Monday, January 31, 2011

A whole, new world

In January, second-year Wisconsin Real Estate MBA students traveled to Hong Kong and Seoul. The tour included meetings with UW alumni and local officials and site visits to significant properties in each market. Students brought back networking contacts, souvenirs, and, most importantly, a new perspective on real estate markets beyond the U.S.

That international perspective is an important component of our real estate MBA program. The trip is part of the second-year curriculum. First-year students will attend MIPIM in Cannes, France in March. It's the Wisconsin viewpoint that the world needs passionate, talented and socially responsible people to develop, finance and improve the urban environment. The Wisconsin Real Estate Program challenges the next generation of leaders to reach their potential.

Students have additional opportunities to travel within the U.S. and abroad through the Wisconsin School of Business and with the UW Real Estate Club.

Check out this video, made by one of our students, of the highlights of the trip:

Hersch Klaff Receives the Real Estate Club Innovator Series Award

Today we have another entry in our Meet Our Current Students Series:

At the Real Estate Club’s first spring semester meeting on Thursday, January 28, Michael Brennan, executive director of the Graaskamp Center, presented the Innovator Award to Hersch Klaff, managing director of Klaff Realty, a Chicago-based privately owned real estate investment company. Mr. Klaff is the fourth recipient of the award which was established to recognize outstanding individuals who have made a creative mark on the real estate industry.

Klaff moved to the United States from South Africa in 1978 to begin a career in accounting. After learning about the real estate industry from his clients, he left accounting and pursued his real estate broker’s license in Illinois. Klaff Realty was started in 1982. He closed his first deal, the $12 million acquisition of a former Marshall Field's building, after reading about the owner’s desire to sell in a newspaper, camping out at their office for three days waiting for a meeting and convincing them to give him a few days to find buyers. The deal closed in one month.

The focus of his speech was the constant search for new ideas and opportunities. Klaff began the first part of his real estate investment career acquiring large corporate assets in the Chicago Loop and repositioning them into multi-tenant buildings. After the real estate crash in the early 1990s, he saw an opportunity to buy distressed assets in suburban Chicago from banks that were eager to sell. While the locations of these assets were outside of his comfort zone, he used the same investment guidelines he had always used to produce returns of around 20% in a three to five year timeframe.

His next move was to team up with companies that specialized in liquidating retail stores, where the stores’ inventories were the focus and the real estate was rarely considered. This strategy involved acquiring assets from bankruptcy court, another first for Klaff. Going through and understanding this process gave Klaff a niche opportunity as the only real estate company utilizing this avenue for acquisition opportunities.

Klaff is currently searching for his next great idea, which may involve real estate in South America or a return to Chicago (Klaff was a strong bidder in the 2009 sale of the Chicago Cubs, which, believe it or not, was a real estate play). While many would see the obstacles in investing in a new arena such as a foreign nation or a baseball team, Klaff sees the opportunities that no one else can.

The Innovator Award was conceived from the paper entitled "Tradition and Innovation," written by Stephen Malpezzi, academic director of the Graaskamp Center. The paper's central theme is that a rich history cannot be established without continually implementing innovation. The award, sponsored by the UW Real Estate Club and the Graaskamp Center, is typically handed out each semester.

Eric Dowling is a first-year MBA student in the James A. Graaskamp Center for Real Estate. Eric plans to combine his previous real estate experience with his MBA education to establish a career in private equity investments.

Wednesday, January 26, 2011

Friday speaker series: Brad Olsen, Atlantic Partners

Meet Our Current Students is a continuing series of blog posts from first-year real estate MBAs in the Graaskamp Center. Here, they share their unique perspectives on the school, the real estate program and more--from the inside. This week, Ben Schmidt shares his thoughts on the first session of our spring semester Friday speaker series:

In just a few weeks, I and the other first-year real estate MBA students will be heading to France to attend the international property conference MIPIM. As part of our preparations for the upcoming trip, both the Global Real Estate Master students and the real estate MBAs had the privilege of hearing from Brad Olsen, founder of Atlantic Partners, Ltd., regarding his observations on current global real estate markets.

Brad has been a friend of the Graaskamp Center for many years and works with global real estate firms looking to invest in the United States. Brad has also been an active participant in MIPIM since nearly its inception.

Brad shared with us his thoughts on global capital flows. Not surprisingly, his outlook was also reflected in the recent survey of members of the Association of Foreign Investors in Real Estate (AFIRE) conducted by the Graaskamp Center: that many foreign investors are looking toward the U.S. as a market in which to invest their capital. But Brad also observed increased investments in Asia and Latin America.

He gave us some insights on possible future sources of foreign capital. In his opinion, Asia is going to be a big source, but not just from China and India. South Korea, Malaysia and even Japan (despite the resources needed to support its aging population) are all making significant real estate investments. And because of smart decisions made in the past 5-10 years, there is capital available to invest. On the European front, Scandinavia represents an interesting potential source of capital, as they become active investors.

When it comes to UW alumni operating on the global stage, Wisconsin alumnus Wenzel Hoburg, Vice President of Real Estate Investments for CPP Investment Board in Canada (and also a member of the advisory board for the Global Real Estate Master program), has been perhaps the single-most active real estate investor globally in past 2 years. It just goes to show that world of Wisconsin real estate is a small one, indeed.

Ben Schmidt is a first year real estate MBA who came to Wisconsin from Indiana by way of Chicago, where he practiced as a corporate attorney. Prior to practicing law, Ben obtained both his B.S. in finance and his J.D. from Indiana University-Bloomington. Upon completion of the real estate program, Ben plans to pursue either a development or policy role with relation to residential real estate.

WBA 2011 Economic Forecast: Business Fundamentals

Recently the Wisconsin Bankers Association organized its 2011 Economic Forecast Luncheon (listen to audio), held at Madison’s Monona Terrace. Graaskamp Center Academic Director Stephen Malpezzi attended as the guest of our friend Kurt Bauer, WBA president and CEO. (Kurt and his colleagues are also sponsors of our annual Wisconsin Real Estate and Economic Outlook conference, along with the Wisconsin REALTORS Association, WHEDA, and the Wisconsin Department of Commerce; mark your calendars now for June 9, 2011.)

The conference was opened with brief remarks by Jeff Mayers, and The main program comprised a speech by Wisconsin’s new governor Scott Walker, and a keynote address by the president of the Federal Reserve Board of Minneapolis Narayana Kocherlakota.

The theme of Governor Walker’s remarks was “Wisconsin is open for business.” He outlined a series of planned initiatives in taxation, incentives, and regulatory relief, as well as a reorganization of the Wisconsin Department of Commerce. The governor’s call for subjecting regulations to a cost-benefit analysis is consistent with a long strand of research at the University of Wisconsin, from James Graaskamp’s analysis of the proper role of the “infrastructure producer’s group” (aka “government”) in his classic ULI monograph “Fundamentals of Real Estate Development” to Malpezzi's research on land use and development regulations ["House Prices, Externalities and Regulation in U.S. Metropolitan Areas." Journal of Housing Research. 1996], rent controls, and their public interventions. A Wisconsin economics PhD, Timothy Bartik, has written one of the deepest and richest analyses of these interventions “Who Benefits from State and Local Development Policies?” (a Reading for Life “Top Twelve”!).

Dr. Kocherlakota’s talk was framed by one of our favorite real estate movies: It’s a Wonderful Life. But instead of asking how Bedford Falls would have fared without George Bailey and his eponymous Building & Loan, Kocherlakota asked how the economy would have fared over the past three years without the extraordinary actions taken by the Federal Reserve, and are continuing in “QE2” (Quantitative Easing II).

Kocherlakota pointed to the key role played by volatility in land and real estate markets in the economic events of the past decade. He didn’t provide references in his talk but, in his academic papers on the subject (and in post-speech conversations), he cites our own Morris Davis as his source on land price data and analysis.

We have a lot of evidence—back through the 80s—that volatility in housing/land prices is driven in part (but in important ways) by the things that affect the supply of real estate product—regulatory constraint and natural geography. See Malpezzi's paper with Susan Wachter, The Role of Speculation in Real Estate Cycles, for example.

The role asset prices, especially housing, play in the recent economic and financial crisis has reopened the question of whether central banks should continue to make policy based primarily on prices as measured by the Consumer Price Index and similar price measures; or whether they should also consider the prices of assets, like housing and stocks. In response to a question from Malpezzi during Q&A, Kocherlakota said that the Fed should not use asset prices to fix monetary policy. Instead asset prices should be an element in designing regulatory oversight of financial institutions.

Friday, January 21, 2011

Where can you find the best in up and coming real estate professionals? the Wisconsin Real Estate Club's 2011 Career Fair, of course!

February 9th
6:00-9:00 pm
Grainger Hall on the UW-Madison campus

The 11th annual event brings together nearly 200 undergraduate and MBA students and employers in a range of real estate sectors for a concentrated evening of networking. This year's event kicks off with an open house in the offices of the James A. Graaskamp Center for Real Estate, followed by the evening expo in the Plenary Room of Grainger Hall, and concluding with a reception in the East Atrium.

Whether your company is looking to hire now or in the future, this is the place to meet and network with top students in all areas of real estate.

Who Should Attend
  • Appraisal companies
  • Asset and property managers
  • Institutional investors
  • Insurance companies
  • Investment banks
  • Mortgage lenders
  • Pension funds
  • Private equity firms
  • Real estate consulting firms
  • Real estate developers
  • Real estate investment trusts
  • Real estate operating companies
  • Residential or commercial brokerage firms

A few spaces are still available to exhibit your company. Click here to visit the career fair page and to register.

Wednesday, January 19, 2011

2011 Wisconsin Economic Outlook

The cover story to this month's Wisconsin REALTORS Association magazine is Stephen Malpezzi's economic outlook for the state for 2011. The recession, now "officially over", was not felt equally across the country; Wisconsin fared relatively better than some of the "really hard hit" markets in California, Nevada, Florida and others. "The national housing market has stabilized, but remains fragile," notes Malpezzi. "However, there is still potential risk from the defaults and foreclosures that much of the nation continues to experience."

What’s the Outlook for 2010 and Beyond?

The U.S. economy has a lot of inertia built into it; the good news this year is very similar to the good news from last year. GDP is growing, and with any luck, as firms exhaust their ability to squeeze more output from existing resources, employment growth will strengthen. Housing prices in Wisconsin, as elsewhere, have stopped their decline and appear to have stabilized. House prices are back in line with fundamentals, broadly speaking. We have done better than most states, though we’ve certainly had pockets of pain. The bad news is that a significant risk remains of downward overshooting, if we fail to successfully work through the foreclosure problem...We also need to keep a close eye on interest rates, and some of their fundamentals; for the long run, we need to get our fiscal house in order.

Click to read the full article and Malpezzi's recommendation for further reading.

For more from Wisconsin Real Estate faculty and their response to the economic crisis, visit our website.

Wednesday, January 12, 2011

Kiplinger’s ranks UW-Madison ninth best value

In a national survey, business magazine Kiplinger's Personal Finance has ranked the University of Wisconsin-Madison the ninth best value among public universities, jumping five spots from last year's ranking of No. 14. The top 100 also includes two other UW System campuses: UW-La Crosse at No. 43 and UW-Eau Claire at No. 68. Read the full article from UW-Madison News here.

The Wisconsin Real Estate Program consistently ranks among the very best real estate education programs in the country, making it an exceptional value.

The Wisconsin Real Estate MBA program is currently accepting applications for fall 2011 admission. The next deadline is February 4, 2011. For more information on applying to the Wisconsin Real Estate MBA, visit

Monday, January 10, 2011

CNBC: Foreign Investors Betting Big on US Real Estate

James A. Fetgatter, chief executive of AFIRE, the Association of Foreign Investors in Real Estate, appeared on CNBC to discuss the results of the annual survey of its members by the James A. Graaskamp Center for Real Estate. The survey was conducted in the fourth quarter of 2010 by Professor François Ortalo-Magné with assistance from first-year real estate MBA students at the Wisconsin School of Business.

The survey was also mentioned on the The Today Show last week.

Welcome to Global Real Estate Master students!

The first students in the Global Real Estate Master (GREM) program at Wisconsin arrived over the weekend. They began their orientation activities this morning.

The Global Real Estate Master brings students from three of the world's leading business schools--HEC Paris, Hong Kong UST, and INCAE (Costa Rica)--to Madison for an intensive semester of real estate training at the Wisconsin School of Business. This unique degree program is the first and only graduate-level business program designed to provide students with a set of skills and experiences that will prepare them to be leaders in global real estate. We are glad to welcome the inaugural class to campus.

The 13 students starting the program today come from a variety of backgrounds including finance and investment banking, economics, real estate development and civil engineering. They all share a passion for real estate and a desire to advance their careers with a unique skill set in real estate.

The GREM semester includes coursework in the real estate process, real estate valuation and feasibility analysis, urban economics, capital markets, and commercial real estate development; plus a field trip to a major U.S. real estate market. There is one intake per year for the spring semester. Learn more about the program and admission at There is also a list of students in the January issue of our newsletter.

The world needs passionate, talented and socially responsible people to develop, finance and improve the urban environment. The Wisconsin Real Estate Program challenges these people to reach their potential, building on a 100-year long tradition in research and education. The GREM initiative is just one example of Wisconsin's commitment to global leadership.

Friday, January 7, 2011

Best Financial Advisers for Doctors in U.S.: Michael A. Dubis Financial Planning

Congratulations to Michael Dubis who was named as one of the best financial advisers for doctors in the U.S. by Medical Economics in November 2010. The list recognizes the nation’s top financial advisors who have experience working with doctors and those in the life sciences, and the issues particular to them.

Dubis is a Certified Financial Planner and President of Michael A. Dubis Financial Planning LLC, a fee-only financial planning & investment management firm. He is also a lecturer for the Wisconsin Real Estate Program, teaching Real Estate Equity Investment and a Contemporary Real Estate Topics course to real estate MBAs. A nationally-recognized expert in financial planning, he is frequently quoted in media including The New York Times, The Wall Street Journal and SmartMoney Magazine, and is the author of a regular column for Madison’s InBusiness Magazine’s blog site entitled “Financial Perspectives with Michael Dubis.”

"I am very grateful for the magazine’s consideration," said Dubis. "I feel it serves as a good example of the strong commitment to excellence I strive for when serving all clients."

Congratulations to you, Mike! The Graaskamp Center and students are proud of your achievement and are grateful for your contributions to Wisconsin Real Estate!

Wednesday, January 5, 2011

U.S. Cities Lead Way for Global Foreign Real Estate Investment

Results of the 19th annual survey of members of the Association of Foreign Investors in Real Estate (AFIRE) conducted by the James A. Graaskamp Center for Real Estate were published this week.

The survey has revealed that the U.S. real estate market offers a stronger investment opportunity for foreign real estate investors’ money than it has in the last 10 years. Survey respondents hold more than $627 billion of real estate globally, including $265 billion in the U.S. The survey was conducted in the fourth quarter of 2010 by the Graaskamp Center led by Professor François Ortalo-Magné with assistance from first-year real estate MBA students at the Wisconsin School of Business.

"Global investors express strong confidence in their favorite US markets: New York City and Washington, D.C.," said Ortalo-Magné. "The trend we have observed of a broadening interest in emerging market strategies beyond China is in line with what our Global Real Estate Master students heard at MIPIM Asia two months ago."

Among the survey results (click here to visit AFIRE):
• More than 60% of respondents, a margin of 54 percentage points over second-ranked China, indicate that the U.S. offers the best potential for capital appreciation. This is the highest positive response to this question since it was first asked in 2000; this number is a dramatic reversal from 2006 when it reached a lowest level of 23%.

• Investors overwhelmingly chose New York and Washington, D.C. as the two top global cities for their real estate investment dollars.

• 72% of respondents say they plan to invest more capital in the U.S. in 2011 than they did in 2010.

• When ranked among countries targeted for real estate investment in 2011, the U.S. score was quadruple that of the second-ranked U.K.

“As the fear of a double-dip recession has faded, investors are becoming more enthusiastic about the prospects for the U.S. economy and are taking aim at real estate investment opportunities in the U.S.,” said James A. Fetgatter, chief executive of AFIRE. “However, their strategy is more akin to a rifle than a shotgun. Except for multi-family housing, they are not scattering their interest throughout the U.S., but rather narrowly targeting it to New York City and Washington, D.C., to an even greater extent than in previous years.”

Other U.S. Real Estate Trends
2011 Perspective: An Improving Market
When asked about their perception of the U.S. real estate market as a conduit for their investment dollars, responses underscore a continuous improvement over the last year:

• 40% said they were more optimistic than they were at the start of 2010
• 55% said they felt about the same
• 4 % said they were more pessimistic.

Top Five U.S. Cities for Foreign Real Estate Investment
Historically, there has been a fairly even distribution of votes among the top U.S. cities. In this year’s survey, however, New York and Washington scored almost four times higher than third place Boston.
1. New York (#2 in 2010)
2. Washington, D.C. (#1 in 2010)
3. Boston (#4 in 2010)
4. San Francisco (#3 in 2010)
5. Los Angeles (#5 in 2020)

Preferred U.S. Property Types for Investment in 2011
Although, as it has for the last several years, multi-family properties remain investors’ first choice, hotels have come out of three year, fourth- and fifth-place doldrums.
1. Multi-Family (#1 in 2010)
2. Retail (#4 in 2010)
3. Hotel (#5 in 2010)
4. Office (#2 in 2010)
5. Industrial (#3 in 2010)

Global Real Estate Trends
“Compared to 2010, there is definitely a broadening of interest among emerging markets,” said Ian Hawksworth, AFIRE’s newly elected chairman. “For those who were risk averse last year, China seemed a safe harbor for emerging market investments. But, for now at least, investors have become more comfortable diversifying into other emerging markets. Likewise, in the last downturn, London was the first market to recover, and whilst investment in the UK Capital is still very active, it is not surprising that London has dropped to third place as investors expand their search to higher yielding markets such as U.S. gateway cities that offer attractive risk adjusted returns.”

Emerging Markets for Investment in 2011
Since 2009, when it was first ranked as an emerging market of interest, Brazil has held either the first (2009 and 2011) or second (2010) ranking. The trio of Brazil, China, and India dominate this ranking. Russia, which has been among the top five emerging markets in the last two years drops into tenth place.
1. Brazil (#2, tied with India, in 2010)
2. China (#1 in 2010)
3. India (#2, tied with Brazil in 2010)
4. Vietnam (unranked in 2010)
5. Mexico (#4 in 2010)

Top Global Cities Rank for 2011
London, which held sway as one of investors’ top two cities every year since 2001, has been deposed into third place. Shanghai returns to fifth place after dropping into ninth place in 2009. Tokyo moves out of the top five into fourteenth position.
1. New York (#3 in 2010)
2. Washington, DC (#2 in 2010)
3. London (#1 in 2010)
4. Paris (#4 in 2010)
5. Shanghai (#9 in 2010)

Top Countries Targeted for Real Estate Investment in 2011
Although historically, investment targeted to the U.S. earns a substantial margin over other countries, in this year’s survey it ranked nearly five times higher than second place U.K. In 2010, it ranked less than three times higher.
1. US (#1 in 2010)
2. UK (#2 in 2010)
3. Germany (# 3 tied with France in 2010)
4. China (#5 in 2010)
5. France (#3 tied with Germany in 2010)

Countries Providing the Best Opportunity for Capital Appreciation in 2011
Consistent with other answers to this year’s survey, the U.S. claimed an historically disproportionate number of votes, more than six times than that for second place China.
1. U.S. (#1 in 2010)
2. China (#3 in 2010)
3. U.K. (#2 in 2010)
4. Brazil (#4 in 2010)
5. Australia (unranked in 2010)

Countries Providing the Most Stable and Secure Real Estate Investments in 2011
The U.S. continues to provide the most stable and secure real estate investment, but by a shrinking margin over other countries. None of the leading emerging markets are among the top 10.
1. U.S. (#1 in 2010)
2. Germany (#2 in 2010)
3. Canada (#3 in 2010)
4. UK (#6 tied with Australia in 2010)
5. Australia (#6 tied with the UK in 2010)

AFIRE members have a common interest in preserving and promoting investment in cross-border real estate. Founded in 1988, AFIRE currently has nearly 200 members representing 21 countries.

The world needs passionate, talented and socially responsible people to develop, finance and improve the urban environment. The Wisconsin Real Estate Program challenges these people to reach their potential, building on a 100-year long tradition in research and education. Click here to learn more.