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September 2003

Wharton News

Real Estate Department — Updates

There has been a flurry of welcome activity in the Real Estate Department. We hope that you will join us in greeting our new faculty member, Dr. Albert Saiz, as Assistant Professor of Real Estate. Professor Saiz recently received his Ph.D. in Economics from Harvard University and comes to us after spending a year working at the Federal Reserve Bank of Philadelphia. His addition brings to seven the number of full-time faculty in the Real Estate Department.

We are also delighted to announce the awarding of chaired professorships by The Wharton School to Georgette Chapman Poindexter and Susan Wachter. Professor Poindexter has been named the David B. Ford Professor of Real Estate, Legal Studies and Law. Professor Wachter has been named the Richard B. Worley Professor of Financial Management in the Real Estate Department.

Finally, Professor Georgette Poindexter has succeeded Professor Joseph Gyourko as Chair of the Real Estate Department. Professor Gyourko, who stepped down after completing his second term as department chair, remains Director of the Zell/Lurie Real Estate Center.

Troubling Imbalance May Upset Center City Real Estate

An article that appeared in the Philadelphia Inquirer (6/9) featured a study by Wharton real estate PhD candidate Kevin Gillen. Gillen researched the cost and supply of office space in Philadelphia's downtown, and devised a sophisticated model for finding the equilibrium in that market. He demonstrated that four factors — cap rates, rent levels, the number of workers, and the supply of office space — exert pressure on one another and he calculated that in Center City Philadelphia, 20,000 more workers are needed, a 10 percent increase to maintain the equilibrium. If developers now promising to build office towers in Center City go ahead, the equilibrium could change even more.

Kevin Gillen was also a recipient of a dissertation fellowship award of $10,000 from the Lincoln Institute of Land Policy

Wharton's Winning Team


 Wharton's winning team
Barron Channer, Tony Ewing, Carl McCarden, Eyrique Miller Jr. and Kareem A. Raymond comprised the Wharton team who won the 2003 ELC Business Case Competition sponsored by Goldman Sachs. ELC (Executive Leadership Council) is a nonprofit organization devoted to developing the next generation of African American corporate executives. The case was on Fannie Mae and its desire to increase minority home ownership. The competition attracted 28 entries from business schools across the country. Three of them (Yale, Emory, and Wharton) were chosen for the final round, which took place on the 27th of May at Goldman Sachs in New York City. Each team presented its analysis and recommendations. Fannie Mae senior executives, including CEO Franklin Raines, grilled the teams with questions. Wharton real estate professor, Susan Wachter attended the event. The team was singled out by the depth and range of their analysis and also had the most polished and thoughtful presentation. The First Place Cash Award was for $20,000.

Wharton Real Estate Center Hosts Joint Program with Korean Industry Leaders

Susan Wachter, Professor of Real Estate, Finance and City and Regional Planning, hosted more than 40 real estate leaders from Korea in a week-long session aimed at educating and training professionals overseas. Leaders from real estate, government, financial institutions, and construction took part in the event currently in its fourth year. This is the first time Wharton has hosted it. Held from June 2 - June 8, 2003, sessions originated in Philadelphia, but also included visits to corporations housed in New York City and Washington, D.C., including Freddie Mac, the Trump Corporation, and Citicorp among others.

Tony Ewing Wins Grant Competition

President of the MBA Real Estate Club, Tony Ewing, was a winner of a ULI/Kenneth M. Good Fellowship, presented to outstanding students who are interested in pursuing careers in real estate. The competition is staged throughout the country by the Urban Land Institute. This highly competitive award carries a cash grant of $5000.

Conference Organized, Paper Presented by Center Director Joseph Gyourko

Joseph Gyourko, Martin Bucksbaum Professor of Real Estate & Finance, with the assistance of his colleagues, Professors Chris Mayer and Todd Sinai, organized a conference on "Real Estate and Public Policy" at the National Bureau of Economic Research in Cambridge, MA, in July. Leading scholars from around the country were in attendance. Professor Gyourko presented his paper"Why Is Manhattan So Expensive? Regulation and the Rise in House Prices" during this conference.

Susan Wachter to Serve on Financial Management Panel

Susan Wachter, Wharton Professor of Real Estate, Finance, and City and Regional Planning, is one of seven experts who was been asked to serve on a panel to testify before the Senate Governmental Affairs subcommittee on Financial Management both for and against Fannie Mae and Freddie Mac.

Suburbs Can Help Solve Philadelphia's Problems

An article in the Philadelphia Inquirer (7/7/03) looks at a study published by Wharton Professor of Finance and Real Estate, Robert Inman. Inman proposes that the city cut its commuter tax and the suburbs make up the revenue another way — via a new regional income tax or by diverting some aid to the city. Revenue would remain the same but the burden would be broadly shared. A strong central city makes the entire region more attractive and support for the city can pay off in the suburbs. Inman states that if the commuter wage tax is cut by $191 million, average home values will rise throughout the region by about 2 percent.

Rybczynski Featured in Publications and Interviews; Serves as Juror and Reviewer

Witold Rybczynski, Meyerson Professor of Urbanism, Professor of Real Estate, and Co-editor of the Wharton Real Estate Review, had articles published in The New York Times, the Smithsonian magazine, and in Metropolis, celebrating the 150th anniversary of Central Park. He was also interviewed on the subject by BBC America. Professor Rybczynski also served as a jury member for the 2003 American Society of Landscape Architects national awards. And, he was a reviewer at the council meeting of the Institute for Traditional Architecture in Washington, DC.

The Wharton/Penn Real Estate Group of Northern California (WPRE)

Professor Chris Mayer headed west to speak to Wharton real estate alumni on "Investing in REITs: The Secrets of the REIT Capital Structure" The lecture in June was part of the Wharton/Penn Real Estate Group of Northern California (WPRE) Speaker Series. In July, Professor Peter Linneman gave a lunchtime lecture to the WPRE group on "The Real Estate Capital Markets Outlook: What Does the Future Have in Store?"

Saiz in Sweden

Newly appointed Wharton Real Estate Professor, Albert Saiz presented a paper,"The Median Voter Didn't Show Up: Representative Democracy and Public Employee's Wages" at the European Economic Association Conference 2003 in Stockholm in August.

Wachter on Why Property Markets Suffer From Bubble Trouble and The Accounts of Freddie Mac

Professor Susan Wachter was cited in an article in Economist.com (5/29). Wachter cites three distinctive features that make property markets particularly prone to bubbles: the absence of short-selling, construction lags and the perverse incentives of lenders.

Reuters (7/23) reported on the accounting problems of Freddie Mac and quoted Professor Susan Wachter."The accounting rules that were violated are rules that are complicated, and need to be understood and enforced by accountants." Freddie Mac was also the subject of an interview broadcast on National Public Radio for the "Marketplace Report" segment. Wachter said that Freddie Mac itself is not "in any economic danger or financially threatened. What's at stake here is that the earnings seemed to have been managed so that they appear to be less volatile than they would otherwise have been."
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