September 10, 2003

LOS ANGELES — Southern California is in a period of sustained growth for multi-family real estate investments, predicts Stephen D. Cauley, associate director, Richard S. Ziman center for Real Estate at UCLA Anderson School of Management. Dr. Cauley's forecast also reports that biotech/biomedical and defense industry employment will be major driver of housing development opportunities.

Today's fifth annual UCLA Multi-Family Housing Forecast Conference at The Skirball Cultural Center features Dr. Cauley's strategic economic analysis and provides overviews of Southern California's multi-family housing market by leading real estate industry figures. The conference also features keynote addresses by Geoffrey L. Stack, managing director of Sares-Regis and vice chairman of the National Housing Council, and Los Angeles City Councilmember Antonio Villaraigosa.

Panel sessions and workshops on related topics include several industry leaders who will present their views on the housing market and address real estate trends affecting multi-family housing. Participants include David Abel, publisher, The Planning Report; Laurie Weir, executive director, California Debt Limit Allocation Committee; Daniel Rosenfeld, principal at Urban Partners LLC; Robert Hart, senior managing director of Kennedy-Wilson International; Kathleen Head, principal at Keyser Marston; Richard Selby, president/CEO of R.W. Selby & Co.; Gregory Vilkin, president, Forest City Residential West, Inc.; Mark Lacter, editor, Los Angeles Business Journal; Rick Cole, city manager, Azusa; Lawrence A. Scott, vice president, AvalonBay Communities; and Diane Winocur, editor, California Real Estate Journal.

Dr. Cauley's multi-family housing forecast addresses market economic drivers that impact demand for Southern California apartments; forecasts of the region's rents, prices and capitalization rates; and forecast implications for the financial and social viability of the Southern California economy.

Long-term demographic trends are very favorable for Southern California apartments, reports Dr. Cauley. “We are in a period of sustained growth of portions of the population that will demand apartments: lower income families who will never be able to afford homeownership and young, highly educated professionals. We think the growth of biotech/biomedical and defense industry employment will present important development opportunities in these areas,” said Dr. Cauley. He also added that the Inland Empire will provide development opportunities as well.

Referring to the past year's rapid price appreciation for Southern California apartments, Dr. Cauley reports that per unit prices for “typical” Los Angeles, Orange, and San Diego County apartments, along with those of the Inland Empire, increased by more than 20 percent. He notes that surprisingly these increases occurred at a time of moderate rent growth.

When asked if these price increases, along with the corresponding declines in cap rates, are indicative of a price bubble, Dr. Cauley demurred. He notes that, “Declines in market interest rates can explain a substantial portion of the observed price increases. During this period the yield-to-maturity on Moody’s BAA bond index declined by more than 170 basis points, approximately the same amount as cap rates.”

In regards to cap rates, Cauley states they are consistent with the long-term growth in rents, between three and four percent. He also believes these are sustainable rates of growth and are consistent with expectations. Thus he concludes that the major source of short-term risk for Southern California apartment investments is unanticipated increases in interest rates.

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UCLA Anderson School of Management is perennially ranked among the top-tier business schools in the world. Award-winning faculty renowned for their research and teaching, highly selective admissions, successful alumni and world-class facilities combine to provide an extraordinary learning environment. Established in 1935, UCLA Anderson provides management education to more than 1,400 students enrolled in full-time, part-time and executive MBA programs and doctoral programs.

UCLA Anderson's faculty includes outstanding educators and researchers who share their scholarship and expertise in such fundamental areas as finance, marketing, accounting, business economics, decision sciences, operations and technology management, human resources and organizational behavior, information systems, strategy and policy.

Recognizing that the school offers unparalleled expertise in management education, the world's business community turns to UCLA Anderson School of Management as a center of influence for the ideas, innovations, strategies and talent that will shape the future.

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