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Wharton News
Wharton Team Wins 2003 ELC Business Case CompetitionA team of Wharton students including incoming MBA Real Estate Club President Tony Ewing and club members Barron Channer and Eyrique Miller Jr. won the 2003 ELC Business Case Competition sponsored by Goldman Sachs. The case was on Fannie Mae and its desire to increase minority home ownership. ELC (Executive Leadership Council) is a nonprofit organization devoted to creating the next generation of African American corporate executives.
The Cost of Construction in PhiladelphiaA recent article in the Philadelphia Inquirer (5/14/2003) on the dearth of investment in urban Philadelphia cited a new study for the Federal Reserve Bank of Philadelphia by Wharton Professor Joseph Gyourko and Dr. Albert Saiz. One way to stimulate more investment in the parts of Philadelphia that seem to need it most is to try pushing down construction costs. The study suggests that even a small decline in local construction costs could produce a substantial increase in private-sector residential reinvestment because the city has a large number of houses whose values are just slightly below their replacement costs. Gyourko, quoted in the article, states that average property values in Detroit, in contrast to Philadelphia, have fallen too far for even much lower construction costs to make a difference. "Philadelphia is unique," he said. "We happen to be a city where a lot of homes are on the margin. Modest declines in construction costs would affect reinvestment in a lot of neighborhoods in this city in a fairly big way." Zoning rules, building codes, and other governmental regulations also drive up the price of renovation or new construction. Gyourko and Saiz calculate that the average cost to put up a modest house in the Philadelphia region is $56.41 per square foot - not the steepest such price in the nation. Absolute costs don't matter as much as whether those costs exceed a property's value. "Declining cities can't afford to be expensive," says Gyourko.
Urban Land Institute Housing PanelProfessor Gyourko was a panelist at the 2003 ULI Spring Council Forum. The panel session, held on May 9 at the Baltimore Convention Center, Maryland, addressed housing affordability.
Forbes Executive Women’s ForumGeorgette Poindexter, Wharton Professor of Real Estate and Legal Studies, was a speaker at The 5th Annual Forbes Executive Women's Forum which took place at The Metropolitan Club in New York, on May 29th and 30th.
CoreNet Symposium in PhiladelphiaProfessor Joseph Gyourko, Director, Zell/Lurie Real Estate Center, is to lead a session, "What Can Attract Corporations to Our Local Area" as part of the First Eastern Regional Symposium of CoreNet Global in June. The symposium, which will take place in Philadelphia, will also feature Asuka Nakahara, Associate Director of the Center. Nakahara will moderate the panel, "Insiders Look at the Art of Deal Making." His session will bring together industry leaders who have experience dealing with complex transactions and will include strategies to address tenant real estate and facilities concerns which drive a transaction, ways to insure that expectations of a transaction are realistic, and how to reach the common ground necessary to complete a complex deal. Wharton real estate professor Peter Linneman, together with Sam Zell, will be opening the CoreNet Global Eastern Regional Symposium with a presentation entitled, "Breaking the Mold in 2003."
Will the War Affect Real Estate?An article in Bloomberg.com (4/7/03) on how the war in Iraq and domestic security will affect the housing market quoted Todd Sinai, Assistant Professor of Real Estate at Wharton. Sinai said that while not worried about a bubble, home prices will suffer from a recession if there is an increase in joblessness in the most vulnerable areas, such as California and Boston. "My real fear is that a recession will cause home prices to fall, but that's not a bubble."
Wachter on CNBCSusan Wachter, Wharton Professor of Real Estate and Finance, was interviewed for a real estate segment on CNBC which aired on May 16, 2003. Wachter, asked to comment on the possibility of a real estate bubble, suggested that those areas in the country which have had the highest run-up are the most vulnerable. The segment focused on Colorado, where the weak economy, overbuilding, and low interest rates have resulted in a sharp increase in unsold housing. Wachter, however, alleged that in the long- term there will not be a significant drop in housing prices.
Real Estate Investment in MiamiAn article in America Economia (4/03) about the success of South American investment in Miami quoted Wharton real estate professor, Susan Wachter. "The real estate business is something very local. The motto in this industry is to ‘know your market’," said Wachter.
Builder Magazine Profiles Witold RybczynskiWitold Rybczynski, Professor of Urbanism and Real Estate, and Editor of the Wharton Real Estate Review was profiled in the April 2003 issue of Builder magazine which called him "a thoughtful chronicler of American architecture and land planning." Rybczynski told Builder that, "the high point of American housing in many ways occurred in the 1900 to 1930 period, when there was real design innovation with prominent architects setting the design bar quite high. Today, architects and home builders have drifted apart."
Taxing Sunny DaysThe Boston Globe (4/6/03) reported on an article in the February issue of the Harvard Law Review by Michael S. Knoll, Professor of Law and Real Estate at the University of Pennsylvania and Thomas Griffith of the University of Southern California. The article "Taxing Sunny Days," discusses whether the tax code benefits or discriminates against you based on where you live. New Yorkers, for example, have expenses that are more than double the national average. In contrast, Kingsport, Tenn., the most affordable town, is sitting pretty at 85 percent of the average cost of living. Knoll states that if federal taxes were slashed in expensive, high-salary cities and raised in more affordable cities, workers wouldn't get any benefit. Employers would simply decrease salaries by a like amount. Many employees will take a low salary if a job's location is especially pleasant -- they'll work in Malibu or Colorado Springs for a (relative) song. Those same employees will only consider moving to grimmer burgs if the wages are higher. Our present tax system, which assesses salary and not sunshine, therefore punishes companies who, because of geographic misfortune, must offer high wages instead of nearby mountain biking, sun, and surf. Knoll and Griffith suggest that changes in the tax code could correct that unfairness by redirecting workers from Malibu and Colorado Springs to less appealing cities.
Peter Linneman -- Conference Schedules at Home and AbroadWharton real estate professor, Peter Linneman, was in Memphis, TN, on May 8 for the 2003 Gerber/Taylor Associates Spring Conference. He was invited as a guest speaker and his presentation was entitled "Current Real Estate Environment." Linneman then headed north to speak on "The Capital Markets Outlook: What Does the Future Have in Store?" at an executive session of the 2003 ULI Spring Council in Baltimore, MD. Later in May, Professor Linneman traveled to Washington, DC for the Crow Holdings Realty Partners Annual Meeting where he delivered the keynote speech entitled "Economic Overview."Linneman looks forward to another busy month in June. He will be the keynote speaker for Page Mill Properties, L.P. Advisory Committee Meeting. Linneman then crosses "the pond" to deliver the keynote economic address for the AFIRE Conference in Frankfurt. The following day he will be in Amsterdam to speak at the second leg of the AFIRE Conference. On June 17, Linneman returns to the US where he will be a guest speaker at The American Jewish Committee Presentation of the National Human Relations Award to Douglas Crocker II in Chicago, IL.
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