Marina Sheriff’s Station Capt. Mary Campbell announced that she will be retiring in late March and said that in 38 years of service with the Los Angeles County Sheriff’s Department, the Marina has been the best assignment she has had and that she’ll miss all of the wonderful people she has met. Campbell addressed her comments to attendees of the Marina Affairs Committee of the LAX Coastal Area Chamber of Commerce at Tony P’s restaurant in Marina del Rey Wednesday, February 20th.

Campbell said that Sheriff Lee Baca will present names of potential replacements that will include Lt. Rod Kusch (head of operations and the harbormaster at the Marina Station) to the Sheriff’s Advisory Committee and the members will choose Campbell’s replacement from the list, she said.

KEYNOTE SPEAKER — The meeting’s keynote speaker was professor Stephen Day Cauley, director of research for the Richard S. Ziman Center for Real Estate at the UCLA Anderson School of Management, who had been asked to speak about real estate during the present vulnerable economy. What follows is drawn from his remarks.

The biggest constraint on Westside development is planned land use, according to Cauley.

He said property is too cheap on the Westside and that this is a time of substantial unprecedented uncertainty in property values.

Los Angeles is being viewed in the wrong frame of reference regarding property values, and rather than comparing it to cities in Ohio or to Chicago, it should be compared with international cities such as London, Paris and Madrid, said Cauley.

Los Angeles “used to be considered a backwater,” said Cauley, who is originally from New York. But he said that isn’t true today, and if his views are correct, it leads to incredible implications for land use policy on the Westside.

Nothing good is happening in the short to medium run for the Westside and Los Angeles, but quoting a Los Angeles Times article that spoke of the “worst recession since the 1930s,” he said that is not likely, though it is possible.

The Westside is more insulated from the ups and downs than Orange County, but what happens to the economy does affect us, he said.

The “short run” is described by Cauley as being typically less than one year — approximately nine to 15 months — and impacted by events that have already happened.

The “medium run” is described as a period affected by the general continuation of events.

The “long run” is impacted by major economic trends that we can’t see right now, said Cauley.

Cauley said he sees the long run for Los Angeles and the Westside becoming international over the next ten to 15 years, bringing major change to the Westside.

There will be a feedback effect from high home prices, said Cauley, asking where engineers and scientists will live.

California is becoming like a Third World country, balanced between the well-to-do and the uneducated, low-income individuals, Cauley said.

The state has major fiscal problems with an adverse impact on growth, resulting in the need for public services for an increasing fraction of the population and a decrease in people paying taxes, said Cauley.

Interest rates are key in determining the health of the economy and real estate in the near to medium term, and interest rates are likely to “go up a whole bunch before they go down,” Cauley said.

California sees a bigger financial problem with tax rates going up, and what happens to interest rates determines what happens to the economy and real estate values, according to Cauley.

The economics of the subprime loan problem is really a big problem and the recession is a different story.

Consumers with a higher credit score and a stable income are more likely to be prime customers and get a loan.

A low credit score for customers means they may still get loans, but they may be more expensive subprime loans, with more money down and complete documentation.

The high LTV (loan to value) ratio is too pessimistic, said Cauley. The LTV is the ratio between the cost of the home and the down payment the buyer makes.

Cauley said that home ownership is equivalent to a portfolio consisting of three things — the property, the loan and a “put” option to give the property back.

A “put option” is a non-recourse loan for the home where the owner, if he/she chooses, gives the keys back to the lender and the lender doesn’t come after the owner’s other property, Cauley said.

As long as the homeowner can make payments, it makes no sense to walk away from the home. Even with a negative equity, people still need to live somewhere, and renting means paying the first and last month’s rent, as well as ongoing rent.

A mortgage is tax-deductible, but rent is not. If people go bankrupt, they’re not getting rid of debt, so they shouldn’t walk away, said Cauley.

Those who default on their home loan still have a tax payment to the IRS (Internal Revenue Service).

If someone buys a home for $100,000, gets a loan of $90,000 and walks away from the loan, the bank may sell it for $70,000, with a loss to the bank of $20,000, so the former owner still gets a tax bill for the difference, the $20,000, Cauley said.

The condominium market is in oversupply with thousands of units coming available — but still not affordable. In ten years condo prices will be a lot higher and the condo owners who buy them to rent out still lose and will not realize a profit, said Cauley.

Condos are where people start out and finish, he says, as they move out to houses with their families, and then back to condos after the children go off to college, he believes.

There is a demand for apartments, and many have been demolished or converted to condos, but young people out of college and working are usually renters, he said.

“In the 1970s, an influx of international money to Los Angeles was Arab and Persian, but today there is a big wealth increase and the money comes from China and India, and these individuals would say the Westside and Los Angeles are heaven,” Cauley said.

The problem is that home prices are too low, not too high, and Santa Monica is still cheaper, with the Westside much too cheap if Los Angeles is viewed as an international city, says Cauley.

The Westwood area beyond Pico Boulevard has small houses, and some have been torn down and mansions built in their place.

This is a tremendous change in land use and this is high-value land which needs to be used more intensely, said Cauley.

He predicts that in 50 years the area north of Wilshire Boulevard and Montana Avenue will have high-rises, with the previous buildings having been knocked down.

Los Angeles is a “place where the front office is,” and not many workers will live here, said Cauley.

People left the city for a reason. They don’t want to live downtown in high-rises, and the cost of fuel and commuting has become much more difficult, he claims.

“Other big cities have well-developed rail systems, and I’m not bullish on Los Angeles in the short to medium run,” Cauley said. Cities where people can live will be where jobs go, such as Bakersfield, said Cauley, adding that “Bakersfield is a good place.

“San Diego is much easier than Los Angeles and La Jolla is a nice place.”