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Page 0
The Credit CrunchOctober 2008
Get Over It
ULI Fall Meeting – Miami Beach, FL
Jason SpicerManaging Director
Page 1
US New Construction Completions by Property Type
0.0%1.0%
2.0%3.0%
4.0%5.0%
6.0%7.0%
8.0%9.0%
10.0%19
80
1983
1986
1989
1992
1995
1998
2001
2004
2007
As
% o
f Inv
ento
ry
Retail Office Industrial Apartment
“Too Much” Building in the ’80s…Not a Concern Today
Source: REIS, DTZ
Page 2
Tech Firms Spurred “Too Much” Office Absorption in the ’90s…Not This Time
Source: REIS, DTZ
Office Absorption vs. Office Employment Growth
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
1995
1998
2001
2004
2007
Office Employment % Growth Absorption As % of Inventory
Page 3
US Commercial Mortgages Outstanding
$0
$500
$1,000
$1,500
$2,000
$2,500
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
5%
7%
9%
11%
13%
15%
17%
19%
Total in $ Blns ( L ) As % of GDP ( R )
“Too Much” Commercial Leverage in the ‘00s? Looks that Way!...
Source: US Federal Reserve,BEA, DTZ
Page 4
…A Uniquely American Problem…
US $4.1 trillion
UK $1.35 trillionEurope excluding UK $3.87 trillion
Asia Pacific $2.9 trillion
Source: DTZ
Page 5
…Thanks, America: REITs, Listed Property Shares Drop In Global Lockstep…
60
70
80
90
100
110
120
130
140
150
160
Jan-
06
Feb-
06
Mar
-06
Apr-
06
May
-06
Jun-
06
Jul-0
6
Aug-
06
Sep-
06
Oct
-06
Nov
-06
Dec
-06
Jan-
07
Feb-
07
Mar
-07
Apr-
07
May
-07
Jun-
07
Jul-0
7
Aug-
07
Sep-
07
Oct
-07
Nov
-07
Dec
-07
Jan-
08
Feb-
08
Mar
-08
Apr-
08
May
-08
Jun-
08
Jul-0
8
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
Credit Crunch
Index (Jan 2006 = 100)
Page 6
…As Have Investment Sales Transactions…
Global Investment/Sales Transaction Activity, $ Mlns
$0
$50,000
$100,000
$150,000
$200,000
$250,00020
01.1
2001
.220
01.3
2001
.420
02.1
2002
.220
02.3
2002
.420
03.1
2003
.220
03.3
2003
.420
04.1
2004
.220
04.3
2004
.420
05.1
2005
.220
05.3
2005
.420
06.1
2006
.220
06.3
2006
.420
07.1
2007
.220
07.3
2007
.420
08.1
2008
.2
Asia Europe US
Source: DTZ,RCA
Page 7
…Though Volume Only Now Beginning to Fall in Asia..
Source: DTZc
Property Investment Transaction Volume, 1H08 vs. 1H07
-100.00% -50.00% 0.00% 50.00% 100.00% 150.00%
PragueGreater Berlin
Washington DC MSALos Angeles MSA
Paris/Île-de-FranceWarsaw RegionGreater London
New York MSATokyo
Hong KongMoscow
SingaporeBeijing
Page 8
US Cap Rates Have Moved Up 50-75 bps, Equating to a 10-15% Value Decline…
Source: DTZ, RCA
US Cap Rates by Property Type
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
01Q
1
01Q
201
Q3
01Q
4
02Q
102
Q2
02Q
302
Q4
03Q
103
Q2
03Q
3
03Q
404
Q1
04Q
204
Q3
04Q
405
Q1
05Q
205
Q3
05Q
4
06Q
106
Q2
06Q
306
Q4
07Q
107
Q2
07Q
3
07Q
408
Q1
08Q
2
Apt. Office (CBD) Retail (Open-Air Ctrs)
Page 9
…Similar to Pricing Corrections in Europe, Asia…
Source: DTZ
Representative European, Asian Office Markets,Current Office Yields and Increase Since Peak
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Beijing
Singap
ore (R
affles
Plac
e)
OsloPrag
ueLo
ndon
(City
)Amste
rdam
Lond
on (W
E)Pari
s (CBD)Berl
in
2Q08
Offi
ce Y
ield
-255075100125150175 Yield Increase in B
Ps
Increase Office Yield
Page 10
Major Global Office Markets, Construction vs. Vacancy, 2Q08
0%
5%
10%
15%
20%
25%M
osco
wB
eijin
gB
anga
lore
Hon
g K
ong
Bar
celo
naLo
ndon
(City
)P
aris
(ID
F)H
oust
onS
inga
pore
Atla
nta
Chi
cago
Bru
ssel
sM
adrid
Am
ster
dam
Dal
las
Vie
nna
Toky
o (5
-ku)
Fran
kfur
tLo
ndon
(WE
)M
unic
hH
ambu
rgS
anB
osto
nLo
s A
ngel
esM
ilan
Rom
eS
tock
holm
New
Yor
kB
erlin
2008
-201
0 C
onst
ruct
ion
Com
plet
ions
As
% o
f Inv
ento
ry
0%
5%
10%
15%
20%
25%
Current A
vailability or Vacancy R
ate
Construction/Inventory Avail/Vac Rate
…While Construction Overseas Is Far Worse:The US Can Spell “Schadenfreude”, Too…
Source: DTZ
115% 50% 28%
Page 11
“Please Look Closely”
Jane Jacobs, 1916 - 2006
Page 12
A Very Large Number
$1.2 Trillion8x 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 13
The Cost of Our Crude Oil Imports Since 9-11
Crude Oil Net Exports (Imports) By Country in Total $ Blns, Since 2002
($1,250)
($500)
$250
$1,000
$1,750
Per
sian
Gul
f Sta
tes
Rus
sia
+ C
aspi
anS
tate
sA
frica
n O
PE
C F
our
Nor
way
Mex
ico
Ven
ezue
la
Can
ada
EU
Rem
aind
er
Indi
a
Kor
ea
Chi
na
Japa
n
Eur
ozon
e 15
US
A
$ B
lns
Source: JODI, DTZ
Page 14
A Coincidence?
1.2 Trillion
Remaining Barrels of Proven Oil Reserves Worldwide
Page 15
Time Bomb?Oil Reserves and Production By Year , 2007 - Nations With Largest Reserves
US
Kuwait
Saudi Arabia
Iraq
Mexico
VenezuelaNorway
Iran
AlgeriaLibya
China
BrazilKazakhstan
Russian Federation
Qatar
United Arab Emirates
Angola
NigeriaCanada
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
0 20 40 60 80 100 120 140 160 180
Years of Reserves Left At Current Production Rate
Cur
rent
Pro
duct
ion
Per Y
ear,
Bln
s B
arre
ls Canada + OIL SANDS
…. Crude Oil Reserves May Have A Limited Horizon…
Source: JODI, BP
Page 16
And While We Are Shifting Closer To Home For Oil…
US Oil and Petroleum Products Imports: Persian Gulf Countries vs. Canada, Mexico
750
950
1,150
1,350
1,550
1,750
1,950
2,150
2,350
2,550
2,750
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Thou
sand
s of
Bar
rels
Per
Day
Persian Gulf Canada Mexico
Source: EIA
Page 17
…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 18
….Asian Trading Partners Rely Heavily On Middle East Oil…
% of Net Oil Imports Coming from Persian Gulf/Middle East, 2006 or 2007 (where available)
0%10%20%30%40%50%60%70%80%90%
US
Chi
na
Indi
a
Kor
ea
Japa
n
Page 19
….Which They Use To Make Things To Sell to the USA…
Japan
USAChina
SouthKorea
+48b (#1)
+13b (#2)+33b ( #2)
+32b (#3)
+256b (#1)
+83b (#1)
Balance of Trade (Net Exports), 2007
Sources: National Trade Ministries, CIA, World Bank
Page 20
…Hence the Geography of Sovereign Wealth Funds:Resource-Rich Nations and Asian Savers
Source: WSJ, Forbes, Morgan Stanley, DTZ
Sovereign Wealth Funds and National Savings Funds, $ Blns
$0 $200 $400 $600 $800 $1,000
KoreaAlaskaQatarLibya
AustraliaCanadaRussiaChina
KuwaitSaudi Arabia
NorwaySingapore
UAE
Page 21
.. Both Groups Buying Up Pieces of Western Banks…
Source: DTZ, compiled from publicly available information
Country TargetSingapore UBS, Standard Chartered, Merrill Lynch, BarclaysAbu Dhabi Citigroup China Morgan Stanley, Barclays Oman UBS Dubai HSBC, Deutsche Bank Kuwait Citigroup, Merrill Lynch Qatar CSFB, Barclays Libya Fortis, Unicredit
SWF Corporate Equity/Debt Infusions To Banks, Last 12-18 Months:
Page 22
To Date, Asians Have Been Strongest Holders of US Debt Obligations, In All Forms…
Source: Treasury, Federal Reserve
% US Securities Held by Foreigners, 1994 - 2007
0
10
20
30
40
50
60
1994 2000 2002 2003 2004 2005 2006 2007
Dec. Mar. June June June June June June
%
Equities Treasuries US Govt Agency (MBS) Corporate + Other Debt
$ Mils% of Total
Excl. Tax Havens
Asian "Savers" 2,690,629 28% 34%Tax Havens 1,953,032 20%UK 920,630 9% 12%Canada 475,196 5% 6%Belgium 396,431 4% 5%Ireland 342,028 4% 4%Switzerland 328,982 3% 4%Netherlands 321,378 3% 4%Persian Gulf States 308,394 3% 4%Germany 265,770 3% 3%France 221,164 2% 3%Australia 165,387 2% 2%Russia 147,699 2% 2%Group Subtotal 8,536,720 87% 84%Total 9,771,725 100% 100%
2007 Foreign Securities Ownership
Page 23
…And Are The New Class of Real Estate Investors…
10 Nations to Watch in Real Estate
1. UAE –ADIA
2. Singapore –GIC, Temasek
3. Norway –Property Adviser
Selected 2008, To Invest 2009?
4. Kuwait –St. Martin’s (FGF), GRF
5. China –CIC Established 2007,
RE Investment Manager Search 2008?
6. Russia – FGF Established 2007, To
Invest 2009?7. Canada – CPPIB,AIMCo
8. Australia –FFMA,
Supers
9. Qatar -QIA
10. S. Korea –KIC,
New RE Allocations
2008
Page 24
.
….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 25
.
….Not To Mention The US Skyline….
Net Buyers/Sellers of US Property in 1H2008
-$3,504
-$2,763
-$900
$884
$2,133
$3,878
-$4,00
0-$3
,000
-$2,00
0-$1
,000 $0
$1,00
0$2
,000
$3,00
0$4
,000
$5,00
0
REIT/REOC
Private
Corporate/User
Institution
Opportunity Fund
Offshore
MillionsSource: DTZ, RCA
Page 26
GM Bldg
$2 BMiddle Eastern
Chrysler Bldg
$900 MMiddle Eastern
120 Park
$525 MMiddle Eastern
527 Madison
$225 MJapanese
MiamiCenter
$265 MJapanese
OneSansome
$370 MKorean
…They’re HEERRREEEE…Do The Nationalities Look Familiar At This Point? But Don’t Worry…
Top 2008 US Investment/Sales, An International Affair1301Sixth
$1.45 BGerman
Source: RCA, DTZ
Page 27
…Despite The Temptations for Conspiracy Theorists…
Source: EPA, DTZ, Fox Mulder & Dana Scully
US Fleetwide Miles Per Gallon by Marketing Group, MY 2008
1012141618202224262830
Toyota Honda HK Nissan BMW VW AVG. GM Ford Chrysler
2008 Oil SWF Acquisitions
Page 28
We Aren’t Alone - Sovereign Wealth Funds, Key 2008 Acquisitions in London
Willis BldgLime StreetLondon
$800 MMiddle Eastern
MetropoleWhitehall St
London
$260 MMiddleEastern
Kensington High St London
$640 MMiddleEastern
Source: DTZ
London Bridge TowerLondon
$300 MMiddle Eastern
Chelsea BarracksLondon
$1.9 BilMiddle Eastern
Page 29
We Aren’t Alone - Sovereign Wealth Funds, Key 2008 Acquisitions in Europe and Asia
Roma EstShopping CtrRome
$630 MSingapore50%
Menara YNHKuala
Lampur
$290 MMiddle Eastern
The Westin Tokyo
$715 MSingapore
Iso Omena”Big Apple” MallHelsinki
$535 MSingapore 40%
Source: DTZ
Page 30
Oil Nations: Why Build These Vast Cities?...
King Abdullah Economic City, Saudi Arabia$27 billion, Projected Population 1.5 million
City of Silk, Kuwait$85 billion, Projected Population: 750,000
Dubailand, Dubai UAE $65 billion, Projected “Population”: 2.5 million
Page 31
…Especially Zero-Carbon and Car-Free Ones?
Masdar, Abu Dhabi UAE, $22 billionProjected Population: 30,000
Page 32
…To Employ Young Locals For A Post-Oil Future!
Source: McKinsey, Global Insight, BP, IIF
Arabian Peninsula vs "Developed" World (G8+), Population by Age Cohort - 2010 Projection
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%
75+
55 to 74
35 to 54
15 to 34
0 to 14
Age
Coh
ort
% of PopArabia Developed
Page 33
…Asians Look Into a Childless Future…
Source: UN Population Division
North Asia (China, Japan, Korea) Fertility Rate - Children Per Woman1950-2050
1
2
3
4
5
6
7
1950
-195
5
1955
-196
0
1960
-196
5
1965
-197
0
1970
-197
5
1975
-198
0
1980
-198
5
1985
-199
0
1990
-199
5
1995
-200
0
2000
-200
5
2005
-201
0
2010
-201
5
2015
-202
0
2020
-202
5
2025
-203
0
2030
-203
5
2035
-204
0
2040
-204
5
2045
-205
0
China Japan Republic of Korea
ReplacementLevel = 2.1
Page 34
North Asia (China, Japan, Korea) Net Reproduction RateDaughters Per Woman 1950-2050
0
0.5
1
1.5
2
2.5
3
1950
-195
5
1955
-196
0
1960
-196
5
1965
-197
0
1970
-197
5
1975
-198
0
1980
-198
5
1985
-199
0
1990
-199
5
1995
-200
0
2000
-200
5
2005
-201
0
2010
-201
5
2015
-202
0
2020
-202
5
2025
-203
0
2030
-203
5
2035
-204
0
2040
-204
5
2045
-205
0
China Japan Republic of Korea
…Exacerbated By A Lack of Female Children…
Source: UN Population Division
ReplacementLevel = 1
Page 35
North Asia (China, Japan, Korea) Net Migration Rate, 1950-2050
-2
-1
0
1
2
3
4
5
619
50-1
955
1955
-196
0
1960
-196
5
1965
-197
0
1970
-197
5
1975
-198
0
1980
-198
5
1985
-199
0
1990
-199
5
1995
-200
0
2000
-200
5
2005
-201
0
2010
-201
5
2015
-202
0
2020
-202
5
2025
-203
0
2030
-203
5
2035
-204
0
2040
-204
5
2045
-205
0
Rat
e P
er 1
,000
Res
iden
ts
China Net migration rate Japan Net migration rate Korea Net migration rate
…Which Coupled With Limited Migration…
Source: UN Population Division
US Level =+/- 4
Page 36
…Makes for Shrinking and Ageing Societies…
Source: UN Population Division
North Asia (China, Japan, Korea) Median Age vs. Population Growth Rate 1950-2050
0
15
30
45
60
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
Med
ian
Age
(Yea
rs)
-1.5-1-0.500.511.522.533.5
Population G
rowth R
ate (%
)
China Population growth rate Japan Population growth rate Korea Population growth rate
China Median age Japan Median age Korea Median age
Page 37
…Which They Must Invest For…
Source: Watson Wyatt, P&I Online
“Big Japanese fund may shift assetsMove would create opportunities for absolute-return and active managers”
June 9, 2008
Signs that Japanese regulators are seeking ways to boost returns of the country's huge public pension fund could eventually open new opportunities for foreign asset managers in areas such as absolute return and alternatives.
Executives with foreign and domestic managers alike said recommendations in May by Japan's Council on Economic and Fiscal Policy for managing the ¥150 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.
Fund CountryTotal assets $
MlnsGovernment Pension Inv. Japan $1,072,429Government Pension Norway $370,985ABP Netherlands $314,969National Pension Korea $231,966Local Government Officials Japan $144,447Postal Savings Fund Taiwan $129,397PFZW Netherlands $128,615Canada Pension Plan Canada $123,903Pension Fund Association Japan $112,698Ontario Teachers Canada $110,600
10 Largest Non-US Pension Funds
Page 38
Haven’t We Gone Through This Before?
The British Are Coming!Germans Russians Japanese
Middle Easterners? Chinese? Asians?
Page 39
…Drop in Oil Prices Doesn’t Change Story That Much…
Source: McKinsey, Global Insight, BP, IIF
Petrodollar Foreign Assets, $ Trillions, Oil Prices at:
$0$2$4$6$8
$10$12$14
2007
2008
2009
2010
2011
2012
2013
$30 pb $50 pb $70 pb $100 pb
Page 40
…So If You Think This is Merely A Repeat of the 70s…
US Oil Consumption and Prices, 1965 - 2007
11,000
13,000
15,000
17,000
19,000
21,000
1965 1970 1975 1980 1985 1990 1995 2000 2005
Thou
sand
s of
Bar
rels
Per
Day
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
Price per B
arrel
Consumption Prices Per Barrel, 2007 dollars
Source: EIA, BP, JODI
Page 41
…Think Again
52%
Source: EIA, BP, JODI
Page 42
…Something *IS* Different “This Time”…
Global Oil Consumption: US, China and India, 1965 - 2007
-
2,000
4,000
6,000
8,000
10,000
12,000
1965 1970 1975 1980 1985 1990 1995 2000 2005
Thou
sand
s of
Bar
rels
Per
Day
24%
26%
28%
30%
32%
34%
36%
38%
US
% of Total C
onsumption
India Daily ConsumptionChina Daily ConsumptionUS Share of Global Oil Consumption
Source: EIA, BP, JODI
Page 43
…All That Oil Is Imported…
Net Oil Imports, Ths. Barrels/Day 1990 - 2006
-500
1,000
2,500
4,000
5,500
7,000
8,500
10,000
11,500
13,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
China & India Japan US
Source: EIA, BP, JODI
Page 44
And It Could Get Much Worse….
Page 45
A Brief Review of History…
1st Century (AD/CE) - Global GDPPPP Basis
India33%
China26%
All Others2%
Rest of Asia8%
Africa9%
Roman Empire
22%
Source: DTZSource: Maddison
Page 46
Year 1000 - Global GDPPPP Basis
India28%
China22%
Japan3%
All Others8%
Western Europe
9%
Rest of Asia7%
Africa12%
Poland11%
Source: DTZ
Notice Anything Yet?
Source: Maddison
Page 47
A Trend?
Year 1500 - Global GDPPPP Basis
India26%
China26%
Japan3%
Poland7%
All Others19%
Rest of Asia8%
Britain1%
Russia3%
France4%
"USA"0.3%
Germany3%
Source: Maddison
Page 48
See it yet?
Year 1820 - Global GDPPPP Basis
India19%
China40%
Rest of Asia6%
Russian Empire
6%Africa5%
USA2%
Britain6%
Germany5%
France6.6%
Japan4%
Source: Maddison
Page 49
UK, US Dominance A Blip In History
Year 1913 - Global GDPPPP Basis
China9%
British Empire
20%
Eastern Europe
5%
All Others17%
Rest of Asia5%
USA18%
Russian Empire
9%
Germany9%
France5.3%
Japan3%
Year 1950 - Global GDPPPP Basis
China5%
India4%
Japan3%
Germany5%
S.+ C. America
7%
Rest of Asia5%
Eastern Europe
4%
Soviet Union10%
All Others20%
USA26%Britain
6.5% France4%
Source: Maddison
Page 50
China, India: Reverting to the Mean/Historic Norms
Year 2007 - Global GDPPPP Basis
South Korea2.0%
Brazil3.0%
Mexico2.2%
Russia3.5% United
Kingdom3.4%
Japan7.1%
India5.1%People's
Republic of China11.7%
Canada1.9%
All Others20.1%
United States22.8%
Eurozone17.1%
Source: World Bank
Page 51
The Case For India
Country Total English
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 France 16,000,000
Largest Fluent English-Speaking Populations
Source: CIA, Census
Page 52
(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)
It’s Payback Time!
Page 53
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 54
Will Technology Turn These Areas Into New Saudi Arabias?
Orinoco Heavy Sands
Venezuela1.2 trillion barrels22% recoverable
= 267 billion barrels
Poor quality, dirty “Orimulsion”
Bakken FormationUSA/Canada
167 - 300 billion barrels1% - 18% - 50% recoverable?
= 3 billion barrels oil?150 billion barrels oil?
Athabasca SandsCanada
1.7 trillion barrels10% recoverable
=170 billion barrels oil
Page 55
How Much of City Migration Reflects Oil Prices?
Source: Census
Urban Population Growth - Key Cities, 2006 vs. 2007
(15,000)
(10,000)
(5,000)
-
5,000
10,000
15,000
Man
hatta
n(c
ount
y)
San
Fran
cisc
o(c
ity)
Bos
ton
(city
)
Los
Ang
eles
(city
)
Chi
cago
(city
)
New
Res
iden
ts
2006 2007
Page 56
How Much of Driving Decline Is The Economy vs. Oil Prices?
US Highway Driving
2,400
2,500
2,600
2,700
2,800
2,900
3,000
3,10019
95
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
YO
Y to
Jul
y 20
08
Bill
ions
of M
iles
Driv
en
8,800
9,000
9,200
9,400
9,600
9,800
10,000
10,200
Miles Per C
apita
Miles Per Capita Total Highway Driving
Source: Federal Highway Administration, Census
,1995 - 2008
Page 57
Will Ridership Reverse Itself If Oil Drops Even Lower?
US Public Transit Ridership, # Trips
1
2,001
4,001
6,001
8,001
10,001
12,00119
95
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
1H07
1H08
# Pu
blic
Tra
nsit
Trip
s
BUS COMMUTER PARATRANSIT HEAVY LIGHT TROLLEY OTHER
Source: APRA
Page 58
…Or Will Light Rail Have Lasting Impact on Development Patterns?…
Miles of Light Rail Track in Major US Cities
557.4
814.8
938.6
0
100
200
300
400
500
600
700
800
900
1000
2000 Current 2010-2012
Source: DTZ, APRA, Various Local Transportation Agencies
Page 59
…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 60
…Light Rail and Transit-Oriented Development…In Texas?UNT Study Evidences A Value Premium.
BroadstoneAmbrose: 300
residential units with retail below; the development is a direct result
of the Green Line expansion
Renaissance Initiative: a long-range plan to pave the way for transit-oriented development;
a number of infrastructure improvements have been
identified; High Street Residential (Trammell Crow) hired to develop TOD sites in
Carrollton
W Dallas –Victory: 252 rooms, 61 residences
The House: 28 story high-end condo
building designed by Phillippe Starck and
YOO
Victory Tower (Mandarin
Oriental): 120 rooms, 90 residences
Cityville at Southwestern Medical District: 263
residential units and 43,000-sf of retail space
Lake Highlands
Town Center: a new DART rail station
will be built to service the
LHTC which calls for 1.3
msf of residential
space, 300,000-sf of retail and 50-100,000-sf of office spaceThe Butler: 460 apartments
as well as retail space
Source: DART, DTZ
Page 61
Or Will We Forget, Again….Until Next Time?
Richard M. Nixon, 1974
% of US Oil Imported
In 1973 - 35%
In 2007- 60%
“Let this be our national goal, at the end of this decade, in theyear 1980, the United States will not be dependent on any other country for the energy we need”
Page 62
…Reality Check…
Source: EIA
US Oil and Petroleum Product Use By Sector, 2007
Commercial2%
Residential4%
Industrial25%
Transportation69%
Page 63
…Some Areas More Heavily Dependent Than Others…
Residential Sector Use Motor Gasoline TotalArizona DC DC Rhode IslandLouisiana New York Rhode Island New YorkFlorida Rhode Island New York CaliforniaCalifornia Hawaii Arizona MassachusettsHawaii Illinois Michigan ArizonaMaine Wyoming Alaska AlaskaVermont South Carolina Louisiana WyomingNew Hampshire Alabama Wyoming LouisianaConnecticut Vermont Texas North DakotaRhode Island Mississippi Hawaii Texas
Total Energy Consumption
Per Capita
States With Highest/Lowest Per Capita Petroleum Consumption:
Hig
hest
Low
est
Source: EIA
Page 64
Electric Car? Electricity Not Dependent on Foreign Oil
Source: EIA
US Electricity Generation by Power Source, 2006
Hydro7%
Other1%
Petroleum2%
Nuclear19%
Renewables2%
Coal49%
Natl Gas20%
Page 65
US, China and India – Clean Coal Technology?
Source: EIA
World's Proven Coal Reserves, 2006
Russia17%
China13%
Australia9%
S. Africa5%
All Others19% USA
27%
India10%
Page 66
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 RecoveryCan’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 nationsAttractiveness of Certain Metros, Submarkets, Microlocations in US