Sources of Multifamily Financing

The Expert: Beyond the GSEs
March 31, 2009, Commercial Property News
By: Keith Misner (pictured), Cushman and Wakefield Inc. and Michael Ryan, Cushman and Wakefield Sonnenblick Goldman

Given the current state of the debt markets, Fannie Mae and Freddie Mac are widely perceived to be the only two viable sources of debt financing for multi-family rental assets. While these two government agencies continue to be the primary sources of financing for these assets, there are a variety of alternative lenders and capital sources willing to lend on stabilized and value-add assets.

As Fannie and Freddie become more conservative and subjective in their underwriting, we have seen a recent increase in activity from the U.S. Department of Housing and Urban Development for cash-flowing market-rate assets. There is often a misperception that HUD will only finance affordable projects or that it takes six to nine months to close a HUD loan. In fact, HUD is aggressively financing Class A assets and can typically close in three to four months. HUD did not change its underwriting criteria during the peak of the market, and it has not changed its underwriting criteria as the market has deteriorated. And with financing offered at 85 percent loan-to-value, subject to a 1.17-times debt service coverage ratio, it has become a viable alternative to Fannie and Freddie.

There are also a handful of lenders and banks willing to finance on a non-recourse value-add basis. The term “value-add” is loosely used these days and is often associated with smaller REO assets in which the new buyer needs to reposition and stabilize an asset through intensive management. In these cases, local and regional lenders often offer the best execution on a lower-leverage basis--typically 65 percent LTV. Other alternative debt sources include core equity investors that are now placing senior loans in lieu of an equity investment. These loans are typically structured for three years on a non-recourse basis, with interest rates ranging from 8 to 11 percent.

At the same time, many multi-family borrowers continue to benefit from the agencies. Thus, while some investors voice concern over the future of Fannie and Freddie, they do fill a vital role in providing liquidity to the rental market, thereby helping to keep rents lower. Additionally, Fannie and Freddie’s investments continue to be the proverbial golden goose for the agencies, accounting for significant profits last year. While Congress bemoans companies like AIG, it is unlikely that they will look to cut or limit a segment of the financial market that is making money for the government and helping facilitate market liquidity.

Keith Misner is executive managing director & head of Cushman & Wakefield’s apartment brokerage services group. Michael Ryan is an executive director of the real estate investment banking firm Cushman & Wakefield Sonnenblick Goldman.

Good News in Store for Retail Category

The News: RREEF Sees Good News in Store for Retail Category
March 31, 2009
By: Paul Rosta, Retail Editor, Commercial Property News

Encouraging words seem harder to find about retail than about any other property sector these days, and the analysts at RREEF Research would hardly be mistaken for Pollyannas. Nevertheless, a new forecast from the Deutsche Bank affiliate finds reasons to sound a few modestly upbeat notes.

“Good news does exist for the retail sector,” RREEF Research stated in an analysis published last week as part of a commercial real estate investment forecast, offering neighborhood and community centers as particular beneficiaries. An average of 25 million square feet of new product came on line in the category while retail was booming between 2003 and 2007. While it is substantial, that figure still represents 6.5 million square feet of space less than the neighborhood and community categories added on average each year since 1981. And it is less than half the 54 million square feet of new inventory that came on line during the retail boom years between 1985 and 1990. Vacancies for those centers will peak at 10.5 percent this year, but they will decline to 9.5 percent as the market starts recovering in 2010, RREEF Research predicted.

Leasing velocity and rental rates will take the hardest hits this year in low-barrier-to-entry locations with low land costs—in particular, locations in the Southwest and the Southeast, with the exception of South Florida. Though no markets will escape the downward trend, a few will turn in better-than-average performances: Seattle, Washington, D.C., San Francisco, Oakland, San Jose, Los Angeles, Orange County, New York City and Miami. The small number of new leases being transacted makes it tricky to estimate how much rents will fall, but RREEF suggested that the most common range for declines will be 5 to 10 percent.

The forecast turned in no surprising recovery for 2009; still, it speculated that the decline in retail sales might come to a halt by the middle of the year, with the beginning of a modest improvement by the fourth quarter. “More solid gains will not likely occur until 2010 and a vigorous rebound will wait until 2011,” the forecast stated. “Until then, the discounters and wholesale clubs should continue to outperform the sector.”

When the turnaround finally arrives, the luxury goods market will be among the first to recover. Discretionary retailers catering to the middle and lower-middle markets for electronics, apparel and mid-level department stores will follow. Bringing up the rear will be home-products stores, which RREEF Research projected are “likely to have the flattest bounce.”

Business is Blooming: New Establishments Help Downtown Continue to Thrive

by Downtown Alliance

New businesses are springing up in downtown Salt Lake City, bucking the global economic downturn that has pummeled communities across the country. "The influx of new business showcases the continued vibrancy of our downtown community even during a severe national recession," said Jason Mathis, Executive Director of the Downtown Alliance. "Unique downtown businesses are a key component to creating a dynamic and unique urban experience and will help downtown Salt Lake City continue to thrive."

In addition to brand new downtown dining options like Bruges Waffles and Frites, Eva Mediterranean Tapas, J Wong's Asian Bistro, and the Olive Bistro, businesses that have recently opened in the city center include:

* Atomic Blonde Salon (350 South 200 East) has relocated to the heart of the city in The Metro Condo building. The new salon has skilled stylists, a casual atmosphere, great music, a variety of hair and esthetic services, and sells several product lines. More information visit www.atomicblondesalon.com.
* Bingham Cyclery (336 West 300 South) opened its flagship store at Uffens Marketplace just north of Pioneer Park. Biking downtown is an easy way to travel from one place to another and it's the preferred form of transit by "green" enthusiasts. This is the second significant bike store to open downtown in the past year. More information visit www.binghamcyclery.com.
* Meyer Gallery (350 South 200 East) opened its Salt Lake City gallery in The Metro Condo building. The Meyer Gallery was established in 1965 in Park City and is one of the most respected galleries in the west. The gallery specializes in bronze sculpture and representational and impressionistic oil and watercolor paintings by regional and national artists. More information visit www.meyergallery.com.
* The Green Ant (179 East 300 South) closed its doors in Sugarhouse and opened them on Broadway. This vintage modern furniture Modern furniture (specializing in pieces from the 1960's and 1970's) and eclectic clothing store offers the quintessential merchandise for admirers of sleek and chic style. More information visit www.thegreenant.com.
* Uptown Cheapskate (353 West 200 South) is an upscale thrift store dedicated to selling famous fashions without an expensive price tag. This franchise clothing store is "more than a fashion exchange concept. It is an attitude, a personality, and an art form." More information visit www.uptowncheapskate.com.

"A new light rail line to the airport, changes to Utah's private club laws, a new cultural district, and the completion of significant construction projects will help to propel downtown for the next few years," Mathis said. "It is a good time to be in Salt Lake City." Downtown Salt Lake City continues to benefit from more than 1000 construction jobs, helping to pump more than $1.6 million per day into the regional economy.

VIDEO: 2009 Governor's Economic Summit: "The Economy of Utah and What the Stimulus Means to the State"

by Bryan Schott



Dr. Kelly Matthews is executive vice president and economist of Wells Fargo Bank and is responsible for local, regional and national economic analysis and forecasting. He also oversees the bank's government affairs in Utah. Prior to this Dr. Matthews was chief economist for First Security Corporation. He is actively involved in banking and financial interests in community, state and national circles.

Economist: Utah poised for economic comeback

Summit » Conference crowd told signs point to improving national, state conditions.

By Tom Harvey, The Salt Lake Tribune
Updated:03/30/2009 01:37:05 PM MDT

Though challenges remain, the nation's recession shows signs of bottoming out, while Utah's economy is poised by the end of the year to see a return of high rates of growth, an economist told the Governor's Utah Economic Summit today.

Kelly Matthews, executive vice president and economist for Wells Fargo, gave an optimistic forecast on the state of the economy at the opening session of the Salt Lake City conference.

"Utah's economy is following a path that can return the state to its prior level of prosperity," Matthews told 1,200 or people who attended the summit at the Grand America hotel.

Gov. Jon Huntsman Jr. was scheduled to address the gathering later in the day.

Matthews said he believes the threat of deflation, or falling prices the lead to a downward in the national economy, has passed. He cited recent profits in the banking/financial industry, consumer and housing demand showing signs of leveling off instead of dropping steeply and recent moves by the Federal Reserve that drove down long-term interest rates, especially mortgage rates.

"The deflationary meltdown of the past six months I believe has passed," Matthews said.

The economist also pointed to areas of the Utah economy that he believes portend a "return to the days of glory and economic prosperity."

Utah has not been as damaged by the bursting of the housing bubble as other states, and the state budget -- thanks to federal stimulus money -- is in relatively good shape, Matthews said. Although the state's unemployment rate will continue to rise through the first half of this year, a combination of factors will jump-start the housing market. Utah's internal growth will continue to produce new households that demand housing, which also will be aided by low interest rates and state and federal incentives.

Added to a 10 percent decline in housing prices, those factors have made Utah houses more affordable, he asserted. "I believe that the conditions are such that many people will decide it's time to buy a house."

Also this morning, Ed Catmull, the president and CEO of Walt Disney and Pixar Animation Studios, delivered a keynote address, speaking on the challenges of managing talented teams of people.

tharvey@sltrib.com

Economic Update - Retail Deals Still Out There

March 27, 2009
By: Dees Stribling, Contributing Editor, Commercial Property News

It isn't the best of times for retail or retail real estate owners and brokers, but the industry isn't at a complete standstill. That's the assessment of John Delatour, director of operations and leasing at Jacksonville-based Regency Centers, a specialist in developing and owning grocery-anchored shopping centers and community centers.

"There's no denying that some retailers are going dark, but leasing deals are still getting done," Delatour tells CPN. "That's especially the case with grocery-store anchored centers, and even some grocery stores are still expanding, though clearly at a much more modest pace than in recent years."

Among others, he added, local and regional banks (or credit unions), fast-casual restaurants, nail and hair shops, and liquor stores are still inking leases. This is even the case in markets that have been famously beaten up by the recession, such as metro Las Vegas. Nevada Federal Credit Union recently took space at Regency's 731,000-square-foot Deer Springs Town Center, a newly completed development in North Las Vegas anchored by Target, Home Depot and Toys R Us.

"The recession is having an impact, of course," Delatour said. In the case of Regency's portfolio, the difficult economy has driven occupancies from about 95 percent to about 93.5 percent. "Still, a lot of properties are still holding their own."

In other retail news, Best Buy Co. Inc., now the "last man standing" among giant big box electronics chains following the demise of Circuit City, has reported a better-than-expected fourth fiscal quarter, though that doesn't mean earnings or sales growth for the quarter ended February 28. Net income for the company fell 23 percent on restructuring charges, to $570 million, or $1.35 per share, while U.S. same-store sales dropped 4.9 percent for the quarter compared with the same period a year ago. The company stressed, however, that the same-store sales drop was only 2.5 percent in the January-February period, after a 6.8 percent drop in December.

If Best Buy's numbers are any indication, consumers haven't quite lost their taste for certain kinds of electronics. "A low double-digit comparable-store sales increase for notebook computers fueled the growth as customers increasingly view notebook computers as a necessary utility," the company posited in a statement on Thursday. "Mobile phones and accessories experienced a nearly triple-digit comparable store sales gain, reflecting significant market share gains."

Best Buy's share prices got a boost from the news to the tune of $4.21 a share, or about 12.58 percent, and the rest of Wall Street didn't do too badly on Thursday either. The Dow Jones Industrial Average was up 174.75 points, or 2.25 percent, while the S&P 500 was up 2.33 percent and the Nasdaq gained 3.8 percent--the highest the tech-heavy index has been all year.

Utah ranked among top states for manufacturing and logistics

Utah ranked among top states for manufacturing and logistics

Deseret News
Published: Thursday, March 26, 2009 5:36 p.m. MDT

Utah is among the top five states for manufacturing and logistics, according to a report released Thursday.

The 2009 Manufacturing and Logistics Report Card was produced by the Ball State University Center for Business and Economic Research. It lists Utah, Indiana, Missouri, Kansas and Alabama as the top states.

Each state received letter grades in seven categories. Utah received As for human capital and benefit costs; Bs for productivity and innovation and tax climate; a C for manufacturing and global position; and a C-plus for logistics. Utah was third-ranked for human capital and fifth in benefit costs.

The worst five states are Alaska, Maine, New York, West Virginia and Rhode Island, the report said.

Details are available at cber.iweb.bsu.edu/research/conexus09.

February's existing home and condo sales rose 32% over January

February's existing home and condo sales rose 32% over January

By Jasen Lee, Deseret News
Published: Wednesday, March 25, 2009 9:52 p.m. MDT

Existing home and condominium sales in Salt Lake County rose 32 percent last month over January. However, sales were down 23 percent compared to February 2008, the Salt Lake Board of Realtors said.

According to figures released Wednesday, 584 homes and condos were sold in February, up from 444 properties sold in January. A news release stated that the increase in sales could be partly attributed to an incentive campaign by the federal government that offered an $8,000 tax credit to first-time homebuyers or buyers who have not owned a home in the past three years.

"Sales will continue to increase going forward because of record-low mortgage interest rates and a second program that offers a $6,000 state grant for buyers of new homes," Ryan Kirkham, president of the Salt Lake Board of Realtors said.

Kelly Matthews, chief economist for Wells Fargo, said that the Federal Reserve's decision last week to buy as much as $300 billion in long-term U.S. Treasury securities pushed down mortgage interest rates — which are benchmarked to Treasury bonds — to below 5 percent. Interest rates could fall as low as 4.5 percent, he said.

The release stated that the median price of homes and condos sold in February was $224,450, down 3 percent from $231,500 in January, but flat compared to a median price of $224,956 in February 2008.

Expert says downtown Provo on the right track

Expert says downtown Provo on the right track
Ace Stryker - DAILY HERALD

PROVO -- A national expert in retail growth says Provo has laid the groundwork for a downtown business boom, but the city must play its cards right if it wants Center Street to stand up to local malls.

Randol Mackley, a principal with the California-based Retail Real Estate Group, told the city's Municipal Council on Tuesday that downtown must create a unique, walkable atmosphere if it would compete with local malls, which have drawn much retail attention away from the area over the years. He said the tumultuous market often determines much of the outcome, but a little planning could go a long way toward fostering a thriving downtown.

"Downtown's customer has changed," said Mackley, a Provo native who has helped develop retail blueprints for several California cities. "Today's downtown customer is choosing Los Hermanos over McDonalds. Also, they're choosing the Covey Center over the cineplex movies."

Mackley said downtown Provo has good historical architecture and "anchor" sites -- including the Covey Center for the Arts and the Provo Tabernacle -- but many Center Street storefronts are vacant or occupied by the "wrong tenants." Those include bars and other businesses that don't inspire the kind of impulse shopping downtown areas depend on, he said. Others, like antique stores, bike shops and independent businesses, add the color vibrant downtowns need, he said.

"Retail, in large measure, is an impulse business," he said. "There are some uses that would merit revisiting. A lot of cities have dealt with this through a zoning ordinance."

Sherrie Hall Everett, the council's vice chair, told the Daily Herald she imagined many businesses that don't fit the city's downtown vision would simply be "priced out" as interest in the area picks up. She said Mackley's comments were validation for many decisions the city has already made, and encouragement for others.

"If we stay the course and stay the vision, then some of these things will eventually work themselves out," she said. "It was encouraging to know that we have done a lot of things really well so far."

Mackley said there are definite steps the city can take to improve its future prospects, including creating a leasing brochure and focusing on drawing more restaurants downtown. He said downtown Provo could feasibly sustain three times its current number of restaurants.

"Restaurants are the last to leave a troubled downtown. They're also the first to come back," he said. "Retail follows the restaurants."

Joel Wallin, executive director of the Downtown Business Alliance of Provo, said his organization has already been moving toward several changes proposed by Mackley, like targeting new restaurants. Others, like creating a map of available space, could be improved or approached differently as a result of the presentation, he said.

"We're more than happy to be involved in the discussion," he said.

Mackley said he would offer feedback to city officials as they consider different ways to continue. Everett said the council will consider the advice, and if it adopts any, would do so through the regular channels, including appropriations.

• Ace Stryker can be reached at astryker@heraldextra.com.

Commercial Property Faces Crisis

Commercial Property Faces Crisis
Delinquency Rate at 1.8%, Near Peak of Last Recession; Parallels to S&L Debacle

By LINGLING WEI, Wall Street Journal

Commercial real-estate loans are going sour at an accelerating pace, threatening to cause tens of billions of dollars in losses to banks already hurt by the housing downturn.

The delinquency rate on about $700 billion in securitized loans backed by office buildings, hotels, stores and other investment property has more than doubled since September to 1.8% this month, according to data provided to The Wall Street Journal by Deutsche Bank Research. While that's low compared with the home-mortgage delinquency rate, it's just short of the highest rate during the last downturn early this decade.

Some experts say it now looks as if the current commercial-real-estate downturn will rival or even exceed the one in the early 1990s, when bad commercial-property debt played a big role in dragging the economy into a recession. Then, close to 1,000 U.S. banks and savings institutions failed. Lenders took about $48.5 billion in charges on commercial-real-estate debt between 1990 and 1995, representing 7.9% of such debt outstanding.

Foresight Analytics in Oakland, Calif., estimates the U.S. banking sector could suffer as much as $250 billion in losses this time. The research firm projects that more than 700 banks could fail as a result of commercial real estate.

General Growth Properties Inc., one of the biggest shopping-mall owners, has been teetering on the brink of a bankruptcy filing and recently failed to repay maturing loans on two shopping centers in Hayward, Calif., and Humble, Texas, according to Trepp, a firm that tracks the commercial property debt market.

John Hancock Tower in Boston is being sold in a foreclosure action. Recent additions to the list of properties with delinquent mortgages include an office building in Stamford, Conn., a hotel in Las Vegas and a shopping center in Ohio.

The problem was underscored when Moody's Investors Service downgraded Bank of America Corp. debt Wednesday, citing likely increases in soured "credit cards, residential and commercial real estate loans."

The Federal Reserve and the Treasury are moving to adapt a government funding program to make it attractive for investors to buy debt backed by office buildings, hotels, stores and other income-producing property. The program, called the Term Asset-Backed Securities Loan Facility, or TALF, was begun to finance purchases of debt backed by consumer credit and officials will expand its use to include commercial property debt.

Commercial-real-estate debt is potentially more dangerous to the financial system than loan classes such as credit cards and student loans because of its size. The Real Estate Roundtable estimates that commercial real estate in the U.S. is worth $6.5 trillion and financed by about $3.1 trillion in debt. The commercial real estate debt market is almost three times as big now as in the early 1990s.

Expanding the TALF program to commercial-real-estate loans would carry additional challenges. One is the commercial mortgages' duration, typically 10 years. The Fed is an institution that traditionally makes short-term debt available. In the TALF program, loans run just three years, which might not be long enough to spur investor demand for the longer-duration securities.
See the Data

Read the report provided to The Wall Street Journal by Deutsche Bank Research: "Commercial Real Estate Outlook Q1 2009."

Real-estate industry executives have been trying to resolve these issues with Fed and Treasury officials in meetings led by William Dudley, chief executive of the Federal Reserve Bank of New York, according to people familiar with the matter. The government officials are considering extending the TALF to accommodate the needs of the commercial-real-estate industry but no decisions have been made. In a statement on Monday, the Treasury Department suggested the Fed might alter the terms of its loans to investors to make them more attractive for long-term securities. "The Federal Reserve is working to ensure that the duration of these loans takes into account the duration of the underlying assets," the Treasury said.

Jeffrey DeBoer, chief executive of the Real Estate Roundtable, said, "The danger is a repeat of what happened on the residential side: A complete choking up, foreclosure disasters and increased stress on the banking system."

As recently as last summer, delinquency rates on commercial mortgages were at historically low levels. Many experts thought problems wouldn't be as bad in this downturn because commercial-property developers had showed more restraint.

But another issue is now looming: lax underwriting standards that some lenders used. Owners were able to borrow so much on the expectation that property values and cash flows would keep going up that some are at risk now that rents and occupancy rates are falling. Burdened by heavy debt loads, some commercial-property owners and developers are teetering, from General Growth to Broadway Partners, a privately held real-estate fund manager.

"In just seven months, we've gone from the best of times to the worst of times," said Richard Parkus, head of commercial mortgage securities research at Deutsche Bank AG.

Even some performing loans could face trouble because the values of the properties have fallen, making it hard for owners to refinance when loans come due. Currently, many banks are agreeing to grant short-term extensions on loans. But "that's just kicking the can down the street for awhile," said William Rudin, an owner of New York City office buildings. "That doesn't solve the problem."

Of some $154.5 billion of securitized commercial mortgages coming due between now and 2012, about two-thirds likely won't qualify for refinancing, Deutsche Bank predicts. Its estimate assumes declines in commercial-property values of 35% to 45% from the peak in 2007. That would exceed the price drops in the downturn of the early 1990s.

The bank estimates the default rates on the $700 billion of commercial-mortgage-backed securities could hit 30% and the loss rates -- which figures in the amounts recovered by lenders -- could reach more than 10% the highest levels seen in the last real-estate bust.

Besides securities backed by commercial-real-estate loans, about $524.5 billion of whole commercial mortgages held by the nation's banks and thrifts are expected to come due between this year and 2012. Between 40% and 45% of those loans wouldn't qualify for refinancing in a tight credit environment, as they exceed 90% of the underlying property's value, estimates Matthew Anderson, partner at Foresight Analytics. Today, lenders generally won't make loans that account for more than 65% of a property's value.

In contrast to home mortgages -- the majority of which were made by only 10 or so giant institutions -- hundreds of small and regional banks loaded up on commercial real estate. As of Dec. 31, more than 2,900 banks and savings institutions had more than 300% of their risk-based capital in commercial real-estate loans, including both commercial mortgages and construction loans. Risk-based capital is a cushion banks can dig into to cover losses.

At First Bank of Beverly Hills in Calabasas, Calif., , the amount of commercial-property debt outstanding was 14 times the bank's total risk-based capital as of the end of last year. Delinquencies reached 12.9%, compared with the average of 7% among the nation's banks and thrifts. Its lending is concentrated in Arizona, New Mexico and Nevada.

"In perfect hindsight, we would have done less commercial real-estate lending," said Larry B. Faigin, president and chief executive. The bank this month announced a deal with a leveraged-buyout and restructuring firm in Chicago, Orchard First Source Asset Management, under which Orchard will provide new capital to the bank.

Within two years after the deal closes, expected by August, First Bank will significantly reduce its concentration in commercial-real-estate lending and have less than half of its assets in the sector, Mr. Faigin said.
—Maurice Tamman and Jon Hilsenrath contributed to this article.

Write to Lingling Wei at lingling.wei@dowjones.com

Utah #1 in New Report Showing Path to Economic Recovery for States

Utah #1 in New Report Showing Path to Economic Recovery for States

by Zions Business Resource Center

Utah has been ranked number one again for economic competitiveness in a new report from the American Legislative Exchange Council (ALEC). The "Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index" places Utah first, followed by Colorado, Arizona, Virginia and South Dakota, to round out the top five.

The second edition of the index, which was just released, shows how the federal bailout of the states may simply encourage out-of-control spending by states-up 124 percent over the last 10 years-without requiring the states to make the tough decisions necessary to bring about financial stability. In the midst of the economic turmoil, federal bailouts and budget deficits in more than 40 states, the report offers a concise roadmap to recovery based upon economic performance trends from states over the last 10 years.

"As legislators, we know that we are in direct competition with other states for human and investment capital," says Utah State Senator Wayne Niederhauser, who chairs the Utah Revenue and Taxation Committee. "Rich States, Poor States has provided invaluable information to strengthen our efforts to reduce tax burdens in Utah and we are happy to again be ranked as the most competitive state in the nation."

TOP FIVE STATES
1. Utah
2. Colorado
3. Arizona
4. Virginia
5. South Dakota

BOTTOM FIVE STATES
46. New Jersey
47. Maine
48. Rhode Island
49. Vermont
50. New York

The index also ranks Utah first for economic outlook and 22nd for economic performance. Click here to view the state's individual analysis.

New York earns the dubious distinction of having the worst economic outlook of any state, according to the report. "The New York governor just might have broken the record for the number of bad ideas he put forward during a recent 17-minute budget address-most notably his 137 proposed tax increases come to mind," the reports authors say.

"Too many states were too eager to add programs and increase spending during the good times, but we now face very difficult choices," says Indiana Senator Jim Buck, Chairman of ALEC's Tax and Fiscal Policy Task Force. "While we need to make tough choices to live within our means, we also need to remain focused on policies that foster economic development and job growth as the best solution to our budget woes."

Co-author and renowned economist Dr. Arthur B. Laffer summarized the report's findings by saying, "States cannot tax their way into prosperity." Rich States, Poor States presents rankings of the 50 states based upon the relationship between policies and performance, revealing which states are best positioned to make a recovery, and which are not.

Laffer and his co-authors, Stephen Moore, senior economics writer at The Wall Street Journal, and Jonathan Williams, director of the Tax and Fiscal Policy Task Force for ALEC, analyzed how economic competitiveness drives income, population and job growth in the states. They found that states with a high and rising tax burden are more likely to suffer through economic decline, while those with lower and falling tax burdens are more likely to enjoy robust economic growth.

"The top performing states keep taxes, spending, and regulatory burdens low, while the biggest losers in the book tend to share similar policies of high tax rates, unsustainable spending and regulation," says Williams.

According to the Rich States, Poor States report, "The decline of California is probably the best evidence that we can present as to the impact of poor state policy making on the economic pulse of a state." In chapter two, the report contrasts the fiscal policy structures of California and Texas to demonstrate how economic theory actually works in the real world.

"California continues to increase regulations, raise taxes and spend profligately," say the report's authors. "Texas, on the other hand, has a pro-growth economic environment with a competitive tax system, sound regulations and spending discipline that will help Texas maintain its superior performance well into the future."

To view the full report, download it here: http://www.alec.org/am/pdf/tax/09RSPS/26969_REPORT_full.pdf

The American Legislative Exchange Council is the nation's largest individual membership organization of state legislators dedicated to advancing the principles of free markets, limited government, federalism and individual liberty.

Utah jobs: No gain, more pain as unemployment tops 5 percent

Utah jobs: No gain, more pain as unemployment tops 5 percent
Others have taken part time work, or jobs with less pay

By Lesley Mitchell, The Salt Lake Tribune
Updated: 03/25/2009 08:33:51 AM MDT

Utah's economy has lost about 26,000 jobs in the past year, pushing unemployment to more than 5 percent for the first time in four years, a new report shows.

But numbers don't tell the whole story.

Some Utahns laid off from jobs have found others, but at half the pay or at reduced hours, meaning that "there's a lot of 'silent pain' in the economy right now that the unemployment rate doesn't measure," said Mark Knold, chief economist for the Utah Department of Workforce Services.

Make no mistake, the numbers are sobering enough. The share of Utahns without jobs, rose to 5.1 percent in February, up from 4.1 percent just two months before, at the end of 2008. Only twice since Utah has been keeping employment data -- both times during the downturn of 1982 -- has the state's unemployment rate jumped by 1 percentage point over just a two-month period.

The report released Tuesday shows that key aspects of Utah's economy are deteriorating rapidly, and that the current slump will be one for the history books.

"This will turn out to the state's worst downturn since the Great Depression," Knold said.

About 70,400 people were considered unemployed in February 2009, compared with 45,000 in the same month last year. Utah's rate is still well below the national average of 8.1 percent, but the state clearly is not immune to the impacts of the U.S. recession.

The state's downward spin began in mid-2007 in residential real estate with a sharp fall in home sales. But what began as a real estate-oriented downturn with layoffs at home builders, real estate brokerages and title companies, has expanded to many different sectors of the economy.

That makes it difficult for many who have lost jobs to find new ones, let alone for similar pay. Veteran Utah residential appraiser Kevin Ethington lost his job at Wachovia over the holidays, one of about 100 Utah loan officers, appraisers and office staff working in Utah for the ailing financial services giant, before it was absorbed by Wells Fargo & Co.

Ethington said he has been unable to find another staff appraisal job, so he tapped his 401(k), which had lost 40 percent of its value in the stock market meltdown, and recently started his own appraisal business. He's making half his former income.

Knold said Ethington's situation illustrates the state's "silent pain."

"You have people who can't find a job that pays as well as the one they lost, or someone who was working full time and can find only part-time work, or someone who has had their hours cut. You have others who are furloughed -- technically they are still employed but they aren't getting paid for a week."

Linda Hilton of the Crossroads Urban Center, an advocacy group for low-income Utahns, is witnessing the same phenomenon.

"I've seen people who have been construction, and now they are selling hardware at Home Depot and they are not making anything close to what they were making before," she said.

How bad might all of this get? Will Utah's unemployment rate get close to the peak of 9.7 percent reached in 1983? Not likely, Knold said, adding that he expects a high in the 7 percent range.

Another key barometer is year-over-year job growth. In the year that ended in February, Utah lost 2.1 percent of its job base because of layoffs and companies forgoing expansions, bringing total employment down to 1.2 million. In a thriving economy, Utah gains, not loses, jobs on a year-over-year basis.

For the time being, job losses are continuing to accelerate and more families like the Denneys of Salt Lake City find themselves coping with the unexpected shock of a layoff.

Earlier this month, James Denney, a father of five children ages 5 weeks to 6 years, was assured his job at a shipping company was safe. On Tuesday, he found himself in a state office filling for unemployment benefits and reviewing help-wanted listings.

"We're looking for any type of job right now," said his wife, Victoria, who works part time.

Knold of Workforce Services said he's closely monitoring jobs numbers in Utah for any sign of improvement but hasn't found much encouraging data. "It will get worse before it gets better. This is the deep and bad part of the downturn."

lesley@sltrib.com

Still Active Fannie, Freddie Dole Out $53M for M-F Deals

Still Active Fannie, Freddie Dole Out $53M for M-F Deals
March 24, 2009
By: Elena Gontar, Staff Writer, Commercial Property News

With the finance industry suffering, securing a loan of any size is not as easy as it used to be. But despite the current economy, Fannie Mae and Freddie Mac remain active sources of financing. In one of the agencies' latest deals, Arbor Commercial Funding L.L.C. announced the funding of three loans totaling $53 million under the Fannie Mae DUS product line.

Financing for the three multi-family properties was arranged by Carolina Mortgage Co. in Fayetteville, N.C.

The loans included a 288-unit Battleground North Apartments, located in Greensboro, N.C., in the amount of $16.2 million; Eagle Point Village, a 300,000-unit complex in Fayetteville, in the amount of $18,7 million and Cedarcrest Village, a 300-unit community in Lexington, S.C., in the amount of $18 million.

Just last week CPN reported that the apartment market's attractive fundamentals are translating into a more or less regular flow of deals for Capmark Finance Inc., through its Freddie Mac and Fannie Mae programs. The real estate loan servicer originated a total of approximately $63.9 million in permanent debt for two multi-family properties located in Philadelphia and Pembroke Pines, Fla. One of the properties was the 320-unit Pembroke Cove in Pembroke Pines, and Capmark orchestrated a $30.9 million Freddie Mac loan for Pembroke Cove South L.L.C. for the purchase of the 361,100-square-foot garden-style complex. Some of the other major transactions include the company's orchestration of nearly $40 million in permanent debt from Fannie Mae for the refinancing of a 320-unit multi-family asset in North Wales, Pa., and the origination of an aggregate $62.4 million in permanent fixed-rate Fannie Mae debt for the refinancing of two apartment properties in Connecticut.

CPN also reported in early March that Colonial Properties Trust closed a $350 million credit facility originated by PNC ARCS L.L.C. for repurchase by Fannie Mae, which, despite a 2008 loss of $58.7 billion, is not deferring from big deals. Colonial's new credit facility, secured by 19 multi-family assets encompassing an aggregate 6,565 residential units, comes with a 10-year term and a 6.04 percent weighted average fixed interest rate.

Last year Denver-based multi-family REIT UDR Inc. closed a $225 million secured loan that includes an option to borrow an additional $175 million. The 10-year credit facility was originated by PNC ARCS L.L.C., for repurchase by Fannie Mae.

Also in late 2008, Freddie Mac purchased a $38.7 million mortgage from Holiday Fenoglio Fowler L.P., paving the way for the developer of a 612-unit Lincoln, Neb., apartment community to retire construction financing for the project. The 10-year fixed-rate mortgage was sold to Freddie Mac under the agency's Capital Markets Execution SM pilot program. Finally, in November the Dallas office of Holliday Fenoglio Fowler secured a $50.78 million loan through Freddie Mac for the owners of two Alabama multi-family properties with a total of 792 units.

Fannie Mae--which, along with Freddie Mac, was taken over by the government last year--asked for $15.2 billion from the U.S. Department of the Treasury on February 25 under the Senior Preferred Stock Purchase Agreement to erase its net worth deficit. If all goes as planned, Fannie Mae will get its multi-billion rescue by March 31.

Lending Grew During Q4, Says Mortgage Bankers Association

Lending Grew During Q4, Says Mortgage Bankers Association
March 23, 2009
By: Paul Rosta, Senior Associate Editor, Commercial Property News

A dearth of financing for acquisition and development has plagued commercial real estate and the general economy for the better part of two years. But a study by the Mortgage Bankers Association published late last week suggests that commercial real estate lending actually started increasing at the end of 2008.

“Counter to what many expected, investors increased their holdings of commercial and multi-family mortgages during the fourth quarter,” said Jamie Woodwell, MBA’s vice president of research, in a statement accompanying the report. “Banks, thrifts, Fannie Mae, Freddie Mac, life insurance companies and other lenders extended additional credit to the market during the fourth quarter.” Those capital sources, he noted, provided more financing for new mortgages than the debt than was retired or paid down during the year.

MBA based its conclusion on an analysis of the Federal Reserve’s Flow of Funds. Total outstanding commercial and multi-family debt increased by a combined $166 billion during 2008, ending the year at $3.5 trillion. That increase includes a $23 billion increase during the fourth quarter. Commercial banks hold $1.5 trillion of the $3.5 trillion total, although MBA notes that the total includes many loans underwritten to the borrower’s business income rather than the income generated by the property itself.

A single blockbuster merger in the banking industry gave commercial banks the single largest increase in commercial and multi-family mortgage debt: JPMorgan Chase & Co.’s acquisition last year of Washington Mutual, a savings bank. That deal generated much of the $152 billion increase in commercial banks’ share of outstanding commercial and multi-family debt, which stood at $1.55 trillion by the end of last year.

In other findings:

• Asset-backed security issues, notably CMBS and collateralized debt obligations, hold the second-largest volume of commercial and multi-family mortgages--$746 billion, or 21 percent of the total. Life insurance companies hold 9 percent of the total outstanding mortgages, and savings institutions have 5.5 percent.
• Fannie Mae, Freddie Mac and Ginnie Mae’s multi-family holdings total 10 percent of the all outstanding commercial and multi-family mortgages, including $189 billion in whole loans and $149 billion in securitized asset-backed loans.
• The outstanding commercial and multi-family debt held by government-sponsored enterprises grew by $42 billion in 2008, a 28 percent increase. During the fourth quarter, their holdings of commercial and multi-family mortgages increased 0.6 percent.

Salt Lake City Foreign-Trade Zone Receives Reorganization Approval from U.S. Commerce Department

Salt Lake City Foreign-Trade Zone Receives Reorganization Approval from U.S. Commerce Department

by World Trade Center Utah

Salt Lake City Mayor Ralph Becker announced today that Salt Lake City has received approval to reactivate its Foreign-Trade Zone (FTZ) from the Foreign-Trade Zones Board of the U.S. Department of Commerce. Salt Lake City's zone project is designated FTZ #30.

"This is great news for Salt Lake City and Utah businesses" commented Mayor Becker. "A Foreign-Trade Zone in Utah is a significant advantage to companies who are doing business in international trade or thinking about that opportunity. It is a great complement to the other assets we have in place as a global city."

A Foreign-Trade Zone is a designated site licensed by the U.S. government that offers U.S.-based businesses advantages in competing with foreign firms in international trade. A designated zone can defer, reduce, or eliminate customs duties, improve cash flow, lower inventory costs, and streamline customs procedures.

The Salt Lake City Foreign-Trade Zone is located at a 55 acre site at 1105 South 4800 West and is planned for development of 1.2 million square feet of warehouse, distribution and/or light manufacturing facilities. The newly reactivated zone replaces one that was begun in 1977 at the International Center but has been inactive since 1995. The new FTZ is managed and developed by The Rockefeller Group, an organization with more than 30 years of success in marketing and developing FTZs in the United States.

"We are fortunate to have such an experienced partner as The Rockefeller Group serving as the manager and developer of the zone site" said Bob Farrington, Salt Lake City Economic Development Director. "The Rockefeller Group has the experience, expertise, and motivation to make this work for all concerned."

Brandi Hanback, Managing Director of Rockefeller Group Foreign Trade Zone Services, has been coordinating the Salt Lake City FTZ approval process. She also serves as Chairman of the Board of the National Association of Foreign-Trade Zones. The Rockefeller Group will identify future operators and users of the zone and work with those companies to realize FTZ benefits.

"This is a significant benchmark in Utah's international efforts," commented Utah Governor Jon Huntsman upon hearing of Salt Lake City's FTZ approval. "I am convinced that our future growth will be linked to our worldwide trading partners."

A formal launch of the site and related educational seminars will be forthcoming in order for local businesses to better understand how to take advantage of the FTZ opportunity. To ensure that the information presented at the seminars will be most relevant to participants, we invite everyone interested in this topic to forward their questions by e-mail to Elizabeth Goryunova at egorn@wtcut.com. Should you need further clarification, please call WCTU at (801) 532-8080

Realtor Commercial Alliance updates

COMMERCIAL MORTGAGE-BACKED SECURITIES ACCEPTED AS COLLATERAL
The U.S. Treasury’s recent announcement that commercial mortgage-backed securities will now be accepted as eligible collateral for the Term Asset-Backed Loan Facility (TALF) will encourage investment in the commercial real estate market, according to the NAR. “There is no secondary market for commercial mortgages, so it is important to encourage lenders and investors whose activity will be essential in refinancing the performing commercial real estate loans in the marketplace, many of which are due to reset soon,” said RCA Chair Robert Toothaker. Read more, here

RCA, NAR ADVOCATING FOR THE COMMERCIAL REAL ESTATE INDUSTRY
RCA Chair Robert Toothaker, industry leaders, and NAR’s Government Affairs staff are working hard in Washington, D.C., to have commercial member interests represented in the $787 billion stimulus package, officially titled the, "American Recovery and Reinvestment Act." RCA supports the commercial real estate provisions that focus on opening of commercial real estate credit markets, green building and energy efficiency, as well as business tax incentives. Read more, here

COMMERCIAL REAL ESTATE ACTIVITY CONTINUING TO DECLINE
The forward-looking index for the commercial real estate sectors published by the National Association of Realtors® forecasts a sustained lack of credit and continued economic slump in the commercial real estate market this year. The slowing index means commercial real estate activity, as measured by net absorption and the completion of new commercial buildings, is likely to weaken further over the next six to nine months. Read more, here.

Utah may see relatively fast economic recovery

Utah may see relatively fast economic recovery

By Brice Wallace, Deseret News
Published: March 19, 2009

While tied to outside influences more than ever and facing slipping economic statistics, Utah nonetheless will fare better than many states when emerging from the economic downturn, the chief economist in the Governor's Office said Tuesday.

Speaking Wednesday at the Utah Foundation's annual meeting, Juliette Tennert said Utah's economy is "more broadly integrated" with the national and global economy than ever before and thus Utah's performance will depend on what happens at those levels. But several factors — unique demographics and industry diversity among them — work in Utah's favor for recovery, she said.

"We have one of the most diverse economies in the nation," Tennert said. "That means that while we're certainly impacted by the national contraction, we'll recover quicker than many other states."

Tennert is predicting Utah's unemployment rate to pass 6.5 percent in 2010 although still be relatively low when compared to most other states and the national prediction of above 9 percent. Utah employment will move from slight growth to a 2.5 percent decline in 2009 and flatten in 2010. "This will be the worst decline since the 1950s; however, it will not be as bad as the 3-plus decline that's expected at the national level," Tennert said.

Other predictions call for Utah home prices to fall 8 percent this year and 5 percent in 2010; average Utah pay growing 1.9 percent this year and 1.6 percent in 2010; and residential construction activity falling in 2009 but returning to "some level of stability" the next year.

"If not for the infusion of cash (from the federal economic stimulus package), I expect that this picture would be even grimmer," Tennert said. "While the outlook over the next year is certainly weak, we should not forget about the inherent strength and durability of Utah's economy. We are well-positioned to manage the downturn, and we really should be grateful for those dynamics that I mentioned that will help keep Utah's downturn less severe and help us to recover quicker than in many other states."

Economic woes led the Legislature to budget cuts of $250 million and later $350 million. Senate Majority Assistant Whip Greg Bell, R-Fruit Heights, described those cuts as "truly Draconian" but also "done with as much precision as possible."

Federal stimulus funds "effectively hide" effects of budget cuts in 2010, but the full effects will be seen in 2011, he said.

"We don't live in a vacuum, and I think that's going to be the message today, that Utah is doing extraordinarily well in so many regards and though our ship seems to sail fairly well, we are getting a lot of backwash from national and international conditions over which we have no control," Bell said. "So for a while it seemed some were immune and now it seems no one is, and we're all going to have to live with the difficult circumstances and conditions imposed upon us by these challenging times."

Natalie Gochnour, chief operating officer at the Salt Lake Chamber, said long-term economic success for Utah can be tied to globalization efforts, including continued funding and a building to house the World Trade Center Utah and becoming a "more welcoming" state. "We live in a post-American world, period," she said. Improving education and air quality and developing energy security were among her other suggestions.

E-MAIL: bwallace@desnews.com
© 2009 Deseret News Publishing Company | All rights reserved

3 Utah metro areas among fastest growing in U.S.

3 Utah metro areas among fastest growing in U.S.
Utah's continuing baby boom credited for most of increase

By Lee Davidson, Deseret News
Published: March 19, 2009

Thanks largely to a continuing baby boom, Utah produced three of the nation's top 10 fastest-growing metropolitan areas last year, the Census Bureau reported Thursday.

The Provo-Orem metro area was No. 6 in the nation with 3.4 percent growth, adding an estimated 17,989 people between July 1, 2007, and the same date in 2008 — meaning it added the equivalent of a city with the population of Payson in a year.

The Logan metro area was No. 9 nationally with a 3.2 percent increase (adding about 3,917 people), and the St. George metro area was No. 10 at 3.1 percent (adding 4,142 residents). The nation has 363 separate metropolitan areas.

Census estimates show that about a third of such Utah growth came from people immigrating, likely attracted by economic conditions that were still generally better here than elsewhere. But about two-thirds of that growth came from Utah's much higher-than-normal birth rates (and long life expectancy).

"We have the highest fertility rate in the nation, and a lot of women in their child-bearing years," explained Utah state demographer Juliette Tennert. "It speaks to the fact that we have a culture here that places an important emphasis on families and children."

Pam Perlich, a research economist at the University of Utah, added, "We've got kind of a permanent youth movement to the state." She said each of the past 12 years have set a record for births here. On top of births to longtime residents, immigrants seeking work here tend to be young "and also are in their peak child-bearing years."

Helen Anderson, Provo community relations director, said of Provo: "It tends to be a conservative place politically, with high value on traditional marriage and children. … Not only do we have a high rate of births, but those children grow up and want to say close to home and continue to enjoy the quality of life here."

Tennert noted that the Census reported a few months ago that Utah was the fastest-growing state between 2007 and 2008. "So, of course, the smaller parts (like metro areas and counties) will show up high in the rankings, too."

Besides the three metro areas in the top 10 for growth, the Ogden-Clearfield metro area ranked No. 18 nationally with a 2.7 percent increase (adding 13,983 people). The Salt Lake City metro area ranked No. 59 nationally with a 1.9 percent hike (adding 20,330 residents — or the equivalent of the population of South Salt Lake in a year).

Also, Utah generated 10 of the nation's 100 fastest-growing counties: Rich (ranked 9th nationally), Piute (No. 17), Juab (28), Duchesne (38), San Juan (40), Tooele and Morgan (tied at 43), Sanpete (56), Utah (81) and Cache (87).

While Utah's economy was already beginning to slow down between 2007 and 2008, "It was still doing relatively well compared to other states. People were still moving to Utah to take advantage of the economic opportunities," Tennert said.

"For that time period, Utah's unemployment rate was 3.1 percent. And nationally, the average was 5 percent," she said. "Utah's economic opportunities are still better (than many areas'), so we still expect to have net in-immigration" in coming years despite the current economic recession.

As Perlich said, "Our economy is diversifying toward industries of growth. It's not like Michigan, and we're losing industrial base. … Even if we're losing jobs, we're not as bad as Michigan. Where are the people in Michigan going to go? They're going to come to places like this."

But data show that the real power behind population growth here is the local birth rate.

In fact, "natural growth" — the difference between births and deaths here in a year — is astronomical in Utah, according to the new Census estimates.

For example, it estimated that the Provo-Orem metro area gained 21 people per 1,000 residents from natural growth last year. That was second highest in the nation behind only Laredo, Texas. It was three times higher than the national average for natural growth of 6.2 per 1,000 residents.

And the other Utah metro areas were not far behind. Logan was No. 3 in the nation for its rate of natural growth at 20.7 per 1,000 residents; Ogden-Clearfield was No. 7 at 15.6; St. George was No. 11 at 15.0; and the Salt Lake City metro area was No. 14 at 14.1.

Estimates show, for example, that 62 percent of the growth last year in Provo-Orem was from "natural increase" and just 37 percent from immigration.

At other extremes, in the Salt Lake metro area 76 percent of growth came from "natural increase" and 24 percent was from immigration. In St. George, just 49 percent came from natural increase and 51 percent was from immigration.

Perlich said much of the current baby boom is an echo from a previous boom that peaked in 1982. "If you figure out how old those kids (from the 1980s boom) are now, they are in peak child-bearing years. We're on a 12-year run of record births. And it's an echo of that previous boom."

Anderson said that growth in Provo-Orem shows "this is a great place to live. We actually have been ranked highly through the last several years for having a high quality of life and low cost of living," and it has low crime rates. "Our families are growing. They want to stay here and live close to each other. We have the jobs, fortunately, to make that possible."

She said that Provo-Orem "can create jobs because we have two great universities — Utah Valley University and Brigham Young University. We have a strong entrepreneurial spirit here." Perlich said those universities also attract more young people, who have children while still in school and further increase the population.

Tennert said state officials are happy with the growth they see, which generally matches predictions they have made. "We always say that the economy fuels population growth, and population growth fuels the economy. We do think that it's a very positive thing."

Of course, it brings challenges for the future.

"We need to be thinking about infrastructure investment," Tennert said. "We need to make sure we can have transportation that can accommodate the population, and schools and services."

Tennert adds that the state expects growth from both immigration and natural growth to continue for years.

"We think we will continue to experience population growth that outpaces the national average," she said.

E-MAIL: lee@desnews.com
© 2009 Deseret News Publishing Company | All rights reserved

Housing surge misses West

Housing surge misses West
Still, Wasatch Front builders are optimistic fed, state incentives may spark turnaround.

Staff And News Services, Salt Lake Tribune
Updated:03/18/2009 08:06:42 AM MDT

Housing construction posted a surprisingly large increase in February, bolstered by strength in all parts of the country except Western states such as Utah.

But even along the Wasatch Front, builders and others in the industry are optimistic that a host of federal and state incentives for buyers could help turn things around.

The Commerce Department reported Tuesday that construction of new homes and apartments nationally jumped 22.2 percent in February, compared with January, pushing total activity to a seasonally adjusted annual rate of 583,000 units.

Investors restarted Wall Street's rally Tuesday on the news, buying financial and homebuilder stocks. Major market indicators jumped more than 2 percent, including the Dow Jones industrial average, which added 179 points. Markets have risen five out of the past six sessions.

Although the surge in housing construction was far better than the continued decline economists had expected, the rebound could be a temporary gain given all the problems the housing industry still faces.

Even with the big increase, construction activity remains 47.3 percent below where it was a year ago. The strength in February was led by a big increase in apartment construction nationally, which can be highly volatile from month to month.

All areas of the country reported an increase last month, except the West, parts of which have been hard hit by the housing slump.

Along the Wasatch Front, builders in February took out permits for the construction of 133 homes, down from 150 in January and 270 in February 2008.

Builders here are hoping a federal tax incentive of as much as $8,000 geared toward first-time homebuyers, and a state grant of $6,000 for those who buy new homes, will help Utah's new-home market.

On the multifamily side, construction of apartments has not dried up along the Wasatch Front as it has in Denver, Phoenix and Las Vegas. That said, the local market is weakening, according to Jed Millburn of ARA Utah, which tracks the multifamily market.

Vacancies are up and the hefty rental increases of the past several years have given way to no increases at all, which makes developers -- even those who can get financing -- not as eager to build complexes, though some are rising in the valley.

The uptick in construction nationally was driven by improving weather in February, particularly in the Northeast, where a severe winter had slowed construction in December and January to a standstill, said Patrick Newport, U.S. economist for IHS Global Insight.

"The numbers are so low that any increase will give you a big percentage increase," Newport said, adding that a surer sign of a turnaround would be a three-month sustained increase in single-family permits.

PWC Survey: Investors Focus on Maintaining Property Values as Economy Struggles

PWC Survey: Investors Focus on Maintaining Property Values as Economy Struggles
March 18, 2009
By: Barbra Murray, Contributing Editor, Commercial Property News

"Survival mode" is how the current state of the commercial real estate investor community is described in the first quarter 2009 PricewaterhouseCoopers Korpacz Real Estate Investor Survey. With the recession taking its toll on the market, investors across the board are just trying to bolster the sliding values of their portfolios in an attempt to keep their heads above water in one of the country's most economically challenging climates seen in decades.

Confidence in the real estate market has been eroding with great speed. Speaking to CPN, Susan Smith, editor-in-chief of the PWC Korpacz survey and a director in PWC's real estate sector services group, put it all into perspective. She explained that on a scale of 1 to 10, with 1 being an abysmal forecast and 10 being very optimistic, the third quarter of 2008 was a 6 and now it's more like a 4. "After looking at the data and talking to investors, there's no panic, there's more trepidation, more disappointment. There's a sense that the bottom hasn't been hit. Values are going down and it's one of the most difficult operator and ownership environments they've seen."

As far as the various real estate sectors go, retail owners are taking a pounding. Sales of regional malls are virtually nonexistent and at power centers, the battle is on to maintain occupancy levels and rental rates. In the office market, vacancies are on the rise even in the most reliable metropolitan areas, and an anticipated decline of as much as 30 percent is on the horizon for city center and suburban assets. Lodging, however, is in the biggest struggle. "It's experiencing tremendous reduction in demand," Smith said. "It's one sector that kind of falls of the cliff when the economy goes south."

There was some good news from the survey participants, however "The multi-family sector is in better shape than others to lead recovery," Smith noted. "There are some pockets, like Las Vegas and Phoenix, that are underperforming because they had a tremendous round of construction of both rental and condominium units in anticipation of population growth that just hasn't happened, but we could start to see signs of market recovery in 2010."

Respondents to the PWC Korpacz survey were not queried about the impact of the stimulus bill on commercial real estate, nor did they feel compelled to broach the subject. "Many investors don't link anything with government to the real estate industry," Smith said. "If you're in it as a long-term holder, you know there are ups and owns, and you have to do what you can to get through it."

The most important action investors feel they can take right now to get through it is to focus on shoring up property values, be it through lease expansions and renewals, offering incentives or decreasing operating costs. "They aren't looking to abandon real estate, they're looking at how to preserve value and be in good shape to capitalize on the opportunities to come."

Economic Update - Investors Still on Lookout for Deals

Economic Update - Investors Still on Lookout for Deals
March 18, 2009
By: Dees Stribling, Contributing Editor, Commercial Property News

A deal like this was garden-variety stuff only about two years ago, but these days it has a ring of news to it: Men's Wearhouse is leasing about 232,400 square feet at a warehouse in Bakersfield, Calif., owned by Northbrook, Ill.-based New Trier Partners as part of its Fund I investment portfolio. The men's wear retailer will use the space as its West Coast Tuxedo Service Center.

"It was a juggling act to get everything done in this environment, including dealing with the existing tenant, the new tenant, and the lender--which was a conduit loan, and those are especially difficult right now," Robert Goldstein, managing partner of New Trier, told CPN.

Since it started its first fund a few years ago, New Trier has been a specialist in acquiring value-add commercial properties, focusing on "single-tenant office buildings and industrial buildings in a handful of markets," said Goldstein. "It's a tough time now to be in the market for acquisitions, because we aren't seeing a lot of banks selling properties yet. But at the same time, there are are decent buildings available with some years' life in them, and the potential for value-add. That's what we're looking for."

Gregory Skirving, a principal with New Trier, told CPN that "we've seeing a lot of cap-rate movement upward. The opportunity is still there to buy buildings that are close to being stabilized, but with some vacancy or rollover risk. If you manage those properties appropriately, you can create some relatively attractive yields."

It might be part grandstanding, but Capitol Hill seems to be emitting some genuine indignation over the bonuses paid, or slated to be paid, to employees of black-hole insurer A.I.G. The bonuses attracted even more ire on Tuesday after the company revealed--at the instance of New York Attorney General Andrew Cuomo--that much of the pay went to the Financial Products division, now known to world know as purveyors of mind-boggling amounts of credit default swaps.

The top recipient at A.I.G. got $6.4 million; the top 10 bonuses combined totaled $42 million; and 73 people--11 no longer with the firm--got $1 million or more. In the Wall Street of 2007, such figures would have merited no attention. Now they are lightning rods.

The residential real estate market isn't the only thing contracting in Las Vegas. So too is gaming revenue, and it's putting the squeeze on the likes of MGM Mirage, which owns 10 hotels on the Strip and is majority owned by billionaire Kirk Kerkorian. The company in the thick of trying to renegotiate debt and auditors have raised "substantial doubt" about the company's future as a "going concern." MGM Mirage also recently reported a $1.15 billion 4Q08 loss it attributed to declining gambling revenue. Somewhere in Vegas, bookmakers are making odds on the prospect of bankruptcy for the casino giant.

The rest of Wall Street continued to enjoy an upward ride on Tuesday, with the Dow Jones Industrial Average up 178.73 points, or 2.48 percent. The S&P 500 was up 3.21 percent and the Nasdaq gained 4.14 percent.

Report says Utah's economy ready to charge

Report says Utah's economy ready to charge

The Salt Lake Tribune
Updated: 03/17/2009 07:42:34 PM MDT

Utah's economy may be in the doldrums now, but low taxes mean it's primed for prosperity.

At least that is the finding of a report co-written by Arthur Laffer, the supply-side economist best known for the "Laffer Curve."

Utah's low taxes and controlled spending give it the most competitive economic environment in the nation, according to the report by the American Legislative Exchange Council (ALEC). Other states that raised taxes to balance budgets are only hurting themselves.

"The economic growth really, really shows that limited government and low taxes are the way to prosper in this world," said Jonathan Williams, ALEC's director of tax and fiscal policy task force and co-author of the report.

The Laffer report gives Utah high marks for having a relatively flat tax, no estate tax, no state minimum wage and being a right-to-work state.

Robert Gehrke

Provo ranked best mid-sized city in U.S.

Provo ranked best mid-sized city in U.S.
Ace Stryker - Daily Herald

Provo has the best quality of life among 124 mid-sized metro areas in the United States, according to a new study.

Bizjournals, a national network of business publications, rated Provo ahead of every other mid-sized city of at least 50,000 people in the country. Boulder, Colo., and Madison, Wis., rounded out the top three, while El Paso, Texas, and Bakersfield and Visalia, Calif., came in at the bottom of the rankings.

Provo's healthy population growth, low unemployment rate and inventory of large homes -- more than a quarter in the area have at least nine rooms -- helped place it at the top of the list, according to the study. Other criteria looked at include median household income, percentage of residents with higher education degrees, and average commuting time to work.

The designation is not new to Provo. In the past few years, the city has received the following recognition:

Nation's top city for commercial growth performance by The Milken Institute in 2008

Metro area with highest volunteerism by The Corporation for National and Community Service in 2008

One of "10 Great Places to Live, Work and Play" by Kiplinger's Personal Finance in 2008

One of the "Best Cities for Married With Children" by Kiplinger's Personal Finance in 2007

One of "50 Smart Places to Live" by Kiplinger's Personal Finance in 2006

Eighth-safest mid-sized city by Farmers Insurance Group of Companies in 2005

• Ace Stryker can be reached at astryker@heraldextra.com.

Utah execs' optimism waned in Q4, but they stay positive

Utah execs' optimism waned in Q4, but they stay positive
Economy » Business leaders are guarded, but some see signs of recovery

By Paul Beebe, The Salt Lake Tribune
Updated: 03/13/2009 04:22:22 PM MDT

Optimism among Utah executives about the financial futures of their companies is ebbing, but has not collapsed, despite declining economic conditions in the country.

"Lets call it guarded. Nothing has fallen off the cliff," said Julie Olsen, a research analyst for Dan Jones and Associates, which produced the latest quarterly economic forecast for Zions Bank.

"Because of everything you hear going on in the media, you have to be blind not to know that something is going on, but people are not ready to throw in the towel," Olsen said.

The study tries to gauge the health of Utah's economy from the perspective of high-level executives across the state. Their optimism about the future of their firms was measured at 5.86 in the last quarter of 2008, down from 6.13 in the third quarter. Optimism is measured on a scale of 1 to 10.

Olsen said respondents impart several meanings to "financial future." The term could mean anticipated earnings, financial stability or cash flow, among other things.

The U.S. economy is in the 15th month of a recession that shows no sign yet of recovery. In Utah, business conditions have weakened considerably, but are healthier than much of the country.

In fact, some businesses even sense that the worst may be over.

"I am sensing in the daily activity we are getting reasonably close to where things are flattening out," said W. David Smith, general manager of the Salt Lake division of XpedX, a
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wholesale distributor of paper, packaging and facilities maintenance supplies.

"I just see that in the requests for quotes and deliveries going out. It's not at the levels that we would like and certainly down compared to levels a year ago. But it looks like the trend is flattening and not trending down," Smith said.

Still, the survey shows executives are cautious about prospects for their companies in coming months.

Capital spending weakened further in the fourth quarter. Just 10 percent of respondents said their spending on equipment and other assets increased in the final three months of last year, marking the lowest level since the survey began in mid-2006, and down from 17 percent in the third quarter.

Utah executives were more pessimistic about hiring in the fourth quarter than at any time before. Thirty seven percent said employment was likely to decrease in the quarter, up from 26 percent in the previous three months of last year.

pbeebe@sltrib.com

Hershey closes center in California after move to Ogden facility

Hershey closes center in California after move to Ogden facility

By Steven Oberbeck, The Salt Lake Tribune
Updated: 03/13/2009 09:44:25 PM MDT

The Hershey Co. is closing down its Redlands, Calif., distribution center after having already moved most of its operations to a newly opened 545,000-square-foot facility in Ogden Business Depot.

The shutdown in Redlands is expected to cost that community about 90 jobs.

"We don't talk about company logistics," Hershey spokesman Kirk Saville said Friday. He declined to discuss Hershey's timetable for mothballing its 600,000-square-foot Redlands distribution facility that opened in 2002.

He indicated, however, that relocating to Ogden was part of Hershey's new global distribution plan.

A year ago, Hershey indicated it intended to take the state up on its offer of a $2.6 million incentive to open the distribution center in Ogden, that it estimated at the time would employ more than 120 people.

Hershey, the nation's second-largest candy maker after Mars Inc., will receive the incentive over 10 years as a partial rebate of the taxes the company would normally have paid to the state.

The company's incentive application filed with the Governor's Office of Economic Development (GOED) indicated Hershey planned to spend about $38 million to open the distribution center.

"These are high-paying jobs in a world-recognized company," GOED Executive Director Jason Perry said at the time. "And this is a pretty large-size investment by Hershey."

Steve Waldrip, of The Boyer Co., which helped Hershey secure the property for its Utah distribution center, said the Ogden facility has been operating for a couple of months now.

He said Hershey always indicated the Ogden facility was being developed as a replacement for its Redlands facility. "They looked at their operating costs in California and what they would be in Utah and decided Ogden was the place."

Waldrip pointed out that Southern Classic Food Group, an Alabama-based manufacturers of dressings, sauces and marinades, recently opened in Ogden as well and is supplying the Hershey distribution center with chocolate syrup.

The Associated Press contributed to this report.

Commercial, M-F Delinquencies Rise, but with Silver Lining

Commercial, M-F Delinquencies Rise, but with Silver Lining
March 13, 2009
By: Eugene Gilligan, Senior Editor, Commercial Property News

Commercial and multi-family loan delinquencies increased during the fourth quarter of 2008, as the contracting economy and continuing credit crisis stressed property fundamentals, according to the "Commercial/Multi-family Delinquency Report" released by the Mortgage Bankers Association.

The report found that the 30+ day delinquency rate on loans held in CMBS rose 0.54 percentage points to 1.17 percent. The 60+ day delinquency rate on loans held in life insurance company portfolios rose 0.01 percentage points to 0.07 percent. The 60+ day delinquency rate on multi-family loans held or insured by Fannie Mae rose 0.14 percentage points to 0.30 percent. The 90+ day delinquency rate on multi-family loans held or insured by Freddie Mac stayed constant at 0.01 percent. The 90+ day delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.24 percent.

The MBA analysis looks at commercial/multi-family delinquency rates for five of the largest investor groups: commercial banks and thrifts, CMBS, life insurance companies, Fannie Mae and Freddie Mac. Together, these groups hold more than 80 percent of commercial/multi-family mortgage debt outstanding.

The declining economy, which suffered a six percent decline in GDP from the third quarter, negatively affected loan performance, said Jamie Woodwell (pictured), vice president of commercial real estate research for the Mortgage Bankers Association.

“Job losses, reduced retail spending and problems in the single-family housing market all affected the property markets, and increased delinquency rates,” he said.

Based on the unpaid principal balance of loans, delinquency rates for each group at the end of the fourth quarter were: CMBS: 1.17 percent (30+ days delinquent or in REO); life company portfolios 0.07 percent (60+ days delinquent); Fannie Mae: 0.30 percent (60 or more days delinquent); Freddie Mac: 0.01 percent (90 or more days delinquent); and banks and thrifts: 1.62 percent (90 or more days delinquent or in non-accrual.)

The Mortgage Bankers Association also released a research data note, reviewing the performance of commercial/multi-family mortgages held by banks and thrifts. The report concluded that commercial and multi-family mortgages are the best performing loans-ranking lowest among bank loans in terms of charge-off rates, second and third in lowest in terms of 30+day delinquency rates, and second and third lowest in terms of increases in delinquency rates between the third and fourth quarters.

“[Commercial/multifamily loans] performed relatively well, considering everything that is going on,” Woodwell said. The delinquency rate of commercial multi-family loans in life insurance company portfolios is “extremely low,” and commercial/multi-family loans in bank and thrifts “are about the best performing loans they have,” he said.

The huge amount of delinquent and defaulted loans in the single-family housing sector scared investors away from CMBS in August of 2007, and has led to a huge dropoff in investment in CMBS.

From a CMBS issuance volume of $230 billion in 2007, volume dropped to $12 billion in 2008, with all of that in the first half of the year.

Woodwell said that one of the missions of the government’s Term Asset-Backed Securities Loan Facility, or TALF, is to re-start the CMBS market. Woodwell also believes the markets will find some way to gain momentum again.

“Markets, and investors, are very adept at finding their way to good investments,” Woodwell said.

This Too Shall Pass

This Too Shall Pass
Economist Christopher Thornberg, who foresaw the single-family housing meltdown, advises developers to take a deep breath and ignore trends.

By Jerry Ascierto
APARTMENT FINANCE TODAY, 2009-03-12

As an economist with UCLA's Anderson Forecast, Christopher Thornberg has garnered a reputation as something of a pessimist. In late 2003, Thornberg began warning about the single-family housing bubble and the risks facing the broader economy. He was often met with unbelieving, blank stares by the real estate industry professionals who came to hear him speak.

Thornberg's forecast has certainly proven prescient. But he believes that the doom-and-gloom scenarios currently dominating economic discourse are far too pessimistic, that irrational greed has now given way to irrational fear.

Thornberg, who in 2006 founded the Los Angeles-based research and consulting firm Beacon Economics, recently sat down with Apartment Finance Today to offer his view of what went wrong, and when the economy will start to right itself.

AFT: So, have you developed a Cassandra complex? Do you feel doomed to see the future but powerless to change it?

CT: I'd call it job security. When you sit down and think about the mistakes that were made—forgetting risk, forgetting about fundamentals—how many times has this been done in the past? The magnitude and scope of this one is pretty awe-inspiring, but it's the same stupidity and the same greed, the same mistakes.

I have a much better sense of the whole Keynesian greed and fear model now. Because when you boil it down, you can talk yourself blue in the face, but those two emotions dominate people's rational thinking. There was no way that anyone could have justified those kinds of crazy cap rates and lending rates and terms. It just didn't make any sense. But it was shocking to me how people refused to acknowledge the obvious.

AFT: Did you anticipate that the single-family housing meltdown would have the kind of ramifications it's had throughout the economy?

CT: Yes, but it's not single family. Single family was the symptom not the disease. The real problem was consumer spending. We had asset prices across the board at local levels that weren't realistic, given GDP. Now, they're crashing down, and, as a result, Americans who thought they were rich and were overspending are no longer taking the risk or overspending. That was the problem in the economy. Single family was just the most outrageous aspect of the entire disaster. When everything started tumbling down, it was the first to go. But housing is not a driver, it's the canary in the coalmine.

AFT: The talking heads out there are increasingly saying that this will be a five-year downturn, or even that we're entering a depression. Has the current discourse become too pessimistic?

CT: Absolutely. At some point in time we moved through the structural collapse. The housing prices in California, for example, have gotten back to historic normal levels relative to incomes in the state, yet they're still falling. Stock prices and P/E ratios for a lot of companies have reached levels that make them terrific deals if the stock market continues to fall. When you look at the firms and the money they're making, it's pretty clear the stock market has fallen too far.

AFT: So, where's the bottom? Does the economy have to get worse before it gets better?

CT: The big driver of the economy at this point is by far the consumer and the fact that consumers had been overspending. Savings rates had gone from 8 or 9 percent down to 0 percent and that just wasn't sustainable. Everybody talks about how we need to expand credit, that the consumer needs more credit so they can go spend more. Every time I hear a politician say that I want to scream. The problem in the economy is too much credit that boosted consumer spending. It's like this man is dying of alcohol poisoning, quick give him a beer!

You're not supposed to use credit to consume. Credit is for investment, credit is for the future. You buy a car on credit because the car will give you value over the next five years; you buy a house on credit because that will give you value over the next 20 years. You don't buy an iPod on credit, and you don't buy food on credit. You buy that from your income.

So the good news is that savings rates have gone from basically 0 percent to 5 percent in the last five months. What this means is that in a few months, at the pace we're going, we're going to have an 8 percent savings rate. That's when we'll see consumer spending stabilize. Now there's the injury, and then there's the healing. So when consumer savings hits 8 percent or 9 percent the injury is over, but we're still going to have a year of healing.

AFT: Outside of consumer spending and savings rates, what other leading indicators will point to the early signs of a recovery?

CT: You'll know that this is over when you see industrial production stabilize, when you see retail sales stabilize, when unemployment stops rising. The end of a recession is dictated largely by unemployment stopping its increase.

AFT: Do you see these indicators, the early signs of a recovery, coming to light anytime soon?

CT: Not yet, we're still in the thick of it. However, the signs that we're reaching the bottom are clearly there. Prices for homes have gotten into a realm that is starting to make sense. You are starting to see the beginning of an increase in sales. You're starting to see the basic signs that assets are getting back to a level that makes sense. When you add this all up, we're moving through this.

And everybody keeps freaking out, thinking that whatever happens today is going to happen tomorrow, but it's that same mentality that got us into this mess in the first place. It's the easiest way of thinking about the economy, and I mean that with disdain. The standard view of the world is that the trend is your friend. And it's exactly that kind of thinking that's the problem. People should be thinking about fundamentals.

AFT: What do you think of the Obama administration's response to this crisis?

CT: Under the circumstances, I think it's been very good. There have been parts of some programs I don't like. I don't care for their homeowner bailout bill. I think their fiscal spending is weighted too heavily at the back end. However, you have to remember that the Obama administration has an important restriction upon their ability to do anything-they're the executive branch. They're supposed to enforce laws, they don't make laws; they're supposed to enforce programs, they don't design programs. Considering that he has 532 knuckleheads between him and results, I think he's doing a hell of a good job.

AFT: When will we see GDP growth again?

CT: You're going to see GDP start to grow again first and second quarter of 2010.

AFT: Any words of advice for single-family and multifamily developers?

CT: Take a deep breath and just recognize that this too shall pass. Think about fundamentals and stop thinking about trends. Trends are not your friend; your friend is fundamentals. When you sit down and remember that, you'll see that things aren't that bad, and we will get through this.

Mark-to-Market Rule Gains More Critics

Mark-to-Market Rule Gains More Critics
Momentum to suspend controversial fair value accounting rule could gain steam as banks continue to write down assets.

By Chris Wood
MULTIFAMILY EXECUTIVE News Service, 2009-03-12

Even as a U.S. House of Representatives financial services subcommittee on capital markets plans a hearing on mark-to-market accounting rules this Thursday, the Securities and Exchange Commission will likely not suspend the controversial fair market accounting rule that has forced banks to write down billions of dollars worth of secured real estate assets, Reuters reported this week.

The mark-to-market rule requires banks and certain publicly traded entities to value the assets on their balance sheets based on the current street price for those assets. Critics contend that the rule forces banks to write down their assets to toxic asset, fire-sale market-bottom prices, regardless of the motivating factors behind those asset sales. In the multifamily sector, for example, an unstabilized and distressed asset that is traded for a sub-5 percent cap rate must be factored into the balance sheet valuation of any otherwise healthy and stabilized properties that might have net operating income demanding a much higher valuation.

"If we had gotten rid of mark-to-market, I would render that this entire recession would not have happened," offers Matt McManus, chairman of NAI BlueStone Real Estate Capital, a Philadelphia-based commercial real estate investment banking and advisory firm that secures debt, mezzanine, equity, and sponsor equity financing for investors, operators, owners, and developers. "Every single transaction out there that trades hands forces the entire remaining market to reflect that transaction. It is not representative of the real market, and it is not representative of real values. It is a vicious cycle, a downward spiral."

Federal Reserve chairman Ben Bernanke has maintained in public comments that he does not support suspension of the mark to market rule, which was found to be effective in dealing with Enron and other corporate fraud schemes that sought to artificially over-valuate assets.

Even private equity firms that were slow to negatively valuate positive cash flow multifamily assets might be caught in the mark-to-market vortex, McManus warns. "A lot of private firms hoped the economy would turn around or something would be done to the mark-to-market rule where everyone who was subject to it would be relieved from it and values would therefore come back up," he says. "A lot of them are beginning to concede that the rule isn't changing and everyone has to mark down their holdings. Really, at this point, the economic impact is irreversible."

Nevertheless, major industry associations and lobbying groups are asking Congress to provide some type of mark-to-market relief. In a March 9 letter to the House Committee on Financial Services, the Mortgage Bankers Association, the National Association of Home Builders, the National Association of Realtors, and the Institute of Real Estate Management joined 12 federal home loan banks and other signatories in calling for immediate action to correct the "procyclical impact" of "flawed" mark-to-market accounting rules.

"The inability of businesses, investors, and government to properly value assets in disorderly markets has created uncertainty and a loss of confidence that has led to a self-reinforcing cycle of write downs and further economic contractions," the letter says.

McManus argues that anything will be better than nothing when it comes to mark-to-market alleviation. "When assets are incorrectly valuated, bank capital is out of balance and they can't lend," he says. "They have got to temporarily lift this rule, or at the very least modify it. As it is set in the books right now, it is a really dangerous rule that is causing a lot of unnecessary hurt and pain to all financial institutions."

Salt Lake convention business strong despite recession

Salt Lake convention business strong despite recession
Bookings » 2008 was second-best year ever, though downturn's effects are being felt.

By Mike Gorrell, The Salt Lake Tribune
Updated:03/11/2009 08:17:23 AM MDT


This is a big year for the Salt Lake Convention & Visitors Bureau.

It's celebrating its silver anniversary, 25 years of marked growth that includes a prominent supporting role in securing and staging the 2002 Winter Olympics.

But like everyone else, the bureau is trying to withstand the onslaught of the recession -- something it has been able to do thus far.

Its prospects of continuing to do so will be enhanced greatly if it succeeds this July in impressing thousands of visitors from Meeting Professionals International (MPI), the people who decide where companies, groups and trade associations hold their future conventions.

Collectively, those meetings generate $14 billion worth of spending each year. With a good showing July 11-14, the Salt Lake CVB hopes to increase its share of the national meeting market beyond the $243.6 million worth of business brought in last year.

"This is a great opportunity to bring the best and the brightest of our industry here and to show them what we are and what we're becoming," said Bureau President Scott Beck, citing ongoing construction projects that are reshaping downtown Salt Lake City. "I'm always amazed by the looks on people's faces when we go to the 16th floor of the Marriott hotel and show them what's going on."

At the bureau's annual meeting Tuesday night, Beck said 2008 was the second-best year ever for booking future hotel-filling meetings, surpassed only by the year when rooms were secured for the Olympics.

The CVB staff booked meetings that, in total, are projected to produce visitor spending of nearly $325 million, he said.

Efforts to promote skiing at Salt Lake County's four resorts -- Alta, Snowbird, Brighton and Solitude -- also grew last winter. The bureau sold $3.2 million of "Superpasses," good at each of the four, a 2.5 percent increase over the previous year.

Free publicity about Salt Lake-based skiing in national publications also increased 95 percent, Beck said.

But there is no doubt, he acknowledged, that the recession is making everyone antsy. Attendance at events is down -- last month's Outdoor Retailer Winter Market slipped 5 percent from 2008 -- and Salt Lake City will face more competition for future bookings from convention-city heavyweights such as Las Vegas.

MPI President Bruce MacMillan, in town to address the bureau meeting, said he believes Salt Lake City is well positioned to flourish in this age of heightened competition.

"The [Salt Palace] convention center is fabulous. You have the hotels. Any city that can host the Olympics and that has put money into the infrastructure will do well," he said. "Strong meeting and event destinations will get stronger, and those on the periphery will fall away. You can't just be good. You have to be great."

MacMillan also emphasized that government officials and politicians should stop criticizing companies for holding meetings in the wake of government bailouts, contending these gatherings spur innovation within the assembled groups and create legacies for the communities in which they are held.

"Making it harder for people to get together is not the answer" to the current economic problems, he said. "Keeping your eye on the long term is the way to go."

mikeg@sltrib.com


2008 total visitor spending

Visitors of all types -- from skiers and conventioneers to tourists in cars and buses -- spent nearly $1 billion in Salt Lake County last year.
At hotels » $348 million
To rent cars » $134 million
At restaurants » $238 million
In retail shops » $232 million
Total » $952 million
Sales taxes generated » $99 million

2008 meetings and conventions
The Salt Lake Convention & Visitors Bureau reported solid financial results from meetings last year:
Delegates » 273,974
Hotel room nights » 329,698
Delegate spending » $243.6 million
Sales and use tax revenues
State » $10.5 million
Salt Lake County » $8.9 million
Cities in county » $2.4 million

Sportsmen's Expo set in Sandy
Hundreds of exhibitors will be on hand at South Towne Exposition Center from Thursday through Sunday for the 11th annual Utah International Sportsmen's Exposition.

Decreased Workforces, Expenditures Predicted by Utah Execs in Latest Zions Bank Quarterly Economic Forecast

UtahPulse.com
March 10, 2009

As optimism for their financial future continues to decline, more Utah executives are predicting decreases in their workforces and fewer capital expenditures, according to Zions Bank's Utah Quarterly Economic Forecast. More panelists than ever anticipate the economic health of their companies will be weaker in the future, according to the bank's fourth quarter 2008 survey results.

Conducted by independent research firm, Dan Jones & Associates, the survey has gauged the health of Utah's economy from the perspective of high-level executives throughout the state since second quarter 2006.

Executives' optimism regarding the financial futures of their companies based on the previous quarter has declined from a mean score of 7.87 two-and-a-half-years ago to the fourth quarter 2008 rank of 5.86 on a scale of 1-10, with 1 being very pessimistic and 10 being very optimistic. The latest survey, conducted January 5 through 27, reveals that just one in 10 Utah executives rate their outlook as a 9 or 10, down from one-third in the second quarter 2006.

"Even with this harbinger of hard times ahead, Utah executives report less concern, collectively, about individual economic factors," said Pat Jones, co-owner of Dan Jones & Associates. "In fact, of the 11 economic factors measured by executives each quarter, only two reach their highest level of concern in the current quarter, and six are actually at their lowest levels of intensity."

The full 30-page report of the fourth quarter 2009 Zions Bank Utah Quarterly Economic Forecast can be viewed here. Following are additional highlights from the latest study:

* Over the two-and-a-half-year period of the study, predictions for their companies' economic health in the upcoming quarter have steadily fallen. In the summer of 2006, half of the panelists thought the economic health of their companies would improve. Now less than one in five panelists think so.
* Anticipated capital spending in the next quarter is down by a similar margin: from 30 percent predicting somewhat or much more spending to 10 percent today.
* Utah business executives are now more likely than in any previous quarter to say they foresee their workforces decreasing somewhat or greatly in the next quarter, up from nine percent two-and-half years ago to 37 percent now.
* Seemingly more focused on the economic "big picture," executives are less concerned about individual economic factors than they have been throughout the course of this study. Each quarter 11 economic factors are measured on a 7-point scale, with 1 being not at all concerned to 7 being very concerned.
* Just two factors reach their highest levels of concern this quarter: first, the ability to compete in the marketplace, with almost one-quarter saying they are greatly concerned (the previous high was 19 percent in the second quarter 2008); and second, the cost of the lease, rent, or mortgage up to 10 percent from the previous high of 8 percent in the third quarter of 2008.
* Concern for the majority of the economic factors is currently at its lowest level. The cost of employee health insurance--the number one concern this quarter--is down from its previous high of 63 percent in the third quarter of 2007 to 48 percent today.

In 2006, 1,169 business executives were recruited to form the study panel and to complete quarterly surveys. Business owners and high-level executives are still needed to join the panel and share their confidential views on the economy. Those interested in joining the panel may learn more information at https://utaheconomicforecast.com.

Index points to tough times for Utah small businesses

Index points to tough times for Utah small businesses

By Jasen Lee, Deseret News
Published: March 10, 2009

An indicator of Utah's small-business strength continued to show weakness in February.

The Zions Bank Small Business Index for Utah was 68.0 in February 2009, up from a revised 65.5 in January 2009, according to a news release.

Despite the slight uptick, the index — initiated in 1990 — still hovered in record-low territory.

"The last two months in the 60s is the lowest its been since we've been doing it," said Kendal Oliphant, senior vice president of Salt Lake City-based Thredgold Economic Associates, which compiles the data for the index.

The index measures business conditions in Utah from the perspective of the small-business owner or manager. A lower index number depicts less favorable business conditions for Utah's small businesses, using 100.0 for calendar year 1997 as its base year.

"In terms of Utah, there is probably more pain coming," Oliphant said. "We were kind of slow to jump on the recession bandwagon, but now Utah is in a full-fledged recession."

The current U.S. recession, already 15 months in duration, is likely to continue throughout most of 2009, negatively impacting Utah's small-business sector, the report said.

Utah's unemployment rate was estimated at 4 percent in the latest month, up from the prior month's revised 4.1 percent rate, Oliphant said. Utah lost an estimated 20,400 jobs during the past 12 months, he said.

Nationally, the economy lost an estimated 651,000 net jobs in February, matching economists' expectations, according to the report. The U.S. unemployment rate rose to a 25-year high of 8.1 percent.

U.S. and global economic performances are components of the Small Business Index for Utah. As a result, weaker performances for both economies contributes to a lower index measure, the release stated.

Oliphant said the nation is expected to pull out of the recession by the end of this year. As for Utah, he predicts the Beehive State will probably follow suit "once the U.S. returns to positive growth."

But that growth will likely not come before the state feels even more job loss pain, Oliphant said.

"We expect unemployment to continue to rise even into next year in the U.S.," he said. "Utah is going to see the same pattern."

It will likely be some time next year before Utah begins to experience job growth again, Oliphant said.

"Small-business conditions are very tough in Utah right now," he said.

E-MAIL: jlee@desnews.com
© 2009 Deseret News Publishing Company | All rights reserved

Quirky liquor laws hurt economic development

Quirky liquor laws hurt economic development
Reform » Utah real-estate group wants restrictions eased

By Dawn House, The Salt Lake Tribune
Updated:03/06/2009 08:53:26 AM MST


Commercial real-estate professionals are making a last-minute appeal to state lawmakers to ease quirky liquor laws they say are hampering economic development in Utah.

The plea from Real Estate Professionals for Economic Growth, representing 95 percent of all commercial real-estate transactions in Utah, came in a letter sent to all members of the House and Senate, where legislation is being considered to do away with Utah's private club law.

The group points to two studies showing that the state's peculiar liquor laws are a roadblock to corporate leaders looking to relocate or expand in Utah.

The research, conducted in 2005 and 2006, was completed when the economy was "white hot two short years ago. Given the current economic climate we now face, we see it as even more urgent," said the letter signed by the group's president, William Martin.

"Even simple moves to make our liquor laws less quirky can go a long way to improving our image," said Martin. "People don't seem to be willing to face the issue of making logical changes to our laws and concentrate instead on enforcing laws dealing with alcohol abuse."

The group supports Gov. Jon Huntsman Jr. in his push to abolish private membership fees people must pay in Utah before they can buy a drink in a what other states consider a public bar.

The governor's spokeswoman, Lisa Roskelly, said Huntsman's "ongoing efforts to normalize Utah's liquor policy has a direct correlation to economic development, which is a critical issue in these economic times."

Corporate executives interviewed in the study said that every state had its own peculiarities. But no other perception was as distinct or distinguishable as was Utah's. The most dominant perception is that The Church of Jesus Christ of Latter-day Saints wields influence over state affairs; the second was Utah's "unusual liquor laws."

One respondent said that although Utah's liquor laws aren't too complicated, "they give the state a weird reputation" that "plays to the whole uptight image."

Said another: "It's not that it's that much harder to get a drink in Utah, there is just something weird about knowing people don't want you to have one."

The research included hundreds of individual and group interviews published in the book entitled Choosing Utah.

Hyatt enters Utah market

Hyatt enters Utah market

By Mike Gorrell, The Salt Lake Tribune
Updated:03/06/2009 08:27:56 PM MST


Absent from Utah's hotel scene until now, the Hyatt brand is establishing a presence in three diverse areas of the Salt Lake Valley.

A Hyatt Summerfield Suites opened in November in Sandy, positioned so its 137 suites will appeal to destination visitors skiing in the Cottonwood canyons and business people with south valley clients.

Joining downtown's cluster of hotels this summer will be a 128-room Hyatt Place Hotel at 55 N. 400 West, the overnight lodging component of The Gateway development.

Another Hyatt Place is scheduled to open this fall at 52 N. Tommy Thompson Road (4700 West) in the growing group of hotels near Salt Lake City International Airport.

Why now, after not being Utah for so long?

"For lack of a better description, the stars just aligned right with the right developers," said Jim Chu, Hyatt senior vice president of franchise and owner relations. He and other Hyatt-affiliated hoteliers met this week at the Sandy Hyatt Summerfield.

"There's no particular reason the brand wasn't in Salt Lake before," he said. "It's not that we didn't want to be. We just didn't have the right opportunity for the right project at the right time."

But now, hard as the economic times might be, turns out to be that right time.

Kevin Ludlow, the Hyatt franchisee whose company owns the 30-employee Sandy hotel, is not surprised.

"Small business can still succeed in a down economy," said Ludlow, owner of Sequoia Development, which pays Hyatt a royalty to use its name. "It's still the engine that makes things work. The hospitality business has taken a hit, but we've got to believe small business is important and can make it in tough times."

Chu said Hyatt believes it has solid partners in the Salt Lake Valley projects.

Sequoia Development has worked on commercial real estate, resort condominiums at Deer Valley and gated community projects for two decades. The Gateway Hyatt is being built by The Boyer Co. and the Gardner Co., while the airport Hyatt Place is part of the Commonwealth Hotels chain.

Commonwealth is part of Corporex Cos., LLC, a Kentucky real estate company with $1.1 billion in assets. Those include 23 hotels in 11 states and another 10 hotels in development, including a Springhill Suites by Marriott in South Jordan.

Chu said these partners "know the Salt Lake City market and the success it's had in years past … It has had consistent performance. It hasn't gone through the big explosion of growth in new hotels over the last five to seven years, so market demand has stayed ahead of the supply curve."

In addition, Utah's overall economy is more upbeat than most states. "Even in today's environment, it's a bit more stable than most other markets. There's been a bit of insulation from the general severity of the economy," he said.

One advantage of bearing the Hyatt name is inclusion in a reservations and promotional system for 370 hotels worldwide, Chu said. Four new hotels were added last month.

mikeg@sltrib.com

Economic Update -- Cautious Optimism About TALF

Economic Update -- Cautious Optimism About TALF
March 6, 2009
By: Dees Stribling, Contributing Editor, Commercial Property News

Will TALF--the Term Asset-Backed Securities Loan Facility, in case anyone's forgotten--bring the securitization of loans, especially non-agency RMBS and CMBS, back to life in any meaningful way? The program will get under way on March 25, and Wall Street is keeping a close eye it. And so are players in some real estate niches that used to obtain much of their capital from securitizations.

"Over 70 percent of loans in the tenant-in-common business were originated through securitized product, and when that evaporated last year, it created a great hardship for TICs," Bill Winn, president of the Tenant-in-Common Association and president of Irvine, Calif.-based Passco Cos., told CPN. "To the extent that TALF will help create liquidity, that would be helpful."

Despite the infusion of capital into the financial system since last fall, Winn characterizes lending as "still in a contraction mode. I'm not overly optimistic, but there's some hope that some investors will be willing to buy securitized debt backed by a government program."

There was modest good news for retail on Thursday, and the retail business is taking what it can get at this point. According to the Columbus, Ohio-based consultancy Retail Forward, same-store sales were up slightly in February compared with January for the 35 major retailers that it surveyed. The gain was 0.4 percent, compared with a 1.4 percent drop from December to January.

The leaders, naturally, were Wal-Mart and a handful of discount department stores. Warehouse club same-store sales dropped slightly on account of gasoline, and apparel, accessory and department stores continued to slide. "In some cases, the belt-tightening several months ago amid broad uncertainty has proved too severe as time or need has unfolded,” posited Frank Badillo, senior economist at Retail Forward.

Wal-Mart isn't just a U.S. success story in these difficult times, either. On Thursday, Wal-Mart de Mexico SA (better known Walmex), which happens to be the largest retailer in Latin America, much less Mexico, reported that its sale-store sales gained 1.5 percent in February compared with the same month last year. This is strong performance in Mexico, whose economy contracted at a 2.41 percent annualized rate in December, according to that nation's central bank.

After a midweek uptick on Wall Street, the various Wall Street indices decided to decline again on Thursday, with the Dow Jones Industrial Average down 281.4 points, or 4.09 percent. The S&P 500 was down 4.25 percent and the Nasdaq lost an even 4 percent.

Bring your meeting here, we're boring

Bring your meeting here, we're boring
Conventions » SLC's rep now may be an asset.

By Mike Gorrell, The Salt Lake Tribune
Updated: 03/05/2009 08:02:25 PM MST

The Salt Lake Convention & Visitors Bureau has not had any companies or associations cancel meetings out of fear they might look like a junket in difficult economic times.

Still, spokesman Shawn Stinson said the bureau is solidly behind a U.S. Travel Association campaign, launched Wednesday, to "push back against the demonization of business meetings and events."

Salt Lake City's reputation as a rather staid, laid-back metropolis "is playing to our favor now," Stinson said. "Salt Lake trips and meetings are not seen as an extravagance. But I imagine high-end properties in Orange County and Las Vegas are feeling it."

Citing a survey by Meetings and Conventions magazine, the U.S. Travel Association said more than 20 percent of companies that have not received taxpayer assistance have canceled scheduled events because of "media and political attention."

Criticism has focused on once high-flying companies that continued to have corporate meetings at lavish resorts, used private jets to fly to Washington in search of taxpayer bailouts and spent millions on office remodels.

In response to the outcry, bailout recipients AIG, Wells Fargo, Chrysler and General Motors canceled gatherings.

"Make no mistake, companies that have received taxpayer assistance must be held to a different standard," said Travel Association President Roger Dow. "But the pendulum has swung too far. The climate of fear is causing a historical
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pullback of business meetings and events, with a devastating impact on small businesses, American workers and communities."

He said meetings and events are responsible for nearly 15 percent of all U.S. travel, generate $101 billion in spending, support 1 million jobs and produce $16 billion in tax revenue for federal, state and government levels.

"Our campaign will challenge policymakers to tone down the dangerous rhetoric," Dow said, "and promote travel as an economic solution."

Stinson said bureau President Scott Beck participated in industrywide discussions that led to the campaign.

"We recognize that a rising tide floats all ships," Stinson said. "We're not in favor of anyone canceling conventions and meetings. They're critical to us -- and to the companies.

mikeg@sltrib.com

More Utahns are losing homes

More Utahns are losing homes
Downturn » The state's rate of troubled loans is still below the U.S. average.

By Lesley Mitchell, The Salt Lake Tribune
Updated: 03/05/2009 06:12:29 PM MST

Nearly 35,000 families in Utah have fallen behind on their mortgages or are losing their homes to foreclosure, but the state's share of problem loans remains well below the national average, a new report shows.

In Utah, 6.06 percent of 440,841 mortgages, or more than 26,000 loans, were at least 30 days past due in the fourth quarter. That's up from 4.15 percent in the same quarter in 2007, the Mortgage Bankers Association reported Thursday in its National Delinquency Survey.

Utah's delinquency rate has now surpassed the state's previous high of 5.3 percent set in 2003, but still remains significantly lower than the national rate of 7.88 percent.

Utah has the 13th-lowest delinquency rate among all states.

Delinquencies are an early indicator of foreclosures, in which a homeowner loses a property. Many, but not all, delinquencies lead to foreclosure.

Another 1.79 percent of loans in Utah -- nearly 7,900 -- were in the foreclosure process at the end of the fourth quarter, a rate that also is climbing but remains well below the national rate of 3.30 percent. Utah has the 17th lowest foreclosure rate.

"We're going to see foreclosures and delinquencies in Utah increase, but we may never reach the national average, because we normally don't," said Austin Sargent, an economist with the Utah Department of Workforce Services.

The higher share of past-due loans nationally and in Utah reflects in part the fact that adjustable-rate
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loans taken out years ago are just now resetting at higher rates and subsequently higher payments.

Many of those homeowners are not able to refinance their properties with today's lower interest rates and get fixed-rate loans because banks have tightened lending standards after the nation's subprime lending debacle.

Many don't qualify under the stricter lending criteria.

But adjustable-rate loans are only part of the problem. A larger factor is the bad economy.

In Utah and elsewhere, many people with already-low fixed-rate loans are falling behind as well because of pay cuts, furloughs and job losses.

"We're seeing increases in fixed-rate categories," said Jay Brinkmann, chief economist for the Mortgage Bankers Association. "The foreclosure picture is more clearly driven by the jobs market."

The problem in Utah -- and elsewhere -- is that borrowers who lose their jobs often can't find another one with comparable pay fast enough and don't have enough savings to last until better times.

Selling their homes isn't quick fix, either, because home prices are falling and a number of Utahns now owe more than their home is worth. Many people simply can't sell their homes fast enough and at a high enough price to cover their mortgage.

Some homeowners are able to do a short sale in which their mortgage holder accepts less than they are owed. But these types of transactions can take months to complete.

The Associated Press contributed to this report.

NAIOP Credit and Capital Advisory Board Report Issued

As part of its Four-Point Promise, NAIOP established a Commercial Real Estate Credit and Capital Advisory Board (CCAB) of capital experts to interpret how the negative impact of the continued credit crisis is affecting the commercial real estate industry.

The CCAB has issued its first report that outlines issues facing investors, commercial mortgage-backed securities and the Treasury's recent actions

GrantThornton survey on CRE

Just found this and starting to study it. First point of interest: 52% of top real estate companies are looking to buy in 2009.

Private Equity, Government Expect Increased Lending

Private Equity, Government Expect Increased Lending
March 3, 2009
Commercial Property News
By: Jeffrey Davis, Jones Lang LaSalle Hotels

Of nationwide lenders to the commercial real estate sector, 53 percent expect loan production to increase from 2008 to 2009, according to Jones Lang LaSalle Inc.’s annual Loan Production Outlook survey, conducted at the Mortgage Bankers Association’s Commercial Real Estate Finance/Multifamily Housing Convention & Expo last month. Private equity lenders and government agencies expected increased lending, noting an average expected rise of as much as 20 percent. Banks and life companies, however, expected volume to decrease anywhere from 30 to 80 percent.

This year, 80 percent of respondents predicted that as much as 40 percent of each their companies’ loan allocations will go toward refinance maturing loans within their existing portfolios. The low LIBOR rate is allowing many hotel owners to avoid technical defaults despite a drop in revenues. Yet, because LIBOR-based loans are generally shorter term and the refinancing and sales markets remain dislocated, maturity defaults loom on the horizon.

Asset-level distress in hotels is not yet widespread, but systemic RevPAR declines are accurately being interpreted as precursors of delinquent and defaulted hospitality mortgages. Hotel operators and investors that recognize that their debt service could be in jeopardy are proactively undertaking a diagnostic review, putting yield-management controls in place and defining cost savings to protect investment value.

While owners seek to streamline operations, shore up their capital positions and de-lever assets, investors are attempting to capitalize on distressed opportunities by buying loans or take-over assets at a discount. Select, well-capitalized investors are able to use all-cash offers to acquire opportunities that generate outsize returns. Lenders are increasingly amenable to unloading no-longer-attractive loan positions to more strategic holders, freeing up capital that can be redeployed at a low basis and extraordinarily high rate.

Utah business conditions better but still weak, report says

Utah business conditions better but still weak, report says

By Brice Wallace, Deseret News
Published: March 3, 2009

A business-conditions gauge for Utah had an upswing in February — the first monthly rise since September.

The Utah Business Conditions Index, released Monday by the Goss Institute for Economic Research, was 45.5 in February, up from January's record-low 36.5 and December's 38.4.

Ernie Goss, the institute's director and director of Creighton University's Economic Forecasting Group, described Utah's index as "still weak."

The index ranges from zero to 100, with a figure above 50 indicating an expansionary economy over the next three to six months. The Utah index is based on a survey of the state's supply managers.

Components of Utah's overall index were new orders at 58.3, production at 42.2, delivery lead time at 40.8, inventories at 47.4 and employment at 38.7.

"The global recession has had a significant and negative impact on the state's large metal manufacturing industry," Goss said in a prepared statement. "Since the beginning of the national recession, this industry has lost more than 1,000 jobs. I expect this industry to be the state's turn-around industry and provide an early signal of the beginning of an economic expansion."

Utah is part of a three-state region that saw its overall index grow to 44.6 in February from January's record-low 31.6.

"For the fourth straight month, the index dipped below growth-neutral," Goss said. "Until recently, growth in the region's large energy sector had bolstered growth in the region. However, a weakening manufacturing sector, especially for firms heavily dependent on international sales, has pushed the region firmly into recession territory."

Colorado's index was 43.5, up from 30.5 in January and 41.5 in December. Wyoming's was below 50 for the third straight month, the first time that has happened since the surveying began there in 1994. Wyoming's 44.8 was up from 35.3 in January but below 47.5 in December.

As part of its surveying, the institute in February asked the region's supply managers about the recently passed federal stimulus package. Only 3 percent of respondents expect it will be "effective" or "very effective" in pushing the economy into growth territory. About 22 percent expect it to be ineffective. The rest of those surveyed were ambivalent.

The national index, also announced Monday, contracted for the 13th straight month in February, but at a slower pace than expected. The reading suggested to some economists that the decline of the ailing factory sector could be bottoming out, though they expect a recovery is still far in the future.

The Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index actually rose to 35.8 from 35.6 in January. Analysts had expected a drop to 33.8. The Goss Institute uses the same methodology as the national survey.

The national index has fallen steadily since August as the economy has deteriorated, hitting a 28-year low of 32.9 in December.

"Survey respondents appear generally pessimistic about recovery in 2009," said Norbert Ore, chairman of the group's survey committee. "Some express hope that the stimulus package will help their industry."

None of the 18 industries covered by the survey — including wood products, primary metals, electrical equipment, transportation equipment and machinery — reported growth.

Contributing: Associated Press. E-mail: bwallace@desnews.com
© 2009 Deseret News Publishing Company | All rights reserved

March job numbers in Utah may foretell the year

March job numbers in Utah may foretell the year

By Laura Hancock, Deseret News
Published: March 2, 2009

As unemployment in Utah creeps toward 5 percent, the Utah Department of Workforce Services will watch the number of new unemployment claims filed throughout March, as the month will be the bellwether for the rest of 2009.

If the claim numbers are to ease off in the next month or so, the economy will likely recover during the second two quarters of 2009, as economists originally forecasted for Utah.

But if claim numbers remain high beyond March, then economists will have to revisit the expected depth and duration of the recession, the Utah Department of Workforce Services announced Monday when it released its monthly employment and unemployment data.

From January 2008 to January 2009, the number of nonfarm wage and salaried jobs contracted by 1.6 percent. About 20,400 jobs have been removed from the Utah economy in that time, lowering the total wage and salary employment to 1.2 million.

The unemployment rate in January was 4.6 percent, up from 3.2 percent in January 2008.

About 64,300 Utahns were considered unemployed in January, compared to 43,400 in January 2008.

Interestingly, the recession is hitting men harder than women in the Beehive State because the worst-hit industries are comprised mostly of male workers. For instance, 14,000 jobs have been lost in construction, an industry that is 80 percent male workers.

Manufacturing has lost 8,800 jobs in the past year. Seventy percent of its workers are men.

E-mail: lhancock@desnews.com
© 2009 Deseret News Publishing Company | All rights reserved

City Council dreams of a more livable town

City Council dreams of a more livable town
Retreat » Elected officials to push for fewer cars, more volunteerism.

By Derek P. Jensen, The Salt Lake Tribune

Branding neighborhood identity, creating citywide bicycle lanes, carving pedestrian paths downtown, conducting small-business road trips, and ripping the red tape that restrains volunteers.

All highlight the 2009 vision for the Salt Lake City Council, whose members mulled quality-of-life improvements despite juggling a recession-ravaged budget last week during an annual retreat attended by Mayor Ralph Becker.

For a panel of seven personalities, there was remarkable consensus on the priorities. And there was buy-in from Becker, who said the once-fractious government bodies are "incredibly lucky" to have a healthy relationship (Rocky Anderson, his polarizing predecessor, often sparred with the council).

"Nobody is doing the job for personal gain," Becker said, suggesting the city must be creative during the perilous economic climate and not just "reactive all the time."

The price tag for the projects is unclear, but city leaders agree on their need.

Councilman Soren Simonsen said the city should shelve noncritical road projects and shift that money to public transit and biking instead. He noted a quarter of the city's population doesn't use a car, but the capital doesn't spend a quarter of its transportation budget on alternative modes of transportation.

"We've been deferring these alternative-mobility projects for a long time," he lamented.

Salt Lake City also lacks defined routes or bikeways from its historic neighborhoods to downtown, according to Councilwoman Jill Remington Love. "It's really taking your life into your own hands going down 1300 East or 800 South," she said.

Simonsen argued 2100 South and Sugar House in general are ripe for bike lanes, perhaps the green-painted model that graces downtown's 200 South. Steering several million dollars -- could it come from the federal stimulus? -- toward such paths along with bus access would make a "significant difference," he said, especially if gas prices soar this summer.

On the walkability front, Councilman Luke Garrott maintained too many of the capital's neighborhoods are ill-defined, while some such as his central city neighborhood are "vacuums." Garrott wants the city to consider rezones -- some could usher restaurants, retail or neighborhood business districts -- to help brand the city's patches of bungalows and boost their character.

"That," Garrott said, "increases ownership, helps property values and helps the fiber and roots of the city."

Another specific on the wish list: nurturing better pedestrian access from the Avenues to Memory Grove.

Becker backed the notion of a so-called neighborhood-visioning effort, saying he likes the idea of encouraging commercial hubs that don't currently exist.

Small businesses also could benefit if city officials invest more time there, perhaps through citywide road trips, the group agreed. That means popping into the small manufacturers on the west side as well as the boutiques on 15th & 15th.

"Everybody likes them, but they won't be there unless they are supported," Councilman J.T. Martin said. "They are going away."

Other policy issues pondered at the retreat:

» No longer voting on same nights as public hearings.

» Creation of ethics and communication subcommittees.

» More robust focus on historic preservation.

Finally, the council agreed in principle to eliminate liability roadblocks for volunteers who offer everything from mowing the lawn at park strips to building amenities in public parks. Love said the move makes sense -- particularly during this recession -- to help motivate teenagers with idle time as well as civic-minded adults.

"Instead of complaining to us about the problems," she said, "they can be a part of the solution."

djensen@sltrib.com


Future talk

During February's annual retreat, Salt Lake City's elected captains agreed that neighborhood development, economic development and alternative transportation should be top goals this year. Despite the budget crunch, Mayor Ralph Becker agreed to promote quality-of-life initiatives.

State gets hip with new economic-development pitch

State gets hip with new economic-development pitch
DVD promo » Film banks on artistic flair to persuade business execs to set up shop in Utah.

By Mike Gorrell, The Salt Lake Tribune

When at Sundance, be like Sundance.

That's the approach the Governor's Office of Economic Development (GOED) took in producing a state promotional DVD whose debut showings were for financial movers and shakers attending the Sundance Film Festival.

"Since it was going to debut at Sundance, we wanted Sundance-caliber work," said Jason Perry, GOED executive director. "We got it."

GOED hired Salt Lake City-based Love Communications to produce the nine-minute DVD titled "Utah: A State of Opportunity." It intersperses photographs of the state's scenic wonders and varied recreational opportunities with artistic illustrations emphasizing the state's attributes, from culture to mass transit to classrooms where sophisticated students spawn innovative technologies.

Actor Edward Herrmann is narrator.

"We want you to join us as we grow," says Gov. Jon Huntsman Jr. in a short speech midway through the DVD.

"Over the years, I've come to realize what a remarkable place this is. It's where extraordinary things happen, especially when you have a safe, competitive, friendly environment for business," he says. "With our unparalleled work force, our aggressive incentive programs and our absolute commitment to your success, we think you'll like it here."

The governor first delivered the message at a luncheon, organized with help from the Sundance Institute, for the international cast of business people behind films shown at the festival. "We showed the film, talked about the state and let these business people know why they should come to Utah," Perry said.

Afterward, GOED took the DVD to a reception at Huntsman's Deer Valley lodge. About 100 corporate executives who have operations elsewhere but own property in Utah -- mostly around Park City -- saw it.

Huntsman's message to the crowd was clear: "You know and love Utah. We need to talk to you about the investment and business opportunities here," Perry said.

Because the DVD was received so warmly, GOED is distributing it more widely. It is going to organizations such as the Kauffman Foundation and Pollina Corporate Real Estate Inc., whose perspectives on good business environments are respected by Fortune 500 companies.

Other recipients include "site selectors," those people who help companies find desirable sites for expansions or relocations, and firms whose line of work coincides with Utah's strengths: medicine and life sciences, genetics, outdoor recreation, energy and natural resources, innovative technology and software development.

To appeal to a Sundance audience, that message had to "have a non-traditional economic-development appeal to it," said communications company boss Tom Love.

"We knew GOED will use this hundreds of times, so it had to have some legs to it," he said. "It's not static with a lot of talking heads, not stodgy. You get more attention with an artistic flair and being hip. How you come across is half the message."

mikeg@sltrib.com
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Top business states

Utah is sending its new DVD to Pollina Corporate Real Estate Inc., which assesses states' economic-development assets.

The company's ranking of top pro-business states for 2008:

1 » North Carolina

2 » Florida

3 » Virginia

4 » South Carolina

5 » Wyoming

6 » South Dakota

7 » Georgia

8 » Alabama

9 » Utah

10 » Kansas