Reports show Utah lodging industry on upswing

Reports show Utah lodging industry on upswing
Hospitality » Occupancy levels rising, but nightly rates remain down, prompting caution.

By Mike Gorrell
The Salt Lake Tribune

Two separate lodging industry reports suggest that key segment of Utah's economy is improving, but full recovery will be slow in coming.

Hotel occupancy rates statewide and in Salt Lake County last month exceeded levels achieved in March 2009, the first time since April 2008 that year-over-year increases were realized.

Similar results also emerged in a monthly report tracking the performance of lodging establishments in Western destination resort communities. That report, by the Denver-based Mountain Travel Research Program, found that occupancy rates last month in those posh places were 9.6 percent higher than March 2009.

March's improved showing was not as pronounced in conventional communities, with Salt Lake County hotels recording a 5.2 percent increase last month. Hotels statewide filled 2.9 percent more rooms on a nightly basis, according to the Rocky Mountain Lodging Report, which also is based in Denver.

Although both sets of results are "great positives," according to Utah Hotel & Lodging Association executive director Michael Johnson, he was reticent to get too excited at this point.

"There's some hesitancy to say it's because we've recovered," he said. "Occupancy has gone up, but hotels have held their rates low, knowing people are still looking for deals.

"People who used to take a couple of small trips a year or one big one put it off last year. They don't want to put it off again. Unlike last year, they feel their jobs are secure and they're more comfortable, so they're traveling again -- but looking for deals."

Good snow in March and an earlier Easter also helped boost occupancy levels at resorts and southern Salt Lake Valley hotels, Johnson said.

"But there are still a lot of unemployed people who won't be traveling and still a lot of companies that have cut back on meetings. It's hard to know when those meetings will come back," he said.

"A lot of [hotel] properties are celebrating now, but it's because they don't have to cut their budgets even further. We have to put it into the context that there's a long way to go."

Ralf Garrison, author of the Mountain Travel Research Program's report, shared Johnson's perspective that it's too soon to rejoice too much about the latest figures.

March of 2009 was a bad month for the industry, so besting its results does not necessarily equate to March of 2010 being "good," he said. Still, it was the third consecutive month with year-over-year increases in actual occupancy for property management companies in 15 resort communities in Utah, Colorado, California and British Columbia.

"These figures indicate that a positive trend has now been established. It is now virtually certain that the winter season occupancies will exceed those of 2008-09," Garrison said. "But our enthusiasm remains cautious since occupancy rates remain fragile and overall revenues continue to lag behind those of last year."

His report projected occupancy this season will be 1.3 percent better than the previous winter. But in line with Johnson's concern, average nightly rates were down about 5 percent, indicative of consumers being rate conscious.

"Now that we are seeing the momentum shifting slowly to the more positive side of the spectrum -- in the ski industry, travel industry and the broader economy -- as a [mountain travel] industry we can be optimistic about carrying this strength into the summer season," said Garrison, who is now looking to the 2010-11 ski season with "cautious optimism."

mikeg@sltrib.com
Filling more rooms

Utah hotels posted higher occupancy rates last month than in March 2009, the first year-over-year increase in almost two years. Rooms filled nightly:

Salt Lake County » 73 percent
Ogden » 66 percent
St. George » 63 percent
Davis County » 61 percent
Utah County » 59 percent
Cedar City » 48 percent
Logan » 46 percent
Mountain resorts » 56 percent
Other parts of Utah » 57 percent
Statewide » 65 percent

Source: Rocky Mountain Lodging Report

EDCU: Commercial Real Estate Recovery: Are We There Yet?

Has Utah's commercial real estate market hit bottom? Are the capital markets unthawing? Will the retail sector be the first to rebound? Will investors swoop in and gobble up record bargains on distressed properties?

Like other areas of the country, Utah's commercial real estate market was hit hard by the recession. In fact, 2009 was a difficult year for the market in most respects; however, 2010 looks much more promising and 2011 even better. While no one has a crystal ball, EDCUtah's partners from the commercial real estate sector say they are cautiously hopeful that improvements in Utah's job market will lead to the recovery of the commercial real estate sector.

You can read the enlightening story about Utah's commercial real estate market and where it is headed in EDCUtah's spring Site Selector Quarterly (SSQ) newsletter, which is being distributed this week to site consultants, real estate brokers, business leaders, and many other interested parties across the state and nation. Written from the perspective of EDCUtah's partners in the commercial real estate market, the feature story provides an engaging look at the market, its challenges, and how it is connected to the state's job market.

Read the full story online in our Site Selector Quarterly newsletter.

Utah job picture shows improvement

Utah job picture shows improvement

By Jasen Lee, Deseret News
Published: Tuesday, April 6, 2010 9:34 p.m. MDT

SALT LAKE CITY — A rise in national employment is pointing to some positive results for Utah small businesses.

The Zions Bank Small Business Index for Utah jumped to 95.9 in March, up from a revised 91.6 in February.

The strongest U.S. job gain in three years was seen as one more sign of renewed national economic growth, ultimately a positive development for Utah's small businesses, according to Kendall Oliphant, senior vice president at Thredgold Economic Associates who compiled the data for the report.



"We do have evidence that Utah job growth is improving," Oliphant told the Deseret News. "The gain in March marks six consecutive months of improvement in the small-business index."

The index measures business conditions from the viewpoint of the Utah small-business owner or manager. A higher index number is associated with more-favorable business conditions. The index uses 100.0 for calendar year 1997 as its base year.

Factors that are moving the index higher include stronger economic performance in the Rocky Mountain region, as well as across the U.S. and around the globe, Oliphant stated.

"In addition, the pace of Utah job losses is slowing, and we anticipate monthly employment gains to be reported by summer," Oliphant said.

Utah's unemployment rate was estimated at 7.1 percent in the latest month, up from the revised 6.9 percent rate in the prior month. Total Utah employment fell an estimated 27,700 jobs during the past 12 months.

In contrast, the U.S. economy gained an estimated 162,000 net new jobs in March. However, the national unemployment rate remained at 9.7 percent in March.

"Utah follows fairly close to what happens across the U.S.," Oliphant said.

He stated that job growth would likely be the trend in the Beehive State in the very near future.

"We anticipate (year-over-year employment) to turn positive in the next few months," he said.

e-mail: jlee@desnews.com

Mountain West output, jobs trail nation in economic recovery

Mountain West output, jobs trail nation in economic recovery
Recession» Study says Ogden-Clearfield a beacon of strength thanks to exports.

By Brandon Loomis
The Salt Lake Tribune
Updated: 03/16/2010 06:46:22 PM MDT

The Intermountain West is heading into new and unwelcome economic territory, according to a quarterly report by the Brookings Institution's regional study program at the University of Nevada Las Vegas.

For the first time in 35 years, the region is lagging behind the rest of the nation's recovery from a recession and may need some "soul searching," according to Brookings Mountain West co-director Mark Muro. Heavily invested in real estate and construction in such previous growth areas as Las Vegas, Boise, Idaho, and St. George, he said, the region as a whole crashed hard and needs diversification.

It particularly needs export businesses, he said. One exception is the Ogden-Clearfield metropolitan area, whose high export levels have put it in relatively strong position heading out of the downturn. The report singles out Electronic Arts, a video game maker that's technically in the Ogden-Clearfield zone because of its location in south Davis County, as performing exceptionally well through export royalties.

EA has announced it will soon move its 100 employees south to downtown Salt Lake City.

"Places that are exporting have been relatively fortunate and had something else to draw on," Muro said. That's why Ogden-Clearfield and Albuquerque, N.M., are the only two major metros in the region to have returned to their pre-recession economic output in the fourth quarter 2009, according to the Brookings report. They're also the only two to add
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jobs in the fourth quarter, though they're not anywhere close back to pre-recession employment levels.

"It's quite an accomplishment to be simply not losing jobs right now," Muro said.

Exports account for about 16 percent of Ogden-Clearfield's economic output, compared with 10.8 percent in the Salt Lake metro area.

Utah as a whole is faring better than much of the region. Salt Lake's employment is off 4.9 percent from pre-recession peaks, compared with losses of 10.7 percent in Boise, 10.6 percent in Phoenix and 9.8 percent in Las Vegas, according to the quarterly report. That's no surprise to University of Utah economist Pam Perlich, who said Utah consistently ranks among the nation's most diverse economies.

Since shedding its 1970s image as having little but energy production and federal jobs, she said, the state has developed substantial manufacturing, military, biomedical and technology sectors. The state's universities help drive the economy, she said, and people have continued moving here even as jobs were lost over the past three or four years -- an indicator that they're betting on Utah's recovery.

What saved the Wasatch Front from bottoming out the way Phoenix has?

"Salt Lake's not known for second homes," Perlich said. Though St. George's retirement-based construction sector took a hard hit, she said, Utah as a whole didn't ride as high on the real estate bubble as much of the West did.

The Ogden region also benefits from relatively high levels of high school graduation, Brookings finds. Education levels -- especially in college towns with many bachelor's degrees -- appear to buffer the recession, Muro said.

"It's good to be educated when the bottom falls out," he said.

Ogden-Clearfield -- including all of Weber, Davis and Morgan counties -- has increased its "Gross Metropolitan Product" 1.8 percent from its pre-recession high, Brookings finds. That's good for a No. 8 ranking nationally.

Salt Lake's output remains down 1.9 percent from before the 2007 start of the crash, and Provo-Orem is down 1.5 percent.

Construction-heavy economies continue to suffer more. Boise's output remains down 4.1 percent. Las Vegas is off 4.4 percent.

In previous recessions the Intermountain West carried the promise of many jobs, even if they weren't always the best jobs, Muro said. This time, employment in the region's metro areas remains 7.4 percent below pre-recession figures, while the nation's top 100 metros are down 4.6 percent and the nation as a whole is down 4.9 percent.

"It's a time of maybe needed deep reflection about the sources of future growth in a region that has always promised rapid snap-back [before]," Muro said.

A good place to start would be in producing more, he said, instead of relying on consumption, including real estate.

bloomis@sltrib.com

Commerce Real Estate Solutions expands to Seattle and Bellevue

COMMERCE REAL ESTATE SOLUTIONS EXPANDS SEATTLE AND BELLEVUE PRESENCE VIA CUSHMAN & WAKEFIELD ALLIANCE

Strategic initiative aims for preeminence in services with more brokers, increased support

Salt Lake City, UT, March 15, 2010 – Cushman & Wakefield, the world’s largest privately-held commercial real estate services firm, today announced the expansion of its alliance with Commerce Real Estate Solutions. In a strategic move to expand its brokerage and property management services to the Seattle and Bellevue marketplace, Commerce will employ the professionals of Cushman & Wakefield’s Washington state offices and provide seamless services to clients.

Commerce, headquartered in Salt Lake City, has been the leading provider of commercial real estate services in Utah and surrounding states including brokerage, tenant representation, property and facilities management services for over 30 years. The firm is one of 27 members of the Cushman & Wakefield Alliance Program, an association of local and regional firms in over 55 US markets of strategic importance to Cushman & Wakefield and its clients.

Commerce plans call for adding more industrial, office and retail brokerage professionals, as well as expanding the office’s services to state and local government agencies, financial institutions, and existing national and global clients. Cushman & Wakefield Valuation Services professionals in Washington state will remain Cushman & Wakefield employees and will continue to offer appraisal expertise under the Cushman & Wakefield brand utilizing a shared office space arrangement with Commerce.

“Our strong relationship with Commerce in Utah and Nevada led to this expansion of our alliance to the Seattle and Bellevue marketplace,” said John C. Santora, president and CEO of Cushman & Wakefield Americas. “We believe the unique nature of the Seattle and Bellevue markets will benefit from the entrepreneurial and localized influence of this strong alliance partnership. Commerce is highly qualified to help us grow our presence in the State of Washington.”

John Miller, senior managing director of Cushman & Wakefield of Washington Inc., will join Commerce as a member of the firm’s regional leadership team.

“This move is a significant benefit to our employees and clients,” said Miller. “To have the advantage of Cushman & Wakefield’s global platform combined with the local ownership and resources provided by Commerce creates alignment throughout the local offices and a dynamic organization going forward.”

Michael M. Lawson, President and CEO of Commerce said, “We have a long history of success with Cushman & Wakefield’s professional team and global platform, and are absolutely thrilled to welcome the Seattle and Bellevue professionals to our firm. In today’s economic environment, clients demand local leadership and national/international services. Commerce and Cushman & Wakefield, together, provide that.”

About Commerce Real Estate Solutions
Commerce Real Estate Solutions has been among the top commercial real estate brokerage firms in the Intermountain West for over 30 years. Commerce Real Estate Solutions is headquartered in Salt Lake City, with offices in Provo/Orem, Clearfield, and St. George, Utah, Las Vegas, Nevada and now in Seattle and Bellevue, Washington. It offers a full range of brokerage services, valuation and consulting, client representation and property/facility management. With over 260 brokers and staff members, Commerce Real Estate Solutions has the tools, resources, and experience to provide world class service to investment and corporate real estate clients on a global basis. www.comre.com

About Cushman & Wakefield
Cushman & Wakefield is the world's largest privately-held commercial real estate services firm and the third largest firm globally. Founded in 1917, it has 231 offices in 58 countries and more than 13,000 employees. The firm represents a diverse customer base ranging from small businesses to Fortune 500 companies. It offers a complete range of services within five primary disciplines: Transaction Services; Capital Markets; Client Solutions, Consulting Services, Valuation & Advisory Services, and a robust Alliance Program led by Director Laurie Williams, Executive Managing Director Clint Miller, and Executive Vice President Mike Elting. A recognized leader in global real estate research, the firm publishes a broad array of proprietary reports available on its online Knowledge Center at www.cushmanwakefield.com.

Is Utah headed for a commercial real estate crisis?

Is Utah headed for a commercial real estate crisis?

KSL.com
March 10, 2010

SALT LAKE CITY -- The Congressional Oversight Panel recently sounded the alarm for another mortgage crisis, this time among the country's retail and office buildings. The panel chairman warns of "significant bankruptcies among developers and significant failures among community banks."

So, does that mean foreclosures in the commercial real estate market deliver another sting from the recession? While national and local analysts say there will be pain, Utah commercial real estate will not take the biggest hits.

Look down Main Street in Salt Lake City, or the business district in your community, and you'll see many signs for available office and retail space. The oversight panel's warning states that "over the next few years, a wave of commercial real estate loan failures could threaten America's already-weakened financial system."

Nearly 3,000 small and mid-sized banks have a risky concentration of commercial real estate loans. The panel fears impending losses could jeopardize the stability of those banks and further weaken the economy.

Nearly $1.5 trillion in real estate loans on the books of those banks needs to be refinanced in the next few years. Commercial real estate values dropped drastically during the recession, so about half of those borrowers owe more than the properties are worth. That makes refinancing troublesome, just as it has been for homeowners upside down in their home loans.

But Zions Bank economist Jeff Thredgold sees a difference between the commercial real estate woes and the housing breakdown.

"There will be some hits, there will be some losses, there will be some problems; but it's not going to be a shock to the system," Thredgold says.

Last year, 150 banks failed. The FDIC has taken control of 20, so far this year, and has 700 banks on its watch list.

"There will be additional bank failures," Thredgold says. "That's typical after a recession, especially the one we just finished."

But Thredgold does not expect the impending foreclosures in the commercial real estate market will cause the kind of economic turbulence experienced when the housing bubble burst.

"Everybody knows the problems in commercial real estate are there," he says. "The banks have been setting aside massive reserves to deal with the problems that are coming. They've been writing down the values of loans and writing down the values of properties that might have already been foreclosed on."

According to CoStar Group -- a Bethesda, Md., real estate research company -- office vacancies in the 12 largest markets range from 15 to 27 percent; in Salt Lake City, only 10 percent.

Ethan Reed is a CoStar senior research manager who studies the Salt Lake Market. He says the fallout here will be much less than in major cities across the country. "Salt Lake City has been an outperformer compared to the national average for at least three or four years now," Reed says.

He cites a stronger-than-average growth rate, more economic stability and lower unemployment than the national average. Salt Lake also gives many businesses a more affordable place to do business.

"In a time when companies are trying to figure out how to save a buck, there are ones looking longer term and seeing Salt Lake City as a low-cost alternative," Reed says.

But across the country, CoStar analysts think the worst is still to come.

"We expect that this distress is going to play out over the next year or two, and then the market will rebound," says Norm Miller, CoStar vice president of analytics.

In part, that's because new construction for commercial real estate stopped. The real estate analyst says banks are restructuring many loans. Real estate investors will lose a lot of equity, but average consumers may feel little pain.

If the federal government forced lenders to foreclose on all loans that are underwater, Miller believes most banks in the country would be insolvent, and we would experience a financial collapse.

But Miller says, "If these loans are able to make the mortgage payments, and we only see foreclosures on the ones that have negative cash flow, then the effect will not be nearly as severe."

Miller says we may not recognize a lot of commercial real estate changes in our communities because eager buyers will pick up distressed properties at a bargain, and keep the office and retail businesses operating.

"Investors are being affected, but at the consumer level, with real estate, buildings don't disappear, and good buildings are still good buildings," he says.

Bottom line: Our analysts do not think the impending commercial real estate troubles will plunge the economy into another round of recession.

E-mail: jboal@ksl.com

Is Utah headed for a commercial real estate crisis?

Is Utah headed for a commercial real estate crisis?

KSL.com
March 10, 2010

SALT LAKE CITY -- The Congressional Oversight Panel recently sounded the alarm for another mortgage crisis, this time among the country's retail and office buildings. The panel chairman warns of "significant bankruptcies among developers and significant failures among community banks."

So, does that mean foreclosures in the commercial real estate market deliver another sting from the recession? While national and local analysts say there will be pain, Utah commercial real estate will not take the biggest hits.

Look down Main Street in Salt Lake City, or the business district in your community, and you'll see many signs for available office and retail space. The oversight panel's warning states that "over the next few years, a wave of commercial real estate loan failures could threaten America's already-weakened financial system."

Nearly 3,000 small and mid-sized banks have a risky concentration of commercial real estate loans. The panel fears impending losses could jeopardize the stability of those banks and further weaken the economy.

Nearly $1.5 trillion in real estate loans on the books of those banks needs to be refinanced in the next few years. Commercial real estate values dropped drastically during the recession, so about half of those borrowers owe more than the properties are worth. That makes refinancing troublesome, just as it has been for homeowners upside down in their home loans.

But Zions Bank economist Jeff Thredgold sees a difference between the commercial real estate woes and the housing breakdown.

"There will be some hits, there will be some losses, there will be some problems; but it's not going to be a shock to the system," Thredgold says.

Last year, 150 banks failed. The FDIC has taken control of 20, so far this year, and has 700 banks on its watch list.

"There will be additional bank failures," Thredgold says. "That's typical after a recession, especially the one we just finished."

But Thredgold does not expect the impending foreclosures in the commercial real estate market will cause the kind of economic turbulence experienced when the housing bubble burst.

"Everybody knows the problems in commercial real estate are there," he says. "The banks have been setting aside massive reserves to deal with the problems that are coming. They've been writing down the values of loans and writing down the values of properties that might have already been foreclosed on."

According to CoStar Group -- a Bethesda, Md., real estate research company -- office vacancies in the 12 largest markets range from 15 to 27 percent; in Salt Lake City, only 10 percent.

Ethan Reed is a CoStar senior research manager who studies the Salt Lake Market. He says the fallout here will be much less than in major cities across the country. "Salt Lake City has been an outperformer compared to the national average for at least three or four years now," Reed says.

He cites a stronger-than-average growth rate, more economic stability and lower unemployment than the national average. Salt Lake also gives many businesses a more affordable place to do business.

"In a time when companies are trying to figure out how to save a buck, there are ones looking longer term and seeing Salt Lake City as a low-cost alternative," Reed says.

But across the country, CoStar analysts think the worst is still to come.

"We expect that this distress is going to play out over the next year or two, and then the market will rebound," says Norm Miller, CoStar vice president of analytics.

In part, that's because new construction for commercial real estate stopped. The real estate analyst says banks are restructuring many loans. Real estate investors will lose a lot of equity, but average consumers may feel little pain.

If the federal government forced lenders to foreclose on all loans that are underwater, Miller believes most banks in the country would be insolvent, and we would experience a financial collapse.

But Miller says, "If these loans are able to make the mortgage payments, and we only see foreclosures on the ones that have negative cash flow, then the effect will not be nearly as severe."

Miller says we may not recognize a lot of commercial real estate changes in our communities because eager buyers will pick up distressed properties at a bargain, and keep the office and retail businesses operating.

"Investors are being affected, but at the consumer level, with real estate, buildings don't disappear, and good buildings are still good buildings," he says.

Bottom line: Our analysts do not think the impending commercial real estate troubles will plunge the economy into another round of recession.

E-mail: jboal@ksl.com

Foreclosure heat still rising

Foreclosure heat still rising
Housing » U.S. rate up by smallest amount in four years, but Utah activity is up 90 percent.

Staff And News Services
Salt Lake Tribune

The pace of foreclosure-related filing nationally may finally be slowing down, but in Utah the rate continues to increase dramatically.

RealtyTrac Inc. said the number of U.S. households facing foreclosure in February grew 6 percent from the year-ago level, the smallest annual increase in four years. By comparison, foreclosure activity in Utah jumped 90 percent.

Nationally, more than 308,500 households, or one in every 418 homes, received a foreclosure-related notice, the company reported. That was down 2.3 percent from January.

In Utah, where the real estate market began to slump two years later than most other parts of the country, 3,430 households, or one in every 275 homes, received a notice. Utah has the sixth-highest rate of filings in the report.

The filings include a range of actions, from default notices, in which homeowners are simply behind in their payments, to notices that a bank is taking possession of a home.

Hundreds of thousands of homeowners nationally are still being evaluated for help under loan-modification programs.

But many analysts say most of those borrowers will eventually lose their homes, sparking a new round of filings later this year.

"It's premature to declare victory just yet," said Rick Sharga, a RealtyTrac senior vice president.

Banks repossessed nearly 79,000 homes last month, down 10 percent from January but still up 6 percent from February 2009.

The RealtyTrac report follows an encouraging report last month from the Mortgage Bankers Association. It said the percentage of borrowers who had missed just one payment on their home loans fell to 3.6 percent in the October to December quarter, down from 3.8 percent in the third quarter.

Although that was a surprising piece of positive news, foreclosures were still at record high levels. The number of borrowers who have either missed a payment or are in foreclosure was at 15 percent.

A record 2.8 million households were threatened with foreclosure last year, Realty-Trac said, and the number is expected to rise to more than 3 million homes this year.

The foreclosure crisis forced the federal government and several states to come up with plans to prolong the process so delinquent borrowers can try to find help. But those efforts have barely dented the problem.

The Obama administration's $75 billion foreclosure prevention program has helped only 116,300 homeowners in the past year.

Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties. Cities lose property tax dollars from homes that sit empty and lower property values.

Economic woes, such as unemployment or reduced income, are expected to be the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit, but homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

Among states, Nevada posted the nation's highest rate of foreclosure-related filings, though they there were down 7 percent from January and down more than 30 percent from a year earlier. It was followed by Arizona, Florida, California and Michigan. Rounding out the top 10 were Utah, Idaho, Illinois, Georgia and Maryland.

The metro area with the highest foreclosure rate in February was Las Vegas. Though one in every 90 homes there received a foreclosure filing, filings were down 9 percent from a month earlier. Filings in the No. 2. metropolitan area, the Cape Coral-Fort Myers area in Florida, were up 31 percent from a month earlier.

Also topping the list of foreclosure hot spots were the California metro areas of Modesto, Riverside-San Bernardino-Ontario and Stockton.

Deal to save Centennial Bank didn't go through

Deal to save bank didn't go through
Banking » Merger was designed to infuse Ogden lender Centennial with capital before seizure.

By Paul Beebe
Salt Lake Tribune

A deal to rescue Centennial Bank apparently fell through shortly before Utah regulators closed the Ogden lender last week.

Centennial announced in September that Orem-based Vision Bankcard had agreed to acquire controlling interest and infuse new capital into the bank, which was collapsing under a mountain of overdue or defaulted real estate loans.

"Efforts by the investors weren't successful," Paul Allred, deputy commissioner of the Utah Department of Financial Institutions, said Monday.

Allred refused to elaborate. Attempts to contact Vision Bankcard, a card processor, were unsuccessful.

The merger apparently was still alive a few weeks ago. Mildred Bruce, one of Centennial's 3,000 depositors, said she received a letter with her February bank statement saying the bank was waiting for regulators to approve the deal.

But Bruce, 87, of South Ogden, did not realize Centennial was in trouble until she opened her newspaper Saturday morning.

"It was a shock," said Bruce, who along with the other depositors were sent checks for their insured deposits Saturday.

"Of course, it was a shock when they closed Barnes Bank. My son had his account at Barnes Bank. My goodness, what's happening?"

Allred's department closed Kaysville-based Barnes in January, and like Centennial, appointed the Federal Deposit Insurance Corp. as the receiver. Also like Centennial, regulators were unable to find another financial institution to take over Barnes' deposits and operations.

Both banks failed because of bets on construction and land development loans, which are considered to be riskier than home mortgages.

Centennial "is just an example of the economic situation that the customers were in and the bank was in," Allred said.

With real estate values off as much as 50 percent in some areas, Centennial and Barnes aren't the only lenders that have struggled with sour loans during the recession. Federal regulators closed Salt Lake City-based Magnet Bank in January 2009. The state Department of Financial Institutions shut America West Bank in Layton in May. Cache Valley Bank of Logan took over its deposits.

HeritageWest Federal Credit Union in Tooele was liquidated two months ago by the National Credit Union Administration. Its assets were bought by Virginia-based Chartway Federal Credit Union, which has said it hopes to buy other distressed Utah credit unions.

Numerous other Utah financial institutions are struggling with real estate loans.

On Saturday, Ed Leary, commissioner of the state Department of Financial Institutions Department, acknowledged other lenders might fail in the future.

Centennial was in particularly bad shape. It's Tier 1 leverage capital had plunged to zero, as of Dec. 31, compared with a healthy 10 percent a year earlier. Tier 1 capital is a core measure of a bank's health from a regulator's point of view. It consists of core capital -- common stock and other reserves.

Loans as a percentage of Centennial's capital totaled nearly 377,000 percent, according to the FDIC.

"Needless to say, that's not good," Allred said.

Almost 30 percent of its deposits were brokered, or raised by a third party. An unknown percentage were deposits Centennial solicited through the Internet.

Both deposit types are considered to be relatively risky, because they belong to people in other parts of the country who aren't necessarily loyal customers.

Centennial used brokered and Internet deposits to make loans. Together, they amounted to a dangerously high percentage of total deposits, but FDIC ombudsman Richard Schmalzer couldn't be specific.

"Let's just say it was a substantial amount," Schmalzer said outside Centennial's main office Monday, where FDIC officials and bank employees were winding down the lender's affairs.

pbeebe@sltrib.com

All gauges point to modest growth

All gauges point to modest growth
Utah manufacturing improves but trails Wyoming, Colorado

By Brice Wallace
Deseret News, March 1, 2010

Utah's economic outlook continues to improve, according to a monthly business conditions gauge released Monday.

The Goss Institute for Economic Research's monthly business conditions index for the state rose to 55.8 in February from January's 52.7.

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



Components of the overall index for February were new orders at 59.5, production or sales at 60.3, delivery lead time at 49.9, inventories at 59.2, and employment at 50.2.

Utah's overall index generally has been rising since last April. It is at its highest point since reaching 60.6 in October 2007.

"Manufacturing firms in the state have lost more than 11,000 jobs over the past year, or more than 7 percent of the state's manufacturing base," Ernie Goss, director of the institute and Creighton University Economic Forecasting Group, said in a prepared statement. "Based on surveys over the past several months, I expect slight manufacturing job gains and flat overall job growth for the state for the second quarter of 2010."
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The three-state Mountain States region saw its overall index rise for the fifth straight month. It climbed to 58.6 in February from January's "healthy" 55.6, Goss said.

"Readings over the past several months indicate that the regional economic rebound that is under way will pick up steam in the months ahead... . The likelihood of the regional economy dipping back into recessionary territory has diminished significantly according to our surveys of supply managers. While I expect the overall regional economy to expand in the months ahead, I continue to expect job growth to be subdued, especially for rural areas of the three-state region."

Colorado's index rose to 58.2 from January's 56.2. Wyoming's grew to 65.0 from January's 62.8.

The Goss institute uses the same methodology as the Institute for Supply Management uses for a national index. The nationwide figure was 56.5 in February, down from 58.4 in January.

Contributing: Associated Press

e-mail: bwallace@desnews.com

Barnes Bank's end leaves trail of victims

Community bank's end leaves trail of victims
Shareholders, executives blame one another for the demise of venerable Kaysville lender.

By Paul Beebe
The Salt Lake Tribune

The first inkling of trouble came in a letter to Barnes Bank shareholders on June 1, 2008.

Signed by chairman, president and CEO Curtis Harris, the letter said the board of directors had approved a dividend of 45 cents per share for the first six months of the year.

The news sent shivers through many of the Kaysville community bank's 400-plus shareholders. Previous payments in June and November 2007 amounted to $3.56 per share -- the biggest annual dividend ever paid by the bank, then in its 117th year. Barnes, Harris said at the time, had a very good year.

This time, though, the ground was shifting, and Harris was not so pleased. Late in 2007, the real estate bubble that had lifted Barnes to record profits had started to sag.

The 45 cent dividend was to be the last payment shareholders would ever receive from Kaysville's biggest employer. A string of profitable years making loans to land developers and builders had ground to a halt. Barnes was entering a nightmare period of losses and crumbling capital reserves that Harris and his subordinates would prove powerless to stop.

The ordeal would continue for 19 months until regulators, certain there was no hope for the dying bank, confiscated Barnes on Jan. 15, wiping out shareholders and staining the reputations of Harris and other top executives. The closure also set off a surge of accusations and recriminations among an inner circle of influential shareholders and bank managers that continues unabated today.

"Five years ago, Barnes Bank was one of the best banks in the country. It had a great franchise. But somewhere in the last five years, the board of directors started making very risky decisions," said Stephan Peers, an investment banker and Barnes family member who joined the eight-member board in September.

Judy Jenson doesn't know why the bank died or who is responsible, but the 62-year-old widow feels suddenly vulnerable. The financial cushion bequeathed to her by her late husband is gone.

"All I know is the bank has squandered my inheritance, which was what I considered to be my future security and get me over the rough edges of retirement," she said.

"The economy is an easy out," wrote blogger Greg Christensen, whose great-great-great grandfather, John Barnes, founded the bank in 1891.

"I believe it was mismanagement, exuberance, nepotism and opaque communications from the board of directors. Our family lost a lot of money. But the wrenching part is feeling we lost a legacy."

--

CFO assigns blame » Like Peers, Christensen blames bank managers for thinking too narrowly. Instead of building a portfolio with a mix of loans, they focused on home building and land development. Such loans are profitable but can be risky because they are tied to the vagaries of the economy.

Harris declined requests for comment. But Chief Financial Officer Douglas Stanger defended the bank.

He repeated an oft-cited claim that credit unions have exploited a federal income tax advantage to pull consumer lending away from banks, forcing them to shift more to business loans.

"And a big business in this state was development and construction," Stanger said.

Moreover, based on history, real estate loans didn't seem particularly hazardous. As recently as 2007, losses on real estate-secured loans amounted to less than 1 percent of the bank's loan portfolio, he said.

"I don't think there was ever any decision made at the time that seemed like it was high-risk or the wrong decision," Stanger said.

Instead, he assigned much of the blame for Barnes' collapse to Peers, whose deceased wife was a member of the Barnes family, and Susan Barnes, another descendant of founder John Barnes. Both, he said, engaged in inflammatory actions that scared shareholders, frightened depositors and touched off a $100 million run on deposits that probably forced regulators to close the bank before Harris and others could save it.

"I don't really think Stephan or Susan really understood the impact of what they were doing," Stanger said, adding the media should share the blame for reports that fueled the bank run.

In a letter dated Dec. 2, Peers told shareholders of his effort to gain a seat on the board earlier in 2009 after learning of the bank's dire condition. Peers said he was opposed by every board member with the exception David Barnes, also part of the extended Barnes family, until finally being seated in September.

Peers urged shareholders to attend a special meeting with Barnes management Dec. 18. In the letter, he mentioned an agreement reached with the Federal Reserve in May. The legal document was a formal acknowledgement that Barnes was in trouble. It commanded Barnes to increase its capital reserves, which had been decimated by stacks of construction and land development loans that had gone bad during the previous two years.

The situation was dangerous, but Stanger wasn't alarmed. The bank had racked up $22 million in loan losses during 2008, but had set aside more than $50 million to cover them, he said. Barnes had been working to comply with corrective measures suggested unofficially by regulators during previous meetings.

So Stanger was surprised when the Fed issued the written agreement May 13, formally instructing Barnes to present an acceptable plan to increase its capital within 60 days. The Fed didn't say what might happen if Barnes failed to comply. But the message was clear: Regulators were worried.

"I thought we were doing what was requested and I thought we were following good procedure," Stanger said. "I didn't feel like the bank was under more stress than other banks that were in the same markets as we were."

What Stanger didn't know until informed by a reporter this month was that another federal agency, the Federal Deposit Insurance Corp., had secretly put Barnes on its closely watched "problems list" a month earlier. The list contained the names of more than 300 lenders, its highest level since 1994, testifying to the gravity of the U.S. financial crisis.

"That's not something they communicated to the bank," Stanger said.

--

'Time is short' » Turmoil inside Barnes mounted over the spring and summer. By Sept. 30, as loans continued to sour, the lender had lost $210 million.

Shareholders were becoming uneasy. Barnes had not paid them a dividend for more than a year. Then came Peers' Dec. 2 letter. In it, he said the Fed was likely to issue a "prompt corrective action" letter at any time.

"Letters of this type," Peers wrote, "are written to banks that have engaged in such egregious practices for so long that the regulators deem the [FDIC] insurance fund better protected from losses than by a continuation of the same management and director team."

Peers also said he believed regulators would not give Barnes much more time to turn the bank around because of "management's continued lack of response over the past year and a half."

The FDIC letter arrived two weeks later and said Barnes was "critically undercapitalized." It ordered Barnes to find a suitable buyer or raise enough capital by Jan. 15. Although it didn't spell out the consequences, the implication was clear: Failure would mean the end of the bank.

Susan Barnes wrote shareholders on Dec. 26, urging them to assist efforts to change the board at an expedited annual shareholders meeting she hoped would occur before the regulators' deadline.

"Time is short," said Barnes, a librarian living in Seattle. She prodded shareholders to remember the Fed's Jan. 15 deadline. And she reminded them the bank's managers had told them at the emotional meeting Dec. 18 their shares had plunged from $125 a share in February 2009 to less than $3.

"They made it clear that they do not accept any responsibility for this decline," Barnes wrote.

CEO Harris immediately fired off a letter to Barnes. He said the media had caught wind of Peers' letter, and a run on the bank's deposits had ensued because of the resulting publicity. He said her letter would likely generate another harmful response by the public and depositors.

The shareholders meeting took place Jan. 14. Susan Barnes held proxies for more than 40 percent of 800,000 voting shares. Others at the meeting had not authorized Barnes to vote their shares for a proposal to change the bylaws to allow for the immediate election of directors, but promised their support, she said.

The vote was inconclusive. Three directors received less than 50 percent of the votes cast and were expected by Barnes and Peers to step down. But a day later, the Utah Department of Financial Institutions stepped in and closed the bank.

In a recent e-mail to The Salt Lake Tribune , Barnes said, "I felt that it was my responsibility as a shareholder to speak up, and I would do the same again."

CFO Stanger said the bank would have needed at least $30 million in new capital to stave off regulators. It could have used as much as $80 million. But raising any capital in such a heated environment was nearly impossible. Between mid-December and mid-January, depositors withdrew $100 million from the bank, he said.

Stanger had worked 30 years at Barnes. Its death was "devastating," he said in a recent interview. Because he was not on the board, he disavows direct culpability for its decision to focus too much on construction and development loans. Nor does he fault Harris or the board for their choices.

Stanger also does not criticize regulators. They closed Barnes because of the run on deposits. If the run hadn't happened, regulators probably wouldn't have felt the need to close the bank in January, he said.

"There is the likelihood that the bank could have found an investor or a group of investors to raise the capital to continue the bank as it was," Stanger said.

Board member Peers said bank executives have no one to blame but themselves. Instead of blaming him and Susan Barnes for writing to shareholders, executives should acknowledge three key mistakes which ultimately doomed the bank.

» Instead of diversifying its loans, Barnes focused on construction and land development, Peers said.

» It also expanded into fast-growing Utah and Washington counties, making loans to builders and developers it barely knew.

» Finally, it relied too much on brokered deposits -- funds raised by brokers from people in other parts of the country chasing high interest rates -- instead of on local depositors who would be more loyal to Barnes.

"Any blip will sink [such] a bank faster than a comparable community bank because they just have a much higher-risk profile," Peers said.

Utah's commercial real estate market still struggling

Utah's commercial real estate market still struggling
Jasen Lee, Deseret News
Published: Tuesday, Feb. 23, 2010 2:01 p.m. MST

SALT LAKE CITY — The economic meltdown has hit Utah pretty hard, particularly in the real estate realm. And while the residential market is may be on the verge of a turnaround, the commercial market has yet to hit bottom, according to a local analysts.

Speaking to an audience of real estate professionals Tuesday at the Marriott City Center, Ron Schulthies, executive vice president and chief lending officer for the Bank of Utah, said the commercial sector continues to struggle.

"There are leaders and laggers in this economy, and commercial real estate is a lagger," he said.

Schulthies added that while the industry is still in an economic funk, the stage is set for a comeback, with lenders poised to support quality development projects.

"(Banks) have excess funds. … There is a lack of demand, and we would love to put money to work," he told the audience of about 50 industry insiders.

He said banks have a "tremendous incentive to make loans" because doing so would yield a much higher rate of return on investment than the institutions are currently getting with their funds essentially sitting idle.

Despite the hardships experienced in the commercial sector over the past couple of years, John Taylor, investment specialist with Commerce Real Estate Solutions, said the Wasatch Front "is doing better than most markets."

"We're stabilizing. The fundamentals (of our real estate) are still pretty good," he told the Deseret News.

Taylor said that since the downturn, prices in the commercial real estate market have dropped significantly, which has altered the landscape in a profound way.

"There was too much money chasing real estate," he said. "Now there is a lot of money chasing real estate … but it's smart money."

Potential investors "are not going to make dumb decisions," Taylor added. "They are going to make sure the property can pay back the debt and pay them the return that they need."

He said that for the foreseeable future, the local commercial market will continue to adjust and correct itself back to a point of lower, more reasonable prices and eventually equilibrium.

He said projects like the LDS Church-owned City Creek development and the recently completed 222 South Main office building will be positive influences on the long-term viability of the downtown business district and the local commercial real estate sector, especially compared to the outlook for hard-hit neighboring states like Nevada and Idaho.

"The fundamentals of (the economy) are much stronger here," Taylor said. "If we looked at a 15- or 20-year trend, we're doing really well right now."

e-mail: jlee@desnews.com
© 2010 Deseret News Publishing Company | All rights reserved

Park City condos going up for auction

More developers want to auction off new units
Success of Silver Strike Lodge prompted two more in March

by Andrew Kirk, OF THE PARK RECORD STAFF
Posted: 02/19/2010 05:02:22 PM MST

On Dec. 26, The Park Record reported that developers of the Silver Strike Lodge at Empire Pass would auction off eight brand-new units. The developers thought this may have been a first for Park City. In essence, it was a kind of experiment, and response to the article indicated some wished them well, others thought it was a charade.

As a result of the auction on Jan. 17, all but one of the units in the lodge have now been sold, and two other Park City developers have signed up with the same auction company Accelerated Marketing Partners.

Developer Matt Mullin said in December he wanted to put Silver Strike Lodge units on the auction block because willing buyers are out there, they just aren't buying because they're worried about overpaying.

An auction allows the buyers to come forward and together establish the true market value of a unit without any suspicion of someone getting a better deal. It also allows for a quick disposal once the agreed-upon value is established.

Mark Waltrip, chief operating officer for Westgate Resorts will offer 44 condominium residences at The Lodge at Westgate Park City Resort & Spa on March 28. Located at The Canyons, these condominiums are much smaller than those at Silver Strike Lodge (they average at about 750 square feet) a but have much better amenity packages, Waltrip said. The Silver Strike Lodge condos sold for about 20 percent of true retail, and Waltrip said he'd be more than happy with the same.

Because the
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units are smaller, at a good location and fully furnished, he expects them to sell quickly. And like Matt Mullin, that's part of the appeal of the process. Westgate manages timeshares and wants to be rid of the unsold whole-ownership condos at the Park City resort, he explained.

"This is a good approach to sell off balance of our inventory," he added. "This is not a company in trouble You're dealing with a 42-year-old company servicing (this resort) to the same level we're servicing all other resorts."

The other developer, Henry Sigg, will auction off seven "homes" in the development Lookout close to the Silver Lake Village on March 27. They're all "condos" he said, but some are attached, some detached ranging from 4,317 to 5,866 square feet.

Sigg, too, said he's perfectly fine letting the units go for less than market price. It's about moving inventory, he said. The market has gone through a correction, and in order for stability to return, inventory levels need to go down.

"You've got to remember, prices in the heyday were too high to begin with," he said.

When auctions dispose of units quickly it spurs demand. The same number of units it takes a whole season to sell can find buyers in a single day. They also attract a variety of bidders, which drives up the winning bid.

There's a need for transparency in real estate, he said.

"People have trepidation. They don't want to overpay People are comfortable when they know what the guy next door paid, they like knowing they got the same deal everyone else is getting," he said.

Could the popularity of the method drive down prices too far? Ken Stevens of Accelerated Marketing Partners said not with this kind of uniqueness in each development.

When similar properties are auctioned en masse, that might happen, but there are no other seven homes like the ones at Lookout and no other vacation condos with the amenities offered by Westgate.

Also, buyers come in and go out of the market every four to six months so it's always changing. But there's a finite amount of product to be sold, he said. These quick sales will speed the day when buyers are all confident the market has hit bottom and price pressures will resume.

"The folks we're selling to are very, very smart," he said. "They're buying now below replacement costs, and sooner or later that's not going to happen anymore, we'll run out of supply first."

Commercial Real Estate Symposium summary articles

I wasn't able to attend this year's NAIOP/CCIM 2010 Utah Commercial Real Estate Symposium and have had my eye out for a good summary. Fortunately, Kelly Lux with "Real Estate News Utah" has done just that with excellent summaries of each presentation. Here are the links.

2009 Report and 2010 Forecast for Utah Retail Market

2009 Report and 2010 Forecast for Utah Office Market

2009 Report and 2010 Forecast for Utah Industrial Market

Thanks to Kelly for her excellent summaries.

Think 2011 for commercial sector recovery

Think 2011 for commercial sector recovery
Economy » Retail rebound likely to precede that of multifamily, industrial real estate, conference speakers say.

By John Keahey
The Salt Lake Tribune
Updated:02/09/2010 07:16:42 PM MST

The massive City Creek project might be on target for completion in 2012, but that's not soon enough to bounce the Salt Lake Valley's commercial real estate market out of the doldrums this year.

"I'm skipping 2010," Michael Morris told several hundred commercial real estate executives meeting in Salt Lake City Tuesday morning, emphasizing 2011 should be significantly better.

The Zions Bank executive vice president's comment got a laugh, albeit a nervous one, from those attending the 16th annual Utah Commercial Real Estate Symposium.

Morris told attendees that inventories of leasable space are expected to increase and pricing per square foot will continue "to get pushed down." But as the year progresses, he noted, some commercial sectors will start a slow rebound.

"Multifamily housing will get financed first" as banks start loosening up their lending, he said. And retail, which was the first sector to get slammed hard when the recession starting mounting in Utah in mid-2008, could also be among the first to rebound, he said. Next in line will be the industrial leasing sector.

Other speakers at the morning-long symposium echoed Morris' outlook.

Wesley Cornelison, a principal in CB Richard Ellis, thinks 2010 likely will bring "flat to slightly negative growth" in the office sector of commercial real estate. He expects "it will take several years to work out office space inefficiencies once job growth starts to rebound."

As for lease rates, landlords will "compete for fewer tenants ... and [rates] will experience downward pressure."

A bit of good news for commercial leasing companies -- though bad for construction firms -- is the reality that "speculative office construction is not expected in 2010," he said. That's because 559,771 square feet of newly constructed office space came online during the past year, led by completion of 222 Main Street in downtown Salt Lake City encompassing 426,671 square feet within 22 stories (no 13th floor).

Some of that space will be filled this year without the pressure of new projects, he said.

Vacancy rates throughout the valley are at 17.2 percent, a dramatic increase from 13.7 percent at the end of 2008 before the recession started to hit with a vengeance in Utah.

But it's going to take some time to get that bigger number down, Cornelison said, noting that companies would have to create more than 12,250 jobs in order for that figure to come down to 9 percent.

"We're all under water," he told his colleagues. "But there is no reason to panic. The surface is right above us."

Troy Hardy of Coldwell Banker Commercial took attendees down memory lane in his talk about the retail segment. He picked 2007 as "arguably the best year in the history of Utah retail ... lease rates climbed substantially and vacancy rates dropped to near negligible levels."

And major players, such as Walmart, Target, Home Depot, Costco and Starbucks, "continued aggressive expansion plans statewide."

Then, "a crack appeared" in 2007's fourth quarter.

"Since retail follows rooftops, it wasn't hard to see that 'the darling of Utah's commercial real estate market' would misstep with the residential meltdown of 2008," he said.

His prediction for 2010 is that evidence of a rebound "may be hidden from view during the first two quarters, [but] retailers will slowly come out of hiding and ultimately, as consumers spend, residential rebounds and unemployment stabilizes, the retail segment will again become the darling of commercial real estate."

jkeahey@sltrib.com

Economic tidbits

In his speech Tuesday at a commercial real estate symposium in Salt Lake City, Zions Bank's Michael Morris tossed out these bullet points in discussing the residential and commercial markets:

Mortgage debt nationwide totals $10.5 trillion.

Twenty-three percent of Americans owe more in mortgage debt than the value of their homes.

The mortgage delinquency rate in the U.S. is 8.1 percent.

By December 2009, 697,026 Americans modified their mortgages, saving an average of $550 a month in payments.

Commercial debt nationwide totals $3.5 trillion.

$1.4 trillion of that debt will mature in the next three years.

Banks hold a majority of commercial debt, $1.6 trillion.

Commercial property values nationwide are down 43 percent, to 2002 levels.

There have been 150 bank closures since the downturn began, with another 300 to 500 expected.

City Creek development update

Move-in plans, new restaurants mark City Creek development's progress in downtown Salt Lake City
Deseret News
Published: Tuesday, Feb. 9, 2010 10:35 a.m. MST

SALT LAKE CITY — Shops at the LDS Church's City Creek Center won't open until 2012, but the progress of the massive downtown development is impossible to miss.

The Regent, a 20-story residential tower, has sprung up at a rate of one floor every six days, and people are expected to move into the 90-unit Richards Court across from Temple Square in April, officials announced Tuesday morning.

"This has been a herculean effort to get to this point," said City Creek Reserve President Mark Gibbons. "The fruits of this marathon effort are beginning to show forth. … Downtown certainly has risen."

Six years after The Church of Jesus Christ of Latter-day Saints announced plans for the project, the Salt Lake City's new skyline is finally taking shape. The nine towering cranes, meanwhile, are now eight, and the project's largest crane is expected to come down in May, Gibbons said.

The center's food court already is open for business, and a pair of Salt Lake favorites will open shop there next month. Taste of Red Iguana and Bocata, an artisan sandwich shop from the owners of Settebello Pizzeria Napoletana, will join Great Steak, McDonald's, Sbarro, Chang Chun and Suki Hana in the court.

While officials have declined to release financial information about the development, some estimate City Creek Reserve, a development arm of the LDS Church, will spend as much as $3 billion by the time the center opens in 2012.

Even in tough economic times, interest in the development has been high.

"It's been amazing," said Ron Loch, vice president of planning and design for Taubman Centers, the church's development partner on the project. "There's been great interest because this is such a unique product."

When the center opens in March 2012, there will be 80 retailers and a mix of restaurants spread out over the two-block development, Loch said.

About half of the 250 residential units made available to date remain on the market, Gibbons said. While condominiums overlooking Temple Square run in excess of $1 million, City Creek also will feature rental units along Main Street.

"Not withstanding the economy, people recognize the opportunity to come into the downtown," Gibbons said. "We've had a very active sales effort."

Downtown parking also will get a boost, officials said. In-street ramps already have been opened along South Temple and West Temple.

About the time residents begin moving into Richards Court, workers will begin placing the framework for a pedestrian skybridge over Main Street.

The mid-block gallerias also will feature a waterfall, meandering creek and a glass retractable skylight that would take six minutes to open and close, Loch said.

Construction of the center's anchors, Macy's and Nordstrom, is under way, and work on a Harmons grocery store along 100 South and State begins this summer.

City Creek officials Tuesday also unveiled a painting by Salt Lake artist David Meikle. "Wasatch Grandeur," a depiction of Mount Olympus at sunset, will hang at the entrance to the food court.

"It's kind of a view I've grown up with," Meikle said. "To me, this makes Salt Lake a great place to live."

e-mail: afalk@desnews.com
© 2010 Deseret News Publishing Company | All rights reserved

Research says Salt Lake underbuilt in homes

Research says Salt Lake underbuilt in homes
Deseret News
Published: Thursday, Feb. 4, 2010 8:36 p.m. MST

The greater Salt Lake new-home market has shifted from being overbuilt in 2005 and 2006 to being what may be an underbuilt situation, given the region's growing population and strong demographics, according to housing market research firm Metrostudy.

Eric Allen, director of Metrostudy's Utah/Idaho region, said the most notable change in the new-home market has been in the category of finished vacant detached-home inventory. Metrostudy uses finished vacant inventory as a fundamental indicator to monitor the health of housing markets.

Inventory of detached new single-family homes decreased 56 percent in 2009. According to a release, there were only 875 finished detached vacant homes available for sale — a 2.2 months' supply at the current annual closings pace and slightly above the ideal balanced supply of two months.

Allen called the scenario "an extremely good sign for builders, as buyers will see a need for new construction."

Metrostudy conducts a count of all new housing units in subdivisions within the market area each quarter. Allen said a bright spot in the market is the decline in total inventory, which he said has decreased consistently since the second quarter of 2007.

© 2010 Deseret News Publishing Company | All rights reserved

Nu Skin plans massive expansion in downtown Provo

Nu Skin plans massive expansion in downtown Provo

Grace Leong - Daily Herald | Posted: Wednesday, February 3, 2010 12:50 am

After years of looking at expansion opportunities in downtown Provo, Nu Skin Enterprises, one of Utah County's largest employers, is moving ahead with a proposed multi-million-dollar expansion of its corporate headquarters that will include consolidating most of its Provo operations in the downtown area.

On Tuesday night, the Provo direct seller of nutritional supplements and personal care products presented its expansion plans to the Provo Municipal Council. The proposal calls for an additional 120,000 square feet to be added to an area that is now occupied by the Kress building and three existing businesses on the southwest corner of 100 W. Center Street.

Nu Skin is also seeking the city's approval to vacate 100 West from Center Street to 100 South to make way for a 5,000-square-foot atrium that will connect its global headquarters on 75 W. Center Street with a proposed new six-story building on 100 W. Center Street. The atrium will serve as a gathering place for Nu Skin's distributors and employees and as a venue for community events.

The council unanimously approved a motion to move forward with discussions about vacating the portion of 100 West and selling it to Nu Skin. The decision to move discussion forward to the March 2 action agenda is not a decision to vacate the street or approve of any project plans, Redevelopment Agency director Paul Glauser stressed in the meeting. It is, however, a message to Nu Skin that the city is interested in working with one of its major partners in the downtown area.

Several council members voiced early approval for the project, though they had questions about how much an effect closing down a street in the downtown area would have. A traffic study showed that area of 100 West has about 2,000 cars on it a day. Center Street in front of Nu Skin, conversely, has between 10,000 and 12,000 cars on it daily.

This also could be big for the city; elected officials have made downtown revitalization a major focus of the recent campaign as well in the last few years. This, combined with the planned convention center and the redesign of the I-15 interchange, could be that plan they've been looking for.

"Momentum is really picking up in our downtown," Mayor John Curtis said.

Lower real estate prices, cheaper construction costs and Nu Skin's sound financial position are among factors that made the company's expansion possible in the midst of the country's worst recession since the Great Depression, company officials told the Daily Herald at an editorial board meeting Tuesday.

"We've needed a new tech center for some time, and construction costs are much more favorable now," said Gary Garrett, vice president of corporate relations and managing director of Nu Skin Force for Good Foundation. "The new tech center and the research center will give us the opportunity to showcase our innovation in terms of our products and direct selling opportunities."

Nu Skin, which is releasing its fourth-quarter earnings Thursday, reported net income of $59.5 million for the third quarter, up 17 percent from a year ago. In the third-quarter earnings report, CEO Truman Hunt cited consistent improvements in its operating margins since it restructured its business in 2006 and strong growth in Japan, its largest market, and several other Asian countries and Latin America.

To make way for the new building, Nu Skin has made offers to buy property from the owners and landlords of B. Ashworth's on 127 W. Center Street, Pioneer Book on 129 W. Center Street, and Art Services on 125 W. Center Street. The offers are contingent on the city's approval of Nu Skin's proposed expansion.

"If we get the city's approval, then the tenants will eventually vacate their buildings and we will take on that space," said Kara Schneck, senior director of corporate communications for Nu Skin. The company is also considering the option of acquiring the now closed Biomedics plasma center on 153 W. Center Street for future expansion.

Pending the city's approval, construction is expected to start this year, and the project is expected to be completed by 2012.

"We've heard rumors of the expansion but our landlord, who was approached by Nu Skin, told us it may be a few months down the road before it happens," said Brent Ashworth, owner of B. Ashworth's. "We need something to keep downtown Provo alive. It will be good for the tax base if Nu Skin expands. I'd hate to lose my bookshop, but I'm sure there are other places we can relocate to."

The new building will be home to the Nu Skin Center for Anti-Aging Research, which will relocate its 50 workers from an existing 30,000-square-foot building on the northwest corner of 100 South and 100 West.

The proposed building will also be home to Nu Skin's network operations center and call center, which will relocate up to 400 workers from their current location in East Bay. Its distribution center, however, will remain in East Bay.

Company officials say they've not decided whether Nu Skin's U.S. operations and human resources division will remain at the Kress building or move to the corporate headquarters.

The proposed vacation of 100 West will help facilitate the creation of a green space on what is now the site of the anti-aging research center. Garrett said the company hopes to bring a sense of place and community to downtown Provo with what it calls a "privately owned public green space" that's similar to that found near the Main Street Plaza and Gallivan Center in downtown Salt Lake City.

"This public-private space can be home to events like the Freedom Festival, First Night, Taste of the Valley. It can function as a city park, and bring more people to the downtown area," Garrett said.

Founded in 1984, Nu Skin has 4,500 workers companywide including 1,200 in Provo. The company also has 750,000 distributors globally.

Kim Anderson of Provo Art and Frame, another longtime downtown business owner, is positive about Nu Skin's proposed expansion.

"I think it's great they're expanding. We really need to invest in downtown Provo and get rid of the old nasty squeaky floor buildings and get something that's sellable and rentable. We need to get people on the sidewalks," Anderson said.

"There are so many old buildings in downtown Provo that a new building will be an improvement. The only negative is the disruption caused by the construction. But in the long term, it'll be great for downtown Provo," he said.

• Daily Herald reporter Heidi Toth contributed to this story.

Utah Commercial sector's pulse faint after 2009

Utah Commercial sector's pulse faint after 2009
Real estate » Full recovery in 2010 unlikely, but some projects are pumping life into S.L. Valley.

By Lesley Mitchell
The Salt Lake Tribune
Updated:01/22/2010 05:13:48 PM MST

The economic downturn has given Utah's commercial real estate sector a beating, and despite some signs of life, the pain will linger through much of 2010.

Companies curbing expansion plans -- or worse yet, shutting down altogether -- have emptied buildings and driven up vacancies in office, retail and industrial space. Rents are down, and construction of new projects has slowed, or stopped altogether in some areas.

In a time of cutbacks in consumer spending, the retail sector has been hit particularly hard.

"There were a few bright spots, but 2009 was probably the worst year in 25 years for retail leasing and tenant expansion," said Chris Monson, a retail and investment specialist with commercial brokerage Mountain West Retail and Investment in Salt Lake City.

The biggest news in Utah retail last year was the entry of grocery chain WinCo Foods, which in October opened its first warehouse-style stores, in Midvale and West Valley City. The company has announced plans to build three more stores in the state, in Ogden, Clinton and Orem.

A handful of expansions by big-box retailers such as WinCo helped compensate for virtually no development in other areas of the retail sector. Mall development -- or redevelopment -- generally came to a grinding halt last year, with a couple of notable exceptions.

The rebuilding of Cottonwood Mall remains stalled, even as owner General Growth Properties has emerged from bankruptcy. Other malls are delaying large capital improvements and struggling with tenants closing shop or electing not to go through with expansion plans.

But in Farmington, the long-stalled Station Park retail-office complex is showing signs of life. The Harmons grocery store chain recently announced plans to start work on a 68,000-square-foot store this spring. California developer CenterCal Properties said it also plans to build a 14-screen Cinemark movie theater; if all proceeds as planned, both could open in early 2011.

But progress on the rest of the large project remains uncertain given the state of the economy. At buildout, the shopping center could have as much as 800,000 square feet to 1 million square feet of retail and office space.

Last week, the Trolley Square shopping center announced that a 42,000-square-foot Whole Foods Market will open in February 2011. Trolley's owners had filed suit against Whole Foods in an effort to force the natural foods grocer to proceed with plans to build a large store as part of the mall's revitalization effort, but the sides settled.

Another key rejuvenation effort under way is at Valley Fair Mall. The West Valley property is adding a 3,400-square-foot In-N-Out Burger by summer, as well a 30,000-square-foot Ross Dress for Less, a 13,500-square-foot Petco, an 8,000-square-foot Famous Footwear, and a 3,000-quare-foot NYPD Pizzeria and 2,100-square-foot Farr's Fresh Ice Cream and Frozen Yogurt Cafe.

Fewer companies expanded their brands into Utah last year, but the popular In-N-Out fast-food chain was an exception. It entered the market with eateries in Draper and West Jordan. Colorado-based competitor Smashburger opened its first Utah location in August, near Valley Fair. Another hamburger chain, Five Guys Burgers and Fries, also came aboard last year, adding locations in Midvale, Sandy, West Valley, Bountiful and Orem. A Layton outlet is coming soon.

As with the retail sector, goods news was hard to come by in the market for office space.

In Salt Lake County, vacancies topped 17 percent by the end of last year, up from just under 14 percent in 2008, according to a report by CB Richard Ellis. That's the highest level since 2004.

"Overall, it was a very difficult year for landlords," said Wesley Tab Cornelison, an office specialist with CB Richard Ellis in Salt Lake City. "If you're a tenant, however, it's great."

The gleaming new office building at 222 S. Main in Salt Lake City, on which construction started before the state and national economies headed downward, opened for business in December. For owner Hamilton Partners, filling the 425,000-square-foot downtown structure will be a challenge, but there is progress.

The Denver-based law firm of Holland & Hart, which agreed to lease the building's top three floors covering 67,000 square feet, is the anchor tenant. Another law firm, Brinks, Hofer, Gilson & Lione, will occupy about 8,000 square feet on the 19th floor. CB Richard Ellis, the building's exclusive listing agent, is occupying the fourth floor, with about 13,000 square feet of space.

Hamilton Partners Principal Bruce Bingham expects the building to be about 55 percent leased by early February after an unnamed tenant signs a lease for 150,000 square feet.

Speculation among those in the city's commercial real estate industry has centered on Goldman Sachs being the tenant. The banking giant operates at the University of Utah's Research Park but is looking for new, larger digs to accommodate an expansion. Bingham would not specifically comment about prospective tenants.

As a landlord, Bingham will be grateful to put a "painful" 2009 behind him.

Several other office buildings opened last year. The new square footage, combined with a high level of space emptied by companies scaling back, has substantially increased vacancies.

Tenants are getting lower rates, significant amounts of free rents and moving allowances, among other perks.

But in a twisted bit of good news, office-building construction in many areas of the Wasatch Front has stopped, giving the market time to absorb the surplus space available.

In the market for industrial space -- which encompasses warehouse, distribution and manufacturing concerns -- development also has virtually halted because of a surplus of available space.

The slowdown in development is helping the situation, said Greg Hunter, an industrial specialist with Salt Lake City-based Commerce Real Estate Solutions in Salt Lake City.

Many companies have postponed, scaled back and even shut down industrial operations, a trickle-down effect tied to the downturn in consumer spending and housing construction.

Home Depot, for example, closed a distribution center in Salt Lake City and delayed construction of another.

Cabinetmaker KraftMaid, which mothballed its 840,000-square-foot building in late 2008, hasn't made any efforts to sell it given the economy, commercial brokers say. Hope remains that as the economy improves KraftMaid will reopen. Hunter thinks the sector should show some signs of improvement in mid-2011.

Despite the challenges Hunter and other said Utah's economy is in better shape than most, with an unemployment rate well below the national average.

The state also is in the enviable position of having the LDS Church drive construction activity with its massive City Creek development in downtown Salt Lake City.

When completed during the next couple of years, the project will include an outdoor shopping mall anchored by Macy's and Nordstrom, as well as residential space and office space.

Utah also is getting another big boost in the form of a 1-million-square-foot National Security Agency Data Center at Camp Williams, which is scheduled to break ground this year. The massive project will cost an estimated $2 billion to build and employ thousands of construction workers.

"Utah is much better shape than many other parts of the country," Hunter said. "Just look at Detroit. Things could be a lot worse."

lesley@sltrib.com

9 banks teetering after bad land bets

9 banks teetering after bad land bets
Utah » Lenders hold more in sour loans than they have money to cover losses.

By Paul Beebe, The Salt Lake Tribune
01/24/2010 05:08:12 PM MST

After betting heavily on real estate lending, about a third of Utah's smaller community banks are teetering between collapse and survival after the worst land-value crash in memory.

Nine banks are struggling to collect on development and construction loans representing 36 percent of their combined portfolios. Many loans are overdue to the point of default and are in danger of being written off as total losses.

If the past year is a guide, some of these banks may fail. Since January 2008, federal regulators have seized three banks and one credit union, including Barnes Bank just 10 days ago. All had gambled on speculative real estate construction and land loans.

The seizure of even one more bank could further deprive cash-hungry businesses of money, potentially amplifying the credit crunch and retarding Utah's economic recovery. Community banks focus much of their lending on small businesses, which generate most jobs. Already the nine troubled banks have cut their loan volumes by an average of 16 percent, according to figures from the Federal Deposit Insurance Corp.

The banks operate in the formerly sizzling real estate markets along the Wasatch Front and in St. George. Until real estate began to slide in 2007, they were profitable; the loans produced rivers of cash. At times, construction and development loans constituted more than 70 percent of some portfolios.

They "were caught up in the land-rush mentality," said Brighton Bank President Howard Holt, whose Salt Lake City institution remained above the fray as a frenzy of imprudence and greed swept through the real estate and financial markets.

"Contractors were out there furiously buying up tracts of land, which just kept driving prices higher and higher. Some financial institutions, including their presidents and their boards, felt that, 'If we want to grow, now is the time. We need to ride the crest of this wave.' "

--

Mark of turmoil » Today, with real estate values off as much as 50 percent in some areas, the nine banks -- two in St. George (SunFirst and Village Bank) and one each in Gunnison (Gunnison Valley), Ogden (Centennial), Orem (Western Community), Provo (Capital Community), Salt Lake City (First Utah), Holladay (Holladay Bank) and Woods Cross (Prime Alliance) -- are floundering. As of Sept. 30, all had lost money, and all had "troubled asset ratios" that exceeded 100 percent, meaning they had more sour loans than money put aside to cover possible losses, according to American University in Washington, D.C., which analyzed the nation's banks using FDIC data.

The troubled asset ratio isn't a definitive predictor of failure, but it is a mark of turmoil, said Wendell Cochran, senior editor at the university's Investigative Reporting Workshop.

"Of the 140 banks that failed [in the U.S.] last year, 125 had ratios of over 100. It's a pretty decent indicator of stress," Cochran said.

To be sure, most community banks are not in trouble. Many have troubled asset ratios closer to the national median of 14 percent. Cache Valley Bank in Logan had a 4.2 percent ratio of troubled assets to capital and reserves. Provo's Bonneville Bank had a ratio of 4.1 on Sept. 30.

Other factors led the nine Utah banks to the brink, from heavy reliance on so-called brokered deposits to hubris by inexperienced bank managers to regulators who pushed banks to forecast future loan losses based on past losses. Because real estate loans had always performed well, some bankers believed they would need virtually no reserves in real estate.

"We've lent millions to contractors and individuals to put families in homes. We had a total loss of less than $20,000 since 1993," said Harley Jacobs, president of Provo's Capital Community Bank, one of a handful of executives from the troubled banks who would speak on the record. One-fourth of the lender's real estate, construction and land-development loans were in danger of being written off as of Sept. 30.

"If we had been able to turn the clock back and repeat what we did through 2007, I don't think we would have done anything different. And we still feel we [did] things right," said Jacobs, who thinks his bank will survive.

Douglas Christensen, president of Bonneville Bank, which has weathered the bank crisis well, said inexperience was also a factor. He is 60. Like him, anyone running a bank in the 1970s and 1980s, when stagflation gripped the economy and the savings and loan industry imploded, looked on the real estate bubble with caution.

"We were a little leery of why the market was so high and what was driving it," Christensen said. "It felt like the market was dependent on easy money. It was getting away from the loans we like to do."

--

Throwing caution aside » With 90 percent of its loans in real estate, Barnes Bank had been in danger of collapse for months before its recent seizure. The Kaysville-based bank survived two world wars, the Great Depression and numerous recessions in its 119-year history. But on Sept. 30, with more than a third of its loans past due, its troubled asset ratio stood at 278 percent, 20 times the U.S. median.

Earlier this month, the Federal Reserve gave Barnes five days to increase its capital reserves or find a buyer. When it couldn't, the plug was pulled by the FDIC, which insures deposits up to $250,000.

Barnes officials haven't explained why they threw caution aside. But, according to the FDIC, the bank doubled its exposure to real estate between 2003 and 2007, from $303 million to $705 million.

That wouldn't have been a problem if borrowers could have repaid their loans. Instead, as land and home prices plummeted, unemployment increased, Utah's economy sank into its worst recession since the 1930s and defaults shot up. Forty-six percent of Barnes' construction and land-development loans were delinquent, according to FDIC figures.

"For at least five years, that was the most sought-after product by customers, and obviously the most profitable. When things are good, everybody expects things to stay good," said Larry Grant, senior lending officer at Ogden's Centennial Bank, one of Utah's troubled nine.

But in September 2007 -- Grant said that was the turning point for the bank -- the bottom fell out of the real estate market, and it hasn't recovered. As of Sept. 30, Centennial's troubled asset ratio had soared to 338 --- worst of all Utah banks.

"We've not had just a recession. We've had a huge downturn that extended outward for an extended period of time, longer than anyone anticipated," he said.

Centennial could be one of the fortunate banks, despite its distress. In September, the bank announced Orem-based Vision Bankcard would acquire controlling interest and infuse new capital, though the deal hasn't closed. The acquisition was revealed three months after the FDIC ordered Centennial to make changes, when regulators said Centennial had too many poor-quality loans and was operating "with inadequate provisions for liquidity."

Liquidity is a bank's ability to convert assets to cash to meet large volumes of unexpected withdrawals by depositors without causing damage to its finances that is impossible to repair.

In hindsight, the risk to Centennial from its ballooning exposure to real estate loans should have been obvious, Grant said. But as the bank looked at the marketplace and what its peers were doing, it was hard to pass up a good thing.

--

'Hot money' » Banks took enormous risks during the real estate boom, often granting loans without demanding proof of income. Others used brokered deposits to fund loans to home builders and developers.

Brokered deposits are raised by brokers who earn fees by selling certificates of deposit that pay high rates of interest to investors, often via the Internet. Amounts raised from each investor are usually slightly below $100,000 so that all interest and principal are covered by FDIC insurance. The funds are often used to make risky real estate loans.

Bankers sometimes call brokered deposits "hot money." Because the deposits aren't raised locally, they aren't loyal to banks that have them. As soon as a bank has a problem or can't match a higher rate, the deposit goes away, leaving the lender holding loans that aren't backed by sufficient capital. In a sense, the bank is upside-down.

Most of Utah's nine most troubled banks used brokered deposits in varying degrees, according to the FDIC. Tiny Gunnison Valley leaned on them enough to catch regulators' attention. In September, the FDIC ordered the Sanpete County bank to stop the practice.

"When the bottom fell out, people just walked away from their houses because they weren't worth what they were costing them," bank President Paul Andersen said, declining further comment.

Virtually all of the deposits of MagnetBank were brokered just four months before the FDIC closed the Salt Lake City lender last January. The bank had amassed $282.2 million in brokered deposits; its total deposits were $282.6 million.

Most were used to make real estate loans. It had $234.8 million in loans on its books. Eighty percent were in construction and land development.

In retrospect, MagnetBank's portfolio of loans looks like a prescription for disaster. Even so, the Utah Department of Financial Institutions allowed MagnetBank in 2007 to convert its operations to commercial lending and continue to fund itself with brokered deposits. At the time, MagnetBank had shown it was able to manage brokered funding appropriately, Tom Bay, supervisor of banks for the department, told the financial services newspaper American Banker .

Today, Bay declines to second-guess the department's decision to allow Magnet Bank to convert. He said the bank failed because of bad loans, not because its deposits were brokered.

Darryle Rude, supervisor of industrial banks at the department, is more philosophical. "In retrospect, would we approve that type of business plan today? Well, obviously in today's environment that would be a poor decision. But at the time it appeared to be a good plan."

--

Time to reflect » Some bankers appear chastened by their behavior. Others, such as Capital Community's Jacobs, wonder how real estate lending spun so far out of control.

"A lot of what this bank's focus was, and many of the community banks share this same position in the market, is we have been relegated to a construction lending platform. We have lost our competitiveness in many of the consumer areas we don't enjoy and others do," Jacobs said, referring to credit unions, which use their federal tax exemption to offer higher interest rates.

Credit union officials counter that they provide competition that helps drive bank rates and fees lower. Unlike banks, they also have severe restrictions on raising capital to fund their growth.

Grant, the senior lending officer at Centennial, said his bank has learned it can't just make real estate loans. It also must investigate applicants more wisely.

"We have learned to diversify. We have learned to look beyond the value of collateral and to focus on the ability of borrowers to support their debt even in bad times."

pbeebe@sltrib.com

Nine banks with asset issues
First Utah, Salt Lake City
Holladay Bank and Trust, Holladay
SunFirst , St. George
Village Bank, St, George
Gunnison Valley, Gunnison
Centennial, Ogden
Western Community, Orem
Capital Community, Provo
Prime Alliance, Woods Cross

Source: American University School of Communication Investigative Reporting Workshop, FDIC data

CRE Financing Update - Ray Walker

I organized a Utah County commercial real estate forum for the Utah County Assoc. of Realtors that was held yesterday. We had excellent presentations by Stan Craft, commercial appraiser with Free & Associates, and Ray Walker with CBRE Debt & Equity Finance. Here is Ray's contact information:

Ray Walker, Senior Vice President
CBRE Debt & Equity Finance
222 So. Main St, 4th floor
Salt Lake City, UT 84101
O: 801-869-8050
F: 801-947-3954
C: 801-918-4599
ray.walker [at] cbre.com


Following are my notes from Ray's presentation.

CBRE represents life companies, local and national banks, direct lender for Freddie/Fannie/HUD for MF and healthcare

Market downcycle in late 80’s/early 90’s was very bad

Credit is frozen to a certain extent, there is plenty of money available at the right price

Land loans are now dead on arrival, must have a defined and strong exit plan
• Banks that are now in trouble are loaded up with land

Utah market hasn’t dropped in Utah nearly as much as some other places
• Approximately 20% drop in values in Utah, 30-40% in other markets
• Utah Co. will likely come out very well in the next upswing

Utah traditionally lags the country, doesn’t go as high or as low

Lenders looking heavily at debt coverage, how are they going to get paid
• Scrutinize tenants on subject property and other properties the borrower owns
• Want global cash flow statement showing all properties owned by borrower

On a purchase, the lender is a partner – on a refinance, the lender is the enemy

Commercial banks hold 45% of commercial mortgage debt
Thrifts hold 6%
CMBS – 21%
Life companies – 9% (most are lending today, 65-70% LTV)

Mortgage debt as a percentage of GDP got above mean, now deleveraging to get back to the mean

On refi’s the lenders are sometimes willing to take a haircut but also want some cash in from the borrower, both share in the pain

Lots of vultures sitting on the sidelines waiting for distressed properties, not real active yet, probably come in small waves
• Private equity groups are paying cash for distressed assets

Life companies – working with borrowers on refi’s so don’t have to foreclose if can avoid

Client getting a 3-1-1 ARM

Thinks it will be 3-5 yrs before finance world is back to normal

MF is a profit-center for Freddie/Fannie, they’ve begun to securitize their portfolio and selling it off, able to shrink their portfolio without reducing lending

Conduits starting to come back (70% LTV, 7-7.25% rate)

Financing on mixed-use buildings – lenders hate mixed-use buildings, the retail/office use always struggles
• Don’t want more than 10% of revenue to come from secondary use

221.d.4 – closed $3b in 2008, have $18b in process, very long process to close (12+ months)
• HUD is saying no more in SLCo except for CDB area
• Utah County will likely have more money available (having to convince HUD that Utah County is worthy of the investment)
o Need more data for Utah County MF market, will help convince HUD

Rates will edge up, not sure what inflation will do

AA corporate bonds are a good benchmark for commercial RE rates, life companies weigh