dependent Than Others… States With Highest/Lowest Per Capita Petroleum Consumption: Total Energy Consumption Residential Sector Use Motor Gasoline Total Per Capita Arizona DC DC Rhode Island Louisiana New York Rhode Island New York Florida Rhode Island New York California Lowest California Hawaii Arizona Massachusetts Hawaii Illinois Michigan Arizona Maine Wyoming Alaska Alaska Vermont South Carolina Louisiana Wyoming New Hampshire Alabama Wyoming Louisiana Highest Connecticut Vermont Texas North Dakota Rhode Island Mississippi Hawaii Texas Source: EIA Page 63
    • Electric Car? Electricity Not Dependent on Foreign Oil US Electricity Generation by Power Source, 2006 Nuclear 19% Petroleum 2% Other Natl Gas 1% 20% Coal 49% Hydro Renewables 7% 2% Source: EIA Page 64
    • US, China and India – Clean Coal Technology? World's Proven Coal Reserves, 2006 All Others USA 19% 27% S. Africa 5% Australia 9% India 10% Russia 17% China 13% Source: EIA Page 65
    • Conclusions Global Yield Increases, Investment Volume Declines: No Markets Spared US Real Estate Developers: Bright Spot! No Overbuilding New Kids On the Block: SWFs from Oil Wealth and Asian Savers Significant Investment To Continue Post-Financial Recovery Can’t Beat ‘Em, Join ‘Em? Ignore SWFs At Your Peril Look Closely At Energy Usage Patterns, They Will Dictate: Strength of SWF Investment in US and other nations Attractiveness of Certain Metros, Submarkets, Microlocations in US Page 66