                         |
 | |||||||
Wharton News The Winter 1999 issue of Development: The Official Magazine of the Commercial Real Estate Industry, published by NAIOP, featured an article by our own Professors Joseph Gyourko and Peter Linneman entitled "Investing in Real Estate in a Low Inflation World." In the high inflation world where today's senior real estate executives "cut their teeth," nominal asset values rose, even absent value-added management. Making money in that environment often meant betting on high inflation. Simply put, lenders tended to underestimate the extent of the erosion in the real value of debt service repayments; borrowers were paying back loans with dramatically deflated dollars. Not so now. Real productivity growth is required to raise property values in this low inflation environment. High leverage is inappropriate under today's conditions, and lower loan-to-values and greater degrees of loan amortization are demanded by lenders, resulting in larger equity bases from owners. The only certain cushion on value will result from productivity growth: real estate owners need to focus on finding ways to generate new income sources from tenants and to realize cost savings. Welcome to the brave new world of real estate in this millennium! "Show Me the Money: The Business of Sports" was the title of a seminar at the University of North Carolina which featured Kenneth Shropshire, associate professor of Legal Studies and Real Estate at Wharton. Professor Shropshire specializes in the legal, business and social issues in sports and entertainment and has spoken in Congressional hearings on sports-related topics. He also chaired Philadelphia Mayor Street's site selection committee that advised on the possible locations of the city's proposed new stadiums.
|
