Port of Houston To Close In Preparation Of Ike

Dear shippers: You don't have to worry about hurricanes on the West Coast. I am just saying.

Story from Chicago Tribune

Just to clarify: Houston is the nation's second largest port when in comes to freight tonnage. The first is South Louisiana (New Orleans). This is because of grain shipments in middle American to the rest of the world. For Houston a lot of that tonnage is oil.

JH Real Estate Snags Inland Empire Retail for $65M

Palm Grove Shopping Center Sold to JH Real Estate for $254.90psf

Newport Beach, CA-based JH Real Estate Partners recently acquired a 255,000-square-foot shopping center in Redlands, CA from Land House Development Co., also of Redlands. Located at the convergence of Lugonia Ave and Alabama St in Redlands, the center sold for $65 million, or approximately $254.90 per square foot. The transaction was financed by a $45 million loan from Wachovia Bank.

Located on 20 acres, the center is 100% leased to tenants including J.C. Penney, a combo Toys 'R Us/Babies 'R Us store, Men's Wearhouse, Chili's restaurant, and more. The project is located directly across from the entrance to Citrus Plaza, which is anchored by Target. House Land has office and hotel space in the works behind Palm Grove.

Typically a multifamily investor, JH has acquired two other retail centers since deciding to branch out into retail investment in 2007. In April 2008, It acquired Porter Ranch Shopping Center, a 55,418-square-foot neighborhood center anchored by Whole Foods Market in Porter Ranch, CA, for $26.15 million, or $471.87 per square foot. And in April 2007, it acquired Brea Imperial Center, a 44,883-square-foot strip center located in Brea, CA with no significant anchor tenant, for $18.5 million, or $412.18 per square foot.

Dallas Fed Chairman Speaks On State Of The Economy

My Favorite Fed Official: Richard Fisher of the Dallas Fed. Here is his September speech on the state of the economy.

Mag-Light: Made In Ontario

Little did I know they occupy a 700,000 SF manufacturing facility (located at 2001 S. Hellman) right here in the Inland Empire.

Zocalo - L.A. vs. Seattle: Whose Pacific Rim is it?

I was going to wait for the actual Pod-cast to be available, but who knows when that will be. Here is a written summary.

Me and Michael Soto were in attendance to this event, which seeks to discuss developments at the ports of La / Long Beach in contrast with the ports of Seattle. There were a couple of speakers at this event.

Steven Erie (moderator): Professor of Political Science and Director of Urban Studies & Planning at University of California, San Diego

Thomas J. O'Brien (Representing LA/LB): Director of Research, Center For International Trade & Transportation, California State University, Long Beach

David Olson (Representing Seattle): Professor of Labor Studies at Washington University, an honest to god Knight of Norway.

Conclusion: After about 30 seconds, David Olson conceded. LA/Long Beach OWNS the pacific rim trade. At least for now.

The point wasn't really to showcase the competition between the two ports, but rather to highlight the challenges both ports are facing.

Obvious challenges: Environment, Labor, Congestion, Politics

It was interesting to learn the politics behind the location of the LA/ Long Beach port (collectively referred to as the San Pedro ports in academic circles).

The whole region was more or less owned by the railroad, and they wanted to put the port for the region in Santa Monica. When the Southern Pacific Railroad arrived at Los Angeles a controversy erupted over where to locate the sea port. The SP preferred Santa Monica, while others advocated for San Pedro Bay. The Long Wharf was built in 1893 at the north end of Santa Monica to accommodate large ships and was dubbed Port Los Angeles. At the time it was constructed it was the longest pier in the world at 4700 feet, and accommodated a train. The plan did not last: San Pedro Bay, now known as the Port of Los Angeles, was selected by the United States Congress in 1897.

The port is actually a public agency and the state has huge influence what can go on at the ports and port revenues stay in the port. Thus, the San Pedro Bay had better lobbyists so the were able to secure the largest economic engine of the state. Santa Monica received the consolation prize, an amusement park on a pier.

The port commissioners, one for Los Angeles and one for Long Beach, are appointed by the mayors of their respective cities. These cities place a different level of importance on the port. For Los Angeles which is connected to the port via a narrow umbilical cord whereas for Long Beach, the port is at the center of life for the city. Thus, the recent clean-port policies reflects the importance of the port for these cities and helps to explain their behavior.

For Seattle, the port is small beans. Only 1.7 million TEU's, or about what LA/ Long Beach pushes out over a 2-3 week period. The reason why so little stuff comes through Seattle is that there are many smaller ports in the region that compete directly with Seattle, and Seattle doesn't have captive cargo like LA/ LB. Captive cargo means that the cargo has to go there, as it is the final point of consumption for the cargo, cargo orginates or is destined for LA/ LB. Seattle doesn't have the population to be a major contender.

Solar Ships? What A Bright Idea

From Wired:

Toyota's Solar Car Carrier

Two Japanese firms are building a solar power system to augment the diesel engines aboard a cargo ship that carries new Toyotas to the United States, a fuel-saving move that makes solar panels on a Prius look like a drop in the bucket.

Slapping photovoltaic cells on a 60,000-ton boat will cut fuel consumption by 6.5 percent, which seems paltry until you realize the average cargo ship burns 120 gallons per mile. The system Nippon Yusen KK is paying Nippon Oil Corp. $1.4 million to develop will save about 46,800 gallons of fuel carrying all those cars 6,000 miles from Japan to Califonia.

To put that in perspective, if you bought a Toyota that arrived on a solar ship with 4,999 other cars, it would have saved nine gallons of fuel before you ever even saw it.

But solar ships do more than save fuel. They also clear the air. Cargo ships burn "bunker fuel," the truly nasty stuff that literally comes from the bottom of the barrel. It's kind of like the Milwaukee's Best of fossil fuels.

A study published in Environmental Science and Technology found emissions from the bunker fuel cargo ships burn may cause 60,000 deaths worldwide. Subsequent research found ship exhaust contributed as much as 44 percent of the sulphate found in fine particulate matter in the atmosphere of coastal California. Anything that cuts the amount of bunker fuel ships burn is nothing to sneeze at.

Nippon Yusen, Japan's largest shipping line, says the solar assist will cut CO2 emissions by 1 to 2 percent per year, or about 20 tons, according to Reuters. Although solar panels have been used at sea to generate power for crews quarters, this is the first time anyone's tried to use them to help propel cargo ships. Beyond seagull-proofing the system, the engineers must figure out how to make it tough enough to withstand salt and vibration. Ikutoshi Matsumura, executive vice president of Nippon Oil, says the first solar ship will be ready to sail by December with "full commercialization of the system in three to five years."

Nippon Yusen could be ahead of the curve, as there is a worldwide push to ban bunker fuel (aka Chanel No. 6) in coastal waters. California, naturally, is among the first, banning its use within 24 miles of shore beginning in July. Similar rules will be in effect worldwide by 2015. Such bans could make shipping cargo more expensive because bunker fuel, as disgusting as it is, is cheap and does the job. Kind of like Milwaukee's Best.

The solar boat isn't the first attempt at cleaning up cargo ships. A much earlier system developed by the Sumerians used wind. More recently, Germany's SkySails has developed a modern interpretation of the sailboat that uses sails the size of football fields to cut fuel use by up to 35 percent. A 2006 design study by Scandanavian shipbuilder Wallenius found ships could use wind and solar power along with fuel cells to create zero-emission shipping.

New technology is another way shipping companies can reduce the cost of transporting cargo in the face of rising fuel prices and stricter emissions standards, all while shortening the "long tailpipe" and giving car buyers something to feel good about. Still, just like the old "double-nickel" speed limit, the less advanced ships can save some fuel by simply slowing down: Dropping speeds by two knots can increase fuel efficiency by up to 5 percent.

Real Share Conference Ontario: Outlook? Real Bad

I wish I went to this conference, the writing has been on the wall and I have been talking about these topics forever, but it is nice to have some reaffirmation every once in awhile. I feel kinda bad for the Ontario Economic Development Director, her job is to not throw the Inland Empire under the bus, which is kind of hard at times like these. Enjoy!

ONTARIO, CA-If you’re looking for the bottom of the economic downturn, you may find it here in the Inland Empire--it’s just that the “when” is another matter. Experts voiced some bleak near-term outlooks Wednesday at the third annual RealShare Inland Empire conference at the Ontario Convention Center, where more than 250 owners, investors, developers, brokers, lenders, service providers and others connected with the commercial real estate industry came to share their views and network.

“There’s no nice way to spin it,” keynote speaker Richard Green, director of the USC Lusk Center for Real Estate, said of the local economy. “The jobs picture in San Bernardino-Riverside County right now is not particularly good. People want to know when are things going to bottom. Will we have a 'V' or 'U' in terms of the recovery?”

Green was one of a host of speakers and panelists who tackled issues ranging from how the changes in the economy, the credit markets and commercial real estate have affected the Inland Empire to what industry leaders see for the immediate and long-term future. His remarks, and those of some others, stood in contrast to the upbeat news that emanated from the Inland Empire for years before the nation's subprime excesses, soaring energy costs and general economic malaise clamped down on every part of the country, even high-flying regions lining the Inland Empire.

The Inland Empire chalked up some of the nation's biggest growth numbers before the downturn. Powered by one of the country's biggest home-building booms, the Inland economy provided a fertile ground for developers to launch scores of retail, office, industrial and multifamily projects.

Now that the economy has slowed and the capital markets are in turmoil, industry leaders and other professionals in the commercial real estate industry are facing a host of questions regarding the near and long-term future of this two-county region east of Los Angeles. Chief among the questions is “When do we hit bottom?” both nationally and in the Inland Empire.
There has never been, until now, a decline in the median home prices nationally since the Great Depression, Green pointed out. The median income is falling and “financial institutions are in an environment of fear,” he added.

In the Inland Empire, existing home sales rose from a year ago, but a lot of that was foreclosure sales, he noted. The good news is “prices have come down so fast and rents have gone up enough that house prices in this region are sensible.”

Green also said educational attainment in the area is lacking. “The Inland Empire lags Southern California, it lags the state of California, it lags the United States as a whole,” he added. According to Green, the percentage of high school students taking college prep classes in Los Angeles County is 37%, slightly above California’s 35.3%, while in Riverside the number is 31.8% and in San Bernardino it’s is 25.5%.

That’s a bad sign for the Inland Empire because educational attainment is a good measure of future incomes, Green said. “This is a good projection of how incomes grow,” he said.
Following Green, a Town Hall Meeting tackled the question, "How Will the Inland Empire Fare in 2009?" The topics covered ranged from the impact of high fuel prices, the credit crisis, the housing slump, flat job growth--and how real estate professionals find and capitalize on opportunities in a confused market.

Job losses for 2008, diminished tenant demand and a generally rugged economy, “have pushed class A office vacancy to its highest level in more than two decades,” said panelist Doug McCauley, regional manager for Marcus & Millichap. He added that Marcus & Millichap anticipates vacancy to reach 15.2% by the end of the year.

Panelist Kim Snyder, senior vice president of the southwest region for AMB Property Corp., says the pinch at the pump is impacting industrial. “Fuel costs are definitely having a major impact on the industrial business in the Inland Empire,” Snyder said.

Panelist Mary Jane Olhasso, economic development director for Ontario, defended the region. “We also have a lot of industrial manufacturing, engineering related to the manufacturing process…medical manufacturing,” she said, noting that “The office sector along the I-10 corridor, that’s the future in our opinion” and that the general development plan from Vineyard to the Interstate 15 Freeway is “just phenomenal.”

She acknowledged the area is “in this bubble of negativity that’s not shared by everyone,” but that the long-term outlook for the Inland Empire is positive, she said, noting that “he who has the work force wins. And guess what? We have the work force. At the end of the day this is where people are going to live in the next two decades.”

Snyder also added his confidence in the long-term outlook for the Inland Empire: “Not only is it a good value, but it’s the best real estate product in the business.”

A new session at this year's RealShare event was a corporate perspectives panel, which included commercial real estate end users and those who represent them talking about the market from their standpoint, why they are in the market, where they are expanding as well as why and where they think the economy is headed.

Another new panel this year addressed how to improve return on investment and save money by going green. Aside from the panels above, RealShare Inland Empire's panels throughout the day included sessions on the capital markets and how investors are getting deals done in today's climate, how the cities and municipalities of the Inland Empire are catering to the diverse needs of its end-users, what it takes and costs to finance deals.

G. Ryan Smith, a senior vice president with Newport Beach-based Buchanan Street Partners, said that “It used to be if you had a heartbeat, you could get a loan. It’s a different world than it used to be.”

Harold Rose, managing director for Greystone, summed things up: “We’re back to the basics,” Rose said.