Deficiency In CMBS Still On the Rise.
WSJ EXCERPT : WALL STREET JOURNAL CHART
Still negative trend for delinquency rate on commercial-mortgage-backed securities as according to Trepp National CMBS Report, over 9% of about $694B in commercial mortgages are 30 days or more past due (current). This can be compared to the 6.49% delinquency rate at the beginning of 2010 and 1.2% at the end of 2008.
Industrial properties overall scorecard hold the lowest delinqeuncy with just 6.5% while lodging sector holds the worst performance sector at close to 20% delinquency. Office, retail and multifamily are 6.61%, 7.13% and 14.4% respectively
CalPERS South America Allocation w Hines Fund.
SFBT & CalPERS press excerpts: 
CalPERS, with approximately $210 billion in assets, is the nation’s largest public pension fund and administers retirement benefits for more than 1.6 million active and retired State, public school, and local public agency employees and their families.
The California Public Employees Retirement System is investing another $190 million in Brazilian real estate through a new investment fund operated by U.S.-based real estate firm Hines.
It’s its third dip into the Brazilian market for the massive Sacramento-based pension fund, following a $95 million investment into one Hines Fund in 2005 and $285 million into a second one in 2007.
Hines has used the money to develop “millions of square feet of premier office, industrial and residential space,” CalPERS says in a press release.
But while the value of CalPERS’ holding in the first fund has grown to $142.4 million from its inception to the end of 2009, the larger investment in the second fund has plunged by nearly half, to $147 million.
“Hines has 12 years of operating experience in the fast-growing Brazilian real estate market, where there’s a mounting demand for commercial buildings and homes,” said Joe Dear, CalPERS Chief Investment Officer. “Interest rates have been favorable, and increased earnings in Brazil have spurred the development of shopping centers, warehouses, offices and residential housing.”
With an office in São Paulo, Hines has committed CalPERS capital to the development of millions of square feet of premier office, industrial and residential space in several markets throughout Brazil, which has Latin America’s largest economy – including São Paulo, Louveira, Embu, Rio de Janeiro, Curitiba and Campinas. In 2007, Hines announced acquisition of the BankBoston Building, a 29-story, 409,000-square-foot architectural landmark in São Paulo.
Hines also invests for CalPERS in other global markets including Mexico, China and Europe.
SF: 350 Mission St. As Proposed
San Francisco’s Planning Commission plan to review the EIR for the proposed development of 350 Mission St on October 21st.
The current building is a four-story, 60-foot-tall, 95,000-square-foot complex currently occupied by Heald College, with ground-floor retail space.
The proposed project would consist of a 24-story, approx. 375-ft tall office building with an estimated 356,000 square feet dedicated for office space. The floor area ratio would be 18:1. The 50-foot-tall ground floor, incorporating a mezzanine would play host to 6,600 square feet of retail and restaurant space, along with a separate outdoor seating area.
Proposed with 61 parking spaces on three basement levels (including three spaces for shared electric vehicles with battery charging capability); and 64 bicycle parking spaces.
The ground floor and mezzanine levels make the overall design standout. At the corner of Mission and Fremont Streets, the ground floor and mezzanine together would serve as an approximately 50-foot-tall atrium, large portions of which would be open to the sidewalk in Sunny weather.
Comments on the project will be reviewed by the Planning Department Monday, November 1 after which a selected comments and responses will be published. Based on comments already received, “potential areas of controversy and unresolved issues” for the project noted include:
[C]umulative construction effects; cumulative shadow and wind impacts, including cumulative effects related to projects having been granted bulk exceptions; shadow and wind impacts on the project’s own open space; consistency with the proposed Transit Center District Plan; displacement of Heald College; visual effects concerning blockage of the sky; economic impacts of housing demand generated by the project; construction noise; the adequacy of open space; LEED certification versus City requirements for energy and water conservation and other “green” features; seismic effects;flooding potential as a result of anticipated sea level rise; and effects related to potential soil and groundwater contamination.
Construction cost are estimated at $85 million with occupancy as early as late 2012.
Bay Area: Affirmed Optimism in Residential Real Estate? ( YOY Numbers )
Unemployment remains the most salient factor in contribution to an actual stabilization of prices. But for now, as reported, both a significant decrease in foreclosure activity and increase in median home prices for select pockets of the Bay Area, point at a stabilized housing market. However, only time will tell if the trend is actually well rooted or an interim period only. 
Oakland Tribune excerpt:
Home prices in Silicon Valley and elsewhere in the Bay Area have climbed at a much higher pace than almost everywhere else in the United States, the National Association of Realtors reported Wednesday.
The San Jose area boasted the nation’s second-biggest percentage climb in median house prices in the second quarter, and the San Francisco area was No. 3.
At $630,000, the median price in the San Jose-Sunnyvale-Santa Clara metro area jumped 26 percent year over year. In the San Francisco-Oakland-Fremont area, which includes San Mateo County, the median price climbed 25 percent to $591,200. Only Akron, Ohio, had a bigger gain, at 36 percent.
Lee noted that Silicon Valley has seen a significant increase in sales of homes worth $1 million or more. In the second quarter this year, 762, or nearly 16.5 percent, of the 4,632 homes that were sold went for at least $1 million.
By comparison, 474 homes sold for $1 million or more during the same period a year ago, representing about 11 percent of the 4,329 homes sold then.
Sales of such pricey homes were even hotter in June and July, increasing about 18 percent year over year, he said. But
he added, those kind of transactions seem to have cooled off a bit in the past couple of weeks.Now that the federal tax credits are no longer available, the group expects a slowdown in sales that will be cushioned somewhat this summer by low mortgage rates.
Economists and other observers, though, say the weak job market also is hurting real estate sales. “Until the employment market stabilizes, we don’t see stabilization in the housing market,” Pete Flint, CEO of real estate website Trulia, told The Associated Press.
East Bay foreclosure activity decreased across the board in July compared with a year ago, a sign of improvement in the region’s real estate market.
Last month, the number of homeowners who received a notice of default — the first step in the foreclosure process — dropped sharply in Contra Costa County, while Alameda County saw a smaller decline, according to a report to be released today by RealtyTrac.com. Both counties also saw a decline in banks taking back properties, the last step in the foreclosure process.
Notice of defaults, percent change
Notice of trustee sales, percent change
Bank-owned REOs, percent change
All foreclosure activity, percent change
Alameda
1,790 -8.3%
923 -29.3%
616 -10.9%
3,329 -15.7%
Contra Costa
896 -53.8%
923 -35.3%
636 -17.0%
2,455 -40.6%
San Joaquin
743 -53.9%
725 -42.4%
522 -32.2%
1,990 -45.3%
Solano
408 -51.8%
429 -21.7%
271 -33.6%
1,108 -38.5%
Bay Area*
3,149 -35.1%
2,325 -29.9%
1,467 -11.5%
6,941 -29.4%
*San Joaquin and Solano counties’ numbers are not reflected in Bay Area totals.
Source: RealtyTrac.com
Year-to-year change in all
foreclosure activity in Bay Area
-29.4%
Fed Reserve to Foreclose On ’08 Bear Sterns Portfolio.
Interesting Wall Street Journal article: 
James Currell is struggling to prevent his Minnesota home from being foreclosed. But his lender isn’t a bank. It is the U.S. government.
The Federal Reserve Bank of New York is facing the prospect of foreclosing on a number of properties in the coming months, from homes to commercial buildings, a result of a souring mortgage portfolio it took over when it helped bail out Bear Stearns in 2008.
As it deals with delinquent borrowers, a team of New York Fed officials and outside advisers are trying to avoid having the U.S. government, along with local sheriff’s departments, seize commercial properties and homes as it copes with falling real-estate values. In the process, the New York Fed is getting a hard lesson in the challenges of mortgage lending.
It is an unprecedented test for the most powerful of 12 regional branches of the Federal Reserve System. In its 96-year history, the Fed hasn’t made or controlled loans to U.S. citizens and businesses outside of banking since the 1930s, when it was done on a much smaller scale. Now, under the watchful eye of Congress, the New York Fed must recoup a $29 billion loan secured by the Bear assets.
“For the Fed to come in and foreclose on properties puts it at some reputational and political risk,” said Vincent Reinhart, a former senior Fed staffer who is now an economist at the American Enterprise Institute. “If the Fed can’t figure out how to recast the terms of these mortgages and work with borrowers—it’s emblematic of the problems the government has had with other programs over the last year and a half,” he added.
The New York Fed faces certain unique issues. It is trying to avoid selling problem assets at discounted prices, which could disrupt markets and hurt banks. And while the regulator is open to modifying existing commercial-property loans, it is less likely than some banks to restructure a loan in a joint-venture situation if it meant the New York Fed couldn’t call the shots in a restructuring.
The New York Fed’s stance about how to pursue foreclosures is a sensitive balancing act. If it proceeds with numerous foreclosure proceedings in the coming months, particularly on residential mortgages, it could trigger concern among legislators looking to protect homeowners in their districts. The issue is particularly sensitive because taxpayers helped fund the Bear Stearns bailout.
As a lender, the regulator is “a pretty tough negotiator,” Helen Mucciolo, a career New York Fed official, said in a recent interview, adding that there is no one-size-fits-all approach to working out each loan as her team seeks to maximize value for U.S. taxpayers.
Overall, the portfolio that acquired the Bear assets for $30 billion in March 2008 had a value of $29.4 billion as of June 30, 2010. The portfolio’s value had dropped to about $25 billion during the depths of the financial crisis.
The problem spot is the real-estate holdings. The portfolio’s residential and commercial loans were worth about $5 billion recently, compared with $9.6 billion in March 2008, when Bear Stearns collapsed, illustrating the financial pain other U.S. banks are experiencing as they deal with their own souring holdings of home loans, offices, hotels, shopping centers and land. So far, buyers have been found for about $1 billion in commercial loans.
The New York Fed’s holdings of commercial-real-estate debt lost 35% of their value over the two years ended March 2010, while a pool of residential loans fell about 60%, according to New York Fed documents and people familiar with the matter.
So far, the regional Fed bank and a company it financed called Maiden Lane LLC have foreclosed on only one commercial property, an Oklahoma City mall it has put up for sale. More commercial foreclosures are expected, a person familiar with the situation says.
Maiden Lane also has been forced to foreclose on homes in California, Illinois, Georgia and Washington, according to public foreclosure records. In addition to working out loans, the New York Fed’s team, led by Ms. Mucciolo, is trying to exit from Bear’s old trading positions tied to scores of mortgage securities and derivative contracts.
The New York Fed ended up with the portfolio as part of the bailout of Bear Stearns, the Wall Street firm that collapsed amid a cash crunch, an early sign of the 2008 market panic. In the bailout, J.P. Morgan Chase & Co. bought Bear Stearns but didn’t want to take $30 billion of its assets, its portfolio of real-estate loans and securities.
To facilitate the deal, the New York Fed set up Maiden Lane as a Delaware corporation and extended to the enterprise a 10-year, $29 billion loan so it could take control of the orphaned Bear assets, which were pledged as collateral for the emergency loan. Now, the New York Fed is trying to unwind the portfolio to recoup the loan. J.P. Morgan put up roughly $1 billion to finance Maiden Lane and will be repaid only after the New York Fed recovers its money.
It could take years. In mid-July, Maiden Lane made its first monthly principal repayment: a relatively modest $30 million.
A 22-person team at the New York Fed’s Investment Support Office is overseeing the portfolio at the central bank’s building on a street called Maiden Lane in New York’s financial district. The team is headed by Ms. Mucciolo, 44 years old, who joined the regulator in 1993 after receiving a graduate business degree at Pace University.
The New York Fed hired investment firm BlackRock Inc. to manage the Bear portfolio and handle negotiations with borrowers while the regulator has a behind-the-scenes role. BlackRock was paid about $35 million in fees for its work on Maiden Lane last year.
More foreclosures could stick the New York Fed with properties it can’t sell. Consider the 2009 foreclosure of the Crossroads Mall in Oklahoma City, a move that put the New York Fed in control of the 36-year-old shopping venue. The mall since 2007 has lost big tenants such as department store Dillard’s.
Maiden Lane last year took over the mall at a sheriff’s auction, to protect the value of the note it held on the property. But in a sign the regulator is struggling to unload properties, an Oklahoma broker has been unable to find a buyer for the mall, which was put up for sale in September for $24 million. “No one is happy about owning a mall, but we have to manage this responsibly and see what we get back,” Ms. Mucciolo said.
The New York Fed has suffered other losses. It has exposure to Extended Stay Inc., a hotel chain that filed for bankruptcy protection last year amid a slump in the lodging business. After an investor consortium bought Extended Stay in an auction, the Fed was forced to mark down its $744 million in mezzanine debt to $0.
The New York Fed and Maiden Lane also took control of roughly 50 commercial real-estate loans tied to hundreds of properties and 9,000 home loans that included both first-lien and second-lien mortgages.
As of year-end 2009, the principal amount due from residential borrowers was $1.5 billion, 49% of which was “nonperforming,” or not accruing interest. (At the same time, 13% of the principal amount due from commercial loans was nonperforming.) The residential pool had a fair value of $1.6 billion in March 2008 that fell to $604 million at the end of this March.
To better oversee the home loans and help more borrowers modify loans, the Fed recently replaced the pool’s legacy mortgage-service companies, Wells Fargo & Co. and Bear Stearns unit EMC Mortgage Corp., with Nationstar Mortgage LLC, based in the Dallas suburb of Lewisville. “It is in our interest for borrowers who qualify for a loan modification to get the help they need,” Ms. Mucciolo said.
Among those under stress is Mr. Currell, a 60-year-old real-estate investor. In 2007, he took out a loan from EMC Mortgage for $420,000 to refinance an existing loan on a four-bedroom home in Woodbury, Minn., initially for himself that he later opted to rent out. That loan today resides in Maiden Lane’s portfolio.
Mr. Currell fell behind on payments and this year filed for bankruptcy protection. Mr. Currell and Nationstar haven’t been able to strike a loan-modification deal. The upshot: Maiden Lane could end up with a home worth significantly less than the value of the loan. Nationstar has offered to lower his rate, currently 7.875%, to 5.5%. But Mr. Currell said he needs an even lower rate, and an extended mortgage period. “Maybe we can make it work,” he says.
“I’m not whining. I’m a big boy,” Mr. Currell says. “I took chances.”
Maiden Lane now owns a large amount of relatively safe securities guaranteed by government-sponsored mortgage operators Fannie Mae and Freddie Mac. Many were bought over the past two years with cash Maiden Lane received from interest and principal payments on assets in the portfolio, and they have helped make up for some of the value declines from soured assets.
The New York Fed and BlackRock also are trying to unwind scores of derivative contracts, including credit-default swaps that act like insurance against defaults. Bear Stearns, a major Wall Street dealer, traded the credit protection on corporate and municipal bonds and mortgage securities, including ones underpinned by subprime loans and bond insurance companies.
To exit from some of the trades, the New York Fed and BlackRock have had to locate the bonds underlying the swaps and hand them over to trading partners that include large Wall Street investment banks. So far they have unwound over half the contracts Maiden Lane originally took on.
Lehman’s Dice Roll : Failed Firm Goes Hard In Commercial Real Estate.
WSJ excerpt:
Lehman Brothers Holdings Inc., brought down in part by its huge property investments, is doubling down on some of its existing deals in a bet that commercial property markets are near bottom.
Since the investment bank’s collapse in September 2008, the firm overseeing Lehman’s bankruptcy has reinvested more than $1 billion in apartments, office buildings and other commercial property already owned or financed by Lehman. Those properties, located from Austin, Texas, to New York to Washington, faced varying levels of distress.
Lehman also has spent nearly $1 billion to pay off partners and creditors and reach other settlements that resulted in the return of real-estate assets to the firm.
By piling more cash into these deals, executives at Alvarez & Marsal, the advisory firm overseeing Lehman’s bankruptcy proceedings, are hoping to salvage the maximum amount from the $14.4 billion of commercial real estate on the bank’s books.
But there is a risk: The success of this strategy depends in many cases on property values rising, something that is far from certain, given the tumultuous real-estate market and the country’s weakening economic recovery. U.S. commercial-real-estate values remain 41% below their October 2007 peak and only slightly above the low hit in October 2009, according to Moody’s Investors Service.
Bryan Marsal, head of Alvarez & Marsal and also chief restructuring officer and chief executive officer at Lehman, says the firm makes new investments only when it is certain that it will protect the existing ones, recover the new money, and achieve “market or above-market” returns on the fresh funds. The firm eventually will sell off all of its real-estate holdings, a process that Mr. Marsal predicts will last three to five years. “We have staying power and can wait until liquidity and the market come back,” he adds.
Lehman’s strategy is being closely watched for the sheer volume of its holdings, which makes it one of the country’s largest commercial-property owners. Scores of other large owners and lenders face similar tough calls as they, too, struggle with maturing loans backed by properties that have plunged in value. Hundreds of billions of these loans likely won’t be paid off in the next five years unless borrowers put in additional equity.
At the same time, Lehman’s unwinding of its myriad faulty deals is shining new light on the firm’s botched assumptions, deal structures and the enormous amount of risk it was willing to assume during the go-go years. When property values were rising, the variety and the size of investments pumped up Lehman’s return. But now, as the market has turned, such convoluted and oversize exposures make it difficult for Lehman to just walk away from troubled projects, as some in the industry have.
Lehman now has a $20 billion cash hoard, including about $2.2 billion from cash proceeds tied to real-estate assets, that can be tapped when reinvesting in real-estate deals. Mr. Marsal and his team estimate that Lehman will recover for its creditors $11 billion within five years from real-estate assets through reinvestments, debt-for-equity conversions and other means, more than double the amount it would get from a quick liquidation of the properties.
But some of the Lehman properties remain troubled despite earlier reinvestment decisions. Take for example, Lehman’s efforts to salvage its investment in the $22 billion leveraged buyout of apartment-building landlord Archstone-Smith. Last year, the firm, which holds both debt and equity in the 70,000-unit company, agreed with partners Bank of America Corp. and BarclaysPLC on an interim solution to make an additional $485 million loan to give it funds to stay current on $5.2 billion in secured debt.
One year later, Archstone still isn’t generating sufficient cash to service its debt, and the $485 million is being depleted. Lehman is now negotiating with Bank of America and Barclays to back its plan to convert the $5.2 billion into new equity.
In another example of reinvestment, Lehman won court approval last month to invest an additional $263 million in a group of office buildings it owns in Rosslyn, Va., a suburb of Washington. The properties are part of a 10-building portfolio that a partnership between Lehman and Monday Properties bought for $1.3 billion in 2007. About $239 million in mortgages on six of the towers are scheduled to mature this month.
Mr. Marsal says the firm’s eventual plan is to bundle the Rosslyn properties, whose tenants include the U.S. government, with other buildings owned by Lehman in the Washington area, and then to “resell or refinance” the whole portfolio for a better return. Another option is to spin off the portfolio to creditors in an initial public offering, he says.
In some cases, Lehman has found itself up against the ropes by partners, creditors and others. Take, for instance, the 21-story office tower at 237 Park Avenue in Manhattan. Lehman in 2007 originated $1.23 billion in loans to finance the purchase of the tower by Broadway Partners, retaining $437 million of the debt on its own books.
In U.S. Bankruptcy Court in the Southern District of New York filings last month, Lehman predicted that Broadway, a private-equity real-estate firm, would default on a $255 million piece of debt held by an unidentified investor, which, according to people familiar with the matter, was Prudential Financial Inc. That debt was senior to the Lehman position, and Prudential was trying to sell the debt to other investors. Such a default posed the risk that Lehman’s debt would “be wiped out,” the filing said. Broadway and Prudential declined to comment.
The solution: Lehman obtained the bankruptcy-court approval to buy back the $255 million in debt for a discount, people familiar with the situation said. That protects Lehman against a default. But it also means that Lehman has increased its stake in the building to close to $700 million.
The new investment will put Lehman “in a better position to protect its other positions in the debt structure and preserve the opportunity to maximize value for the estate,” Lehman said in court filings.
Board Signs Off On SF Hunters Point | Candlestick Point $8B Redevelopment EIR
SFBT excerpt: 
An emotional and contentious showdown over the $8 billion redevelopment of the Hunters Point Shipyard and Candlestick Point ended with the Board of Supervisors signing off on the project’s environmental impact report.
The vote was 8 to 3 with supervisors Chris Daly, Eric Mar, and John Avalos voting to uphold the appeal of the EIR.
The redevelopment plan, led by master developer Lennar, calls for creating a neighborhood of 10,500 homes, plus parks and amenities on the 720-acre site of the former shipyard. The development also includes 3.5 million square feet of commercial space — the planners envision a center of green technology — as well as 800,000 square feet of retail and 320 acres of open space and parks.
During more than 10 hours of testimony, supporters evoked the vision of a green, dense and economically vibrant neighborhood that would address decades of neglect in the city’s poorest corner. As midnight approached, dozens of carpenters, pile drivers, electricians and laborers – many of them Bayview residents — urged the board to pass a development that would create thousands of construction jobs.
“I’ve watched two communities get built while I’ve waited for something to happen in this one,” said Angelo King, a contractor and Bayview resident. “You have done it in Mission Bay and South of Market, now you have a golden opportunity to do something in Bayview Hunters Point.”
Critics argued that the plan should not go forward until the shipyard, one of the U.S. Navy’s most polluted bases, has been 100 percent cleaned up. Stephen Volker, an attorney for Californians for Renewable Energy, said the project posed “human health risks bourne by the adjacent minority community.” “I encourage you to separate the remediation phase from the development phase,” he said.
Both federal and state environmental agencies, as well as the San Francisco Department of Public Health, would have to approve any transfer of the property from the Navy, said EPA Remedial Project Manager Mark Ripperda.
“We are not going to allow any transfer unless we are convinced it is safe,” he said.
Another controversial topic was the proposed 900-foot bridge across the Yosemite Slough. The bridge is opposed by the Sierra Club and other environmental groups, who argue it would harm one of the Bay Area’s last remaining wetland areas. Supporters said the bridge would be needed for the green-technology center city officials hope will create thousands of jobs.
Michael Cohen said the project faced “much greater financial risk” without the bridge because it would more difficult for employees and residents to travel between the isolated Candlestick Point and the rest of the city.
“It is the primary job-generating heart of the shipyard for the major employers we hope to have there; having that direct connectivity to BART, Caltrain, and T-Third is going to be important,” he said.
Cohen stressed that House Speaker Nancy Pelosi and U.S. Senator Dianne Feinstein have brought more money to clean up the site than to any other decommissioned military site in the country. More than $700 million has been spent on the cleanup so far. Failing to certify the EIR could jeopardize future federal cleanup money.
“Not only will not certifying the EIR do nothing to help the cleanup, it could set it back significantly,” Cohen said. “It is central that we are able to show that the cleanup is going to yield real public and economic benefits.”
Supervisor Chris Daly, who voted to reject the EIR, argued that the environmental documents didn’t take into account the impact the project would have on the existing residents. Just before 2 a.m., Daly gave a speech outlining his belief that “proposal doesn’t work for the majority of the residents of Bayview Hunters Point.” He called labor’s support of the project “the sellout of the union bosses” Another opponent of the project, District 11 Supervisor John Avalos, quoted 1980s pop singer Thomas Dolby, saying the EIR had”blinded us with science.”
But District 10 Supervisor Sophie Maxwell, who represents the shipyard, said the environmental study was “comprehensive and exhaustive” and went “well beyond its required scope.”
“I too want the community to be healthy. I believe we can have both, either and or,” she said. “Jobs and health. Jobs and parks and health.”
Alameda’s Former Naval Station May see Community Build Out.
Apparently one of the West coast’s leading real estate community developers, Suncal Co. (founded by Boris Elieff) has been selected by the city of Alameda, CA to take on the Alameda Point Project, a former naval station on 770 acres. The Irvine developer hired seasoned architect / urban planner Peter Calthorpe who’s original proposal included high density housing which surpassed the allowable limits per city policy. Originally, Suncal had proposed a plan to construct 4,210 units, but offered an alternative in April that would include 3,712 units staying within city’s density regulations. *a draft of the master plan can be found here http://www.alameda-point.com/
I was rather impressed with Suncal as a company, their business practice and track record.
Today, SunCal has developed over 200,000 residential lots and 25 million square feet of commercial spaces spread across 40 projects. Their projects are spread across the state, with more emphasis in Southern California but in the Bay Area they helped with initial entitlement of Point Richmond’s SeaCliff community ( Toll Brothers took over the project eventually and built 140+ luxury homes overlooking the SF Bay ).
Some of SunCal’s successful developments include Amerige Heights in Fullerton, Lincoln Crossing near Sacramento, Westport at Mandalay Bay in Oxnard and Serrano Heights in Orange.
Local environmental groups Sierra Club, Greenbelt Alliance and Renewed Hope Housing Advocates have conducted an in depth review of Suncal’s overall proposal and are showing support
“If we want a region that is climate-friendly and less auto-dependent, that safeguards our iconic landscapes and creates great neighborhoods for all Bay Area residents, this is exactly the right kind of development,” said Jeremy Madsen, the executive director of Greenbelt Alliance.
Suncal has an exclusive negotiating agreement with a the City of Alameda that will expire Tuesday unless the city council extends it.
Kent Lewandowski, chairman of the Northern Alameda County Group of the Sierra Club, added, “We are pleased that the City and the developer have already initiated the environmental review process mandated by CEQA, which requires review of environmental impacts, analysis of mitigation proposals, and public participation.”
This is by far Alameda’s largest on-going project which could bode well for the city as it continues to make advancements in it’s development dynamics.
Structured Like a Mutual Fund, Traded Like a Stock (NY Times)
NY Times excerpt:
Exchange-traded funds seem to be advertised as a magic bullet for whatever ails an investor. They’re easy to buy and sell. Many have low fees. What they hold is transparent. And because there are so many of them — more than 1,000 in the United States, according to Forefront Advisory — investors can invest in very specific ways, singling out telecommunication companies, for instance, or European government debt.
One of the recent claims made by proponents of E.T.F.’s is that they are ideal for the volatile markets we’re in. One reason is that the funds are essentially baskets of securities sold as one stock. And like a stock, the fund is priced throughout the day so it can be bought and sold more easily than a mutual fund. These funds are also so specific that they allow people to invest in particular niches. Investing in E.T.F.’s in general, the argument goes, allows some investors to reduce volatility, while allowing others to exploit swings in the market. But is this true? Can these funds really do for investors what their proponents say they can, or are they just another investment that goes up and down like any other?
E.T.F.’s, like all popular things, have vocal detractors. No doubt these people will send e-mail to note the funds that have shut down or failed to perform in line with the indexes they track. True, but I want to look specifically at the advantages and disadvantages of investing some portion of a high-net-worth portfolio in exchange-traded funds.
Proponents see benefits in a volatile market in investors’ ability to buy and sell the funds quickly and to focus on certain indexes or sectors.
“The one thing I think that E.T.F.’s allow you to do in a volatile market is divorce yourself from your emotions as an investor,” said Daniel Faucetta, principal of global exchange-traded funds strategies for Forefront Advisory. “We’ll hear from investors who say we love G.E. or Apple. That emotional attachment to a position can be harmful. It’s much easier to buy and sell an E.T.F. from an emotional standpoint.”
He said the firm’s models were meant to find trends. In doing so, he said, they often miss the first 10 percent on the upside and lose 10 percent on the downside. The strategy adapts to what is already happening, rather than trying to predict which might happen. Its goal is to outperform the MSCI All World Index, an index of global stock funds — it has done so by 1.5 percentage points over the last five years — but to do so with half the volatility.
Such an approach irks someone like John Calamos, founder of Calamos Investments and a proponent of a different low-volatility strategy. He considers exchange-traded funds the domain of a manager who has given up.
“He says, ‘I can’t pick stocks. I don’t know if Apple is any better than BP so I’ll just pick an E.T.F. and have both of them in there,’ ” Mr. Calamos said. “If I’m no good at picking stocks, am I better at picking groups of stocks? That’s silly. We believe active management works.”
His strategy, which relies heavily on convertible securities, was born out of a similarly rough time in the 1970s, and his two funds, meant to capitalize on volatile markets, were both up around 15 percent last year with fewer swings. He admits, though, that these strategies do not perform as well in less volatile markets.
Daniel Weiskopf, who runs Forefront’s E.T.F. strategy with Mr. Faucetta, said the best active managers might have an advantage in volatile markets, but finding the best ones could be difficult. He hews to the belief that 80 percent of the returns come from picking the sector and only 20 percent from the individual securities.
In terms of funds intended to limit losses, the options seem limited. There is the PowerShares BuyWrite E.T.F., which replicate a traditional covered call strategy to limit the depreciation of a stock in return for giving up some of its appreciation. And a 2008 University of Massachusetts study, “Collaring the Cube,” showed how a similar strategy could be applied with the popular Nasdaq exchange-traded fund, QQQQ.
Ben Marks, president of Marks Group Wealth Management, argued that a properly constructed basket of E.T.F.’s could be an effective hedge against market volatility in and of itself. This is the goal of his Alternative Strategy Portfolio, which currently consists of investments in eight separate funds.
“This portfolio is really meant to take the bumps out of the road,” he said. “It’s meant to be noncorrelated to equities and bonds.”
One recent addition was a fund focused on base metals in the belief that emerging markets like China are going to drive up metal prices — creating volatility in commodity prices — while a recent success was a fund that bet that European currencies would lose value against the dollar.
None of this is risk-free, and some exchange-traded fund. investments could create problems for investors far greater than a bit of volatility. One comes from leveraged funds and so-called inverse funds, which return the opposite of what an index does. The danger here comes if your assumption is wrong and instead of being down 5 percent the index being tracked is up 20 percent.
The more common risk is in people jumping on the exchange-traded fund bandwagon in the hope that it will save their portfolios.
“There are so many E.T.F.’s now and the industry has been booming, that they really have become a catchall,” said Joseph Jennings, investment director in Baltimore for PNC Wealth Management. “They’re a good tool to manage diversification and risk in a portfolio as long as the investor is aware of what he is buying.”
He pointed to a popular telecommunications fund that was meant to track that industry. Some 45 percent of its holdings were in AT&T and Verizon, making it not very broad. In other words, buyer beware.
Politics As Usual…Republicans Looking Forward to November
July 19 (Bloomberg Excerpt) — Growing dissatisfaction with U.S. President Barack Obama before this year’s elections is good news for stock investors, if history is any guide.
The Standard & Poor’s 500 Index has surged 48 percent on average starting in the second year of each U.S. presidential term, measured from its lowest level through the high the next year, according to data going back to 1928 compiled by Bloomberg. That compares with trough-to-peak gains of 38 percent in other years.
An advance this year would come after Obama already presided over the biggest rally during the start of a presidency since Franklin D. Roosevelt in the 1930s. Bets on Intrade show a 54 percent chance Republicans will take control of the House, enabling them to block Obama’s policies. That may help prevent a bear market after equities tumbled as much as 16 percent in the past two months, says billionaire Kenneth Fisher.
“I envision a rally from before the midterm elections,” said Fisher, who oversees $35 billion in Woodside, California, as chief executive officer of Fisher Investments. “Markets love gridlock. What the market wants to see is no change: less legislation that engages in changes in taxes, spending, regulation or property rights.”
The S&P 500 slipped 1.2 percent to 1,064.88 last week, extending its 2010 loss to 4.5 percent, after revenue at Charlotte, North Carolina-based Bank of America Corp. and General Electric Co. in Fairfield, Connecticut, trailed analysts’ estimates. The stock index climbed 0.6 percent to 1,070.84 at 9:37 a.m. in New York.
Republican Majority
The benchmark measure for U.S. equities has advanced 15 percent on average in years when there was a Democratic president and Republican majority in Congress, the most of any combination, according to Strategas Research Partners.
Republicans will gain 40 to 50 House seats in November, based on historical trends including times when presidential support falls to Obama’s current level, New York-based Strategas said. Obama has a job approval rating of 52 percent, according to a Bloomberg National Poll of 1,004 U.S. adults.
Odds that Democrats will lose their Senate majority are 18 percent, according to Intrade, a prediction market based in Dublin. Republicans must win at least 40 seats in the House and 10 in the Senate during the Nov. 2 elections to take control.
Erosion of Power
“The current thinking is that the administration is punitive towards business and any erosion of power in Congress would create an environment that’s less punitive,” said Walter “Bucky” Hellwig, a Birmingham, Alabama-based senior vice president at BB&T Wealth Management, which oversees $17 billion. “From the standpoint of a lot of investors, that would certainly help equities.”
The S&P 500 gained 6.7 percent in the 12 months after the 2006 midterm election, when Republicans and President George W. Bush lost control of both houses of Congress. In the 1994 congressional elections under President Bill Clinton, Democrats gave up their majority in the House and Senate. That preceded the S&P 500’s 34 percent surge in 1995, the biggest in 37 years, data compiled by Bloomberg show.
Losing seats may make it harder for Obama to scale back Bush’s tax cuts to boost revenue and pay down the budget deficit. Democrats are seeking to raise taxes on dividends and capital gains and end breaks for Americans earning $250,000 or more. Obama signed the largest change in U.S. health-care policy in 45 years into law in March, enacting a $940 billion plan to extend coverage to tens of millions of uninsured Americans.
‘Uncomfortable’
“The market has been uncomfortable with the pace of the legislative agenda this year,” said John Canally, a Boston- based investment strategist and economist at LPL Financial, which oversees $285 billion. “Republican control of the House could usher in some gridlock and slow the pace. The view of the market is that Washington is pushing a little too far.”
The S&P 500 sank 8.1 percent in the three weeks after Jan. 19 as Obama proposed legislation to limit risk-taking at banks and prevent a collapse of the financial system. Better-than- estimated profit reports then spurred a 15 percent rise through April 23. That extended the rally for the first 15 months of Obama’s presidency to 43 percent, as the government spent, lent or guaranteed as much as $12.8 trillion to pull the country out of its longest recession since the Great Depression.
Spending cuts to trim record budget deficits may now curb further gains in stocks, according to Jason Pride, director of investment strategy at Glenmede.
Presidential Cycle
“The U.S. is going to have to deal with its debt issues, so we see that as a constant wall that the market and economy is going to have to slowly find its way through,” said Pride, whose Philadelphia-based firm manages $18 billion. “I don’t think you should make an entire investment decision on the presidential cycle.”
The White House is scheduled to release an updated 2010 U.S. deficit forecast on July 23. It predicted a record budget shortfall of $1.6 trillion in February, compared with a $1.4 trillion gap last year. More than half of Americans say thedeficit is “dangerously out of control,” according to results from the Bloomberg National Poll conducted July 9-12. Obama has pledged to cut the 2009 deficit in half in five years.
Concern that the economic recovery is faltering pushed the S&P 500 down to the lowest level in 10 months on July 2. New U.S. home sales fell to a record low in May and reports on manufacturing and consumer confidence trailed the median forecasts from economists in Bloomberg surveys, has trimmed the S&P 500’s gain since March 2009 to 57 percent.
Most Since 1995
Worse-than-estimated revenue from Bank of America, the largest U.S. lender, and GE, the world’s biggest maker of jet engines and medical-imaging equipment, sent the S&P 500 down 2.9 percent on July 16, wiping out the week’s advance.
Companies in the benchmark index for U.S. equities are projected to increase profit by 34 percent in 2010 and 17 percent in 2011, the fastest two-year gain since 1995, according to analysts’ estimates compiled by Bloomberg.
The Bloomberg National Poll showed Americans still disapprove of Obama’s handling of almost every major issue and are pessimistic about the nation’s direction, presenting an opportunity to Republicans in November.
“Midterm years have an historic tendency,” said Sean Clark, chief investment officer of Clark Capital, which oversees $2.1 billion in Philadelphia. “The market doesn’t like when one party or the other has control of both the executive and legislative branches. Business leaders are very much paralyzed waiting on a definitive set of rules.”
‘Huge Election’
The U.S. Senate passed an overhaul of financial-industry regulation on July 15 that creates a consumer bureau at the Federal Reserve, a council of regulators to monitor firms for systemic risk to the economy and a mechanism for liquidating financial firms whose collapse would threaten the economy.
Most Senate Republicans voted against the measure, saying it doesn’t go far enough to prevent future taxpayer-funded bailouts of Wall Street firms. White House spokesman Robert Gibbs said the Obama administration will promote the biggest change in banking regulation since the Great Depression during the midterm elections.
“I see a rally into year-end,” said Louis Navellier, who oversees $2.5 billion at Navellier & Associates Inc. in Reno, Nevada. “It’s going to be a huge election. The people who are going to vote are the people who are mad. Independents and Republicans are mad. There’s going to be a big shift.”
