Happy Holidays from the Graaskamp Center!

We wish you all a very happy and safe holiday! Please note that the Center will be closed for the holidays on December 24, 30 and 31. We look forward to connecting with you in 2011!

Observations on Essays, Blogging, and Reading for Life

by Stephen Malpezzi, Professor and Lorin and Marjorie Tiefenthaler Distinguished Chair in Real Estate

Regular readers of Wisconsin Real Estate Viewpoint have read some of my missives about “Reading for Life.” Some of you may have even downloaded the very long list (pdf) I’ve posted at my web page on selected teaching materials.

Given my research and teaching interests, it’s no surprise that most of the readings I’ve pointed to relate to real estate, economics, cities, globalization, etc. Today let me step out of my usual zone.

This morning reading The New York Times (paper version! I’m old school) I ran across a short article playing off Sarah Bakewell’s new book, How To Live: Or A Life of Montaigne in One Question and Twenty Attempts at an Answer.

The article, “Conversation Across Centuries With the Father of All Bloggers” (Patricia Cohen, published December 17, 2010) caught my eye because I remember reading some 16th century Montaigne essays many, many years ago. Certainly there were short-form writers before Montaigne – many classical authors from Greek and Roman days, Pauline Epistles and Montaigne’s near-contemporary Francis Bacon come to mind. Nevertheless, Montaigne is considered by some as the father of the essay as we know it today.

Although I’m not sure there is a water-tight definition of the essay. Subjects are all over the map; it’s usually (not always!) a shorter piece; and an essayist often puts forward a personal point of view. Why, it seems I am writing a short essay now! You’re an essayist too – if you’re a current or past student at Wisconsin Real Estate, you surely wrote a number of personal essays explaining why you’d make a great addition to the Badger student body, the Wisconsin School of Business, and perhaps the Graaskamp Center.

As the title of Cohen’s article suggests, one of the points that Bakewell makes in her book is that the essay is the precursor of the blog. Short, personal, and written on a variety of topics. Sounds like the Wisconsin Real Estate Viewpoint to me!

So it’s time to add some of my favorite essayists to Reading for Life.

One of the great things about the internet is that many of the great essayists of the past is that their work is now in the public domain and available for free. I like aphorisms, so I spent a little time browsing George Bernard Shaw’s essay Maxims for Revolutionists. What I like about Shaw’s aphorisms is how he turns the way I usually think upside down. For example, in the Tradition and Innovation paper I briefly discuss the “golden rule” approach to some ethical questions; but Shaw the economist reminds me that there are exceptions: “Do not do unto others as you would that they should do unto you. Their tastes may not be the same.” Consumer sovereignty!

We just had a very successful Graaskamp on the Road in New York, which brings to mind another favorite, E.B. White’s 1949 essay, This is New York. Part paean, but also very clear-headed and realistic.

White, like many other top essayists, often wrote for The New Yorker. One could spend weeks reading great essays from this single source – James Thurber, Joyce Carol Oates, Calvin Trillin and John McPhee come to mind.

James Graaskamp himself was no mean essayist – Principles of Real Estate Development and A Rational Approach to Feasibility Analysis are among his works that fit the form.

Perhaps thinking about the great essayists will help me be a better blogger. The next time I make it over to the reference section of Memorial Library I’ll have a look at Tracy Chevalier’s 1997 Encyclopedia of the Essay.

But in the meantime I downloaded a free version of Montaigne’s collected essays, to browse through when I need a break from grading. Leave a comment with your favorite essayist!

Photo by Djof via Flickr

Rose Bowl construction facts

Rose Bowl fever continues here on campus in Madison. Curious about the history of the Rose Bowl and construction of the stadium itself, I visited the Rose Bowl Stadium's official website. There, I found they have a great feature--"154 Facts About the Rose Bowl Stadium"--summarizing important dates in the stadium's history.

Particularly interesting, I thought, is how over the course of the 88 years since it was built you can see how not only the capacity has changed/expanded but also how the facility has been modified to meet the needs for accessibility, earthquake safety, modernization and more. Also available on the website are plans for further proposed improvements for "The Next 100 years."

Below are some of the construction/renovation-related highlights. Visit the Rose Bowl Stadium website for the complete list of "154 Facts."

1922 Construction of the horseshoe shaped stadium is completed with a seating capacity of 57,000. Designed by Myron Hunt, the stadium cost $272,198.

1922 The Tournament of Roses Association built the Bowl in the Arroyo, a ravine of parkland and natural vegetation on the west side of Pasadena.

1923 The stadium is named "The Rose Bowl" and is dedicated hosting its first college football game.

1928 Rose Bowl Stadium enlarged by 19,000 seats, increasing seating capacity to 76,000.

1931 Wooden sections of the Rose Bowl are removed and replaced with reinforced concrete. The addition of 10,000 seats increased total capacity to 83,000.

1937 Seating is increased to 87,677.

1949 Stadium is enlarged to seat 94,410 - $335,000 improvement.

1950 Fourth expansion increased capacity to 100,983. The Rose Bowl Game becomes the first bowl game to have 100,000 spectators in attendance.

1969 Wooden benches are replaced with aluminum seating.

1982 An eight-year project to add earthquake reinforcements to the stadium structure begins. Locker rooms are again remodeled, a new sound system is installed, and parking areas are also improved.

1991 Tournament of Roses Association accepts the city's request to renovate the press box, tripling capacity to more than 1,000.

1992 Construction completed on $11.5 million three-level structure at the Rose Bowl providing state-of-the-art facilities for both news media and spectators in the Executive and Club Suites. The seating capacity was increased form 330 to 1,200.

1993 The Rose Bowl is designated as an engineering landmark by the American Society of Civil Engineers. After many renovations, The Rose Bowl seating capacity is 104,594 people.

1993 $2 million renovation of the Rose Bowl is a gift from World Cup USA 1994 Inc. to the City of Pasadena. The field is widened to 224 feet and 345 feet long. Permanent ramps are installed for the disabled. Capacity - 100,184

1996 The Rose Bowl undergoes a $21.5 million renovation including a new sound system, scoreboards, video board, elevator with field access and restrooms.

1997 Disabled access increased. Seating capacity reduced to 98,636.

2007 In August 2007, a 40,000 square foot state of the art new locker room and media center space were added.

The Wisconsin Badgers will meet the TCU Horned Frogs in the 97th Rose Bowl Game on January 1, 2011 at 4:10 pm CT.

The photo above is from the Badgers' 1963 Rose Bowl Game appearance, featuring "Lou Holland of the University of Wisconsin--Madison Badgers running around the end." Image courtesy of University of Wisconsin Digital Collections, via Flickr. Also, be sure to check out their amazing series of football team photos from as far back as 1890!

On Wisconsin!

"The Big Bank Theory"

This is probably one of the hottest video clips watched in central banks around the globe. When asked about it, Abdullah Yavas, our central bank insider and voting member of the Monetary Policy Committee of the Central Bank of the Republic of Turkey, commented "Central banking is about expectations management, and credibility is one of the most crucial assets of a central bank in managing expectations. It takes years to build credibility, and a wrong policy to destroy it."

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
The Big Bank Theory
www.thedailyshow.com
Daily Show Full Episodes Political Humor & Satire Blog The Daily Show on Facebook

Connect with us on Facebook for a chance to win!

We want you to connect with the Graaskamp Center on Facebook.

When you do, you'll find out about one of the country's leading real estate undergrad and MBA degree programs, stay informed about Wisconsin Real Estate events and activities, connect with other alumni and friends of the program--and if you become a fan before December 27th, you could win a 2011 commemorative Badger Rose Bowl t-shirt.

We'll choose the winner Monday December 27th and mail out the t-shirt right away so you can wear it with pride on January 1st as you watch the game.

But if you're already a Facebook fan, don't worry. We'll choose the winner from among ALL of our fans.

So share your passion for Wisconsin Real Estate on Facebook--and your passion for the Badgers!

On Wisconsin!

Real Estate and Badgers Football

Excitement on campus is high as the UW Badgers football team prepares for its 2011 appearance at the Rose Bowl. As the semester winds down, alumni, students and fans are busily making plans to watch the game. Tickets may be hard to come by, but that hasn't dampened the enthusiasm. It's the seventh trip to Pasadena in school history, and the team's first time since 2000.

All the talk about Badgers football reminded us of Wisconsin Real Estate's football connection through real estate graduate and current Cleveland Browns tackle Joe Thomas. Thomas graduated in 2007 with a B.S. in Real Estate and Urban Land Economics and was subsequently drafted by the Browns.

We looked back in our news archives to June 2007 for an interview we did with Thomas talking about his interest in real estate, what he got out of the program, and his strong work ethic. Here is an excerpt:

What did you like about real estate?

“I think real estate is more hands-on than a lot of other majors. You’re doing a lot more stuff in the field, not so much sitting in a cubicle or at a desk. And just about everybody is affected by it. Anybody who plans on owning a house, it’s such a big advantage to take a real estate class, and to be able to know about a mortgage, what your best options are when buying a house or looking for property.”

What real estate classes did you take, and were they challenging?

“I took Real Estate Process, with Sharon McCabe; Valuation and Appraisal, also with Sharon; Urban & Land Economics, with Morris Davis; Finance, with François Ortalo-Magné; and Residential Development, with Tom Landgraf.

“To me, the whole real estate program just makes sense. A lot of people who are really good at math say that it makes sense to them, and that’s kind of how real estate is to me. It's like a puzzle; everything fits together. It’s not just memorizing it, you just understand it.”

What else did you like about the real estate program?

“The networking and connections that you make. That’s part of the reason why this is the number 1 program in the country: you are involved with different groups, you do projects with each other, you form great friendships. The people you meet here are the people who are going to help you get a job down the line.”

To read the rest of the interview with Thomas, click through to our News Archive.

The Wisconsin Real Estate Program publishes a monthly newsletter with information on real estate events, activities and more. To receive your copy, add your email address to our mailing list at Constant Contact.

Career outlook and on-campus recruiting

According to an article in this week's Wisconsin School of Business Gazette,

On-campus recruiting statistics appear promising after the recruiting slump of the 2009-2010 academic year.

The MBA Career Management Center reports growth in the number of organizations coming to campus to interview MBA students. There was a 30% increase over last year in on-campus recruiting, including the additions of highly regarded companies such as 3M, Colgate-Palmolive, Simon Property Group, Tishman Speyer, and Rexnord Industries.

2011 is frequently mentioned as a transitional year for real estate as sectors begin to show signs of movement and improvement. Companies are now looking to fill vacancies that had been left open during the worst of the crisis. Many firms believe they will be net hirers in 2011.

The Wisconsin Real Estate Club is actively reaching out to companies to participate in its 2011 career fair to be held on February 9th in Madison. 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.

Wisconsin's best and brightest real estate students are available for internships and full-time employment. Companies are encouraged to sign up now for best placement for the expo and to make the most of time on campus by announcing internship or job openings ahead of time through the online recruiting system. Employers can start collecting student resumes right away and even schedule interviews in advance.

Past participants in the career fair have included T. Wall Properties, NAI MLG Commercial, Heitman, Dominium, Transwestern, Harrison Street Capital, Northwestern Mutual, Ernst & Young, U.S. Bank, Ridge Property Trust, Waterton Residential, Grubb & Ellis, Apex, Realogic, and others.

Every February, the Real Estate Club hosts a career fair featuring representatives from regional and national companies looking to connect with Wisconsin’s talented pool of real estate students. The Club, one of the largest and most active student-run organizations on campus, is open to graduate and undergraduate students.

To find out more about the career fair and to register, visit the career fair website.

Competing in the National Real Estate Challenge

Meet Our Current Students, a continuing series featuring some of our first-year real estate MBA students:

Recently I was fortunate enough to take part in the National Real Estate Challenge, a real estate case competition held annually in Austin, Texas. The competition was held on November 17-18 and was hosted by the McCombs School of Business at the University of Texas. I was part of a six-person team comprised of MBA students in the Graaskamp Center for Real Estate. We competed against nineteen other teams representing leading business schools from around the country. Members of this year’s team were second-year students Chris Hammes, Lindsay Kruger, and Jeff Swhier and first-year students Tess Gruenstein, and Eric Hansch and myself. Lecturer Arif Qureshi was the faculty advisor. The Wisconsin team was one of only a handful of teams that included first-year students.

The case in this year’s competition deviated quite a bit from years past. Usually involving the development of an asset, this year’s case involved the capital restructuring of one firm’s investments in two parcels of lands that were mortgaged by the same lender. One parcel of land was undeveloped and located in a weak market. With the value of the land decreasing, the owner had stopped making debt payments on this parcel. The second parcel was split into two phases, one being undeveloped but entitled for the development of an office building, and on the second sat a recently completed but vacant office building. The second parcel was in a strong market and was expected to begin generating significant cash flow shortly. With loan maturities and loan covenants coming due and no current cash flow, alleviating the lender’s risks as well as keeping the upside potential of the second parcel for the investment firm was the ultimate goal. The case also described a proposal created by the investment firm, laying out their strategy for talks with the lender. Goldman Sachs provided the case which was based on an actual investment they have made.

Each team had 72 hours to read the case and create and complete a PowerPoint presentation explaining the current situation as well as the optimal strategy from the viewpoint of the investment firm. Once the competition began in Texas, the teams were split into groups of five. Each group made a twenty minute presentation before approximately ten real estate professionals who were judges. A ten minute Q&A session followed where the judges tested the participants’ strategy as well as their understanding of the case and the real estate principles involved. One team from each of the five groups was then selected to compete in the final round.

Our team developed a strategy that was quite unique and very different from the investment firm’s proposal. Our strategy involved selling the speculative land and using the proceeds to buy down the risky loans, easing the lender’s concerns. The excess proceeds would be used for tenant improvements on the completed office building, increasing that asset’s potential for significant positive cash flow in the short term. This plan would require no additional equity from investors. Unfortunately, the Wisconsin team did not advance to the finals as we lost out to the eventual champion, the team from Wharton.

While the outcome was not what we had hoped for, the competition was still a very rewarding experience. It allowed us to take what we learn in the classroom and apply it to a real world situation while also forcing us to work with each other’s strengths and weaknesses as a team. An added benefit was meeting and socializing with the students from the other schools as well as the industry professionals. As a first year student, I am excited about the opportunity to compete in this and other case competitions during my remaining time as a student at the Wisconsin School of Business.

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.

Celebrate the holiday season with the WREAA

The holiday season has begun and Wisconsin Real Estate Alumni are celebrating with WREAA regional events.

The events are open to members. If you're not one already, please visit the WREAA website to find out how. The organization is open to alumni and friends of the Real Estate program at the Wisconsin School of Business.

• Wednesday December 1, Illinois Region 2010 Holiday Party
• Thursday December 9, Washington, DC Holiday Luncheon
• Wednesday December 15, Southern California Holiday Party
  

Click to learn more and to RSVP. Bookmark the WREAA Community Calendar to keep up to date on all events and activities.

WREAA serves as a link between its members and the School, current students, and the real estate industry, organizing opportunities for networking and interaction for members and affiliates. Members contribute to the ongoing development of the Wisconsin Real Estate Program through WREAA's financial support at a departmental level, through its financial support of students, and through the organization of its nationwide network of alumni and affiliates who serve as "guardians" of the Program.

Global Power City Index 2010

Last month Wisconsin Real Estate, including a small group of our real estate MBA students, attended the Urban Land Institute's fall meeting in Washington, DC. I noticed recently that ULI has posted all of the presentations from the meeting online. It's a great way to go back and review sessions, catch up on ones you may have missed or even just get the benefit of the content if you weren't able to attend the show. With that as inspiration, I thought this would be a good time to share the viewpoints of one of our students who attended the meeting.

Second-year MBA Kan Zuo attended the “Global Power City Index -2010” session featuring the latest version of the Global Power City Index (GPCI) issued annually by the Institute for Urban Strategies at the Mori Memorial Foundation in Tokyo. His write-up follows:

This session in particular caught my attention because, as background, I've observed an interesting phenomenon in my native China along with its rapid economic development. Everyone in China is aware that their respective cities have changed much over the past several years, but they underestimate the development of other cities. All kinds of attempts to rank Chinese cities came about, and people sometimes fight fiercely when their cities are ranked lower than they expected.

The “Global Power City Index-2010” attempts to rank cities worldwide. It evaluated several indicators and calculated a combined score for each city. In its ranking, New York, London, Paris, and Tokyo were ranked from number one to number four respectively. The report on the research can be found here.

However, one of the difficulties in ranking cities is that cities are defined somewhat differently by different people. For example, in comparing Tokyo to U.S. cities, it is unclear whether Tokyo Metropolis (Tokyo-to) or the city of Tokyo (Tokyo-shi) should be considered. Creating a unified international definition of “city” is no easy task. This issue, if not handled well, could certainly weaken the value of any city ranking system.

It’s difficult to assess the value of such research and to interpret what the results mean. Even if we limit discussion to the “economy” indicator, the top ranked cities are all largest cities; does this mean these top ranked cities necessarily hold the best investment and employment opportunities? From our real world experiences, we can hardly conclude that this is the case. That being said, the presenters mentioned that the original motive of the research was to find out what features Japanese cities are lacking and make improvements accordingly. From that point of view, I would say that the research is a reasonable and worthwhile endeavor.

Kan Zuo is a second year MBA student in the James A. Graaskamp Center for Real Estate. Originally from China, he completed his undergraduate education at Beloit College in 2006 with a double major in Economics and Management and International Relations. As an undergraduate, he interned with the U.S. Senate Committee on Health, Education, Labor and Pensions. In his first year he participated in our on-going blog series Meet Our Current Students. You can read previous posts in the series here.

Rays of Research: Morris Davis

Last week, Morris A. Davis, associate professor of real estate and urban land economics at the Wisconsin School of Business, presented a summary of his ground-breaking research into the relationship between land and housing prices during the faculty seminar series: Rays of Research. As an often-cited expert on housing and its impact on the macro economy, his work on measuring and studying the determinants of land and housing prices is a particularly illuminating lens through which to look back at the housing crisis.


Click here to watch video of the presentation.


Rays of Research is an ongoing speaker series which presents the progress and innovations of the research done by Wisconsin School of Business faculty to other faculty members, staff, students and the community.

Other real estate faculty who have participated in this series include

• Abdullah Yavas (Experiments in Asset Characteristics in Boom & Bust Periods),
• François Ortalo-Magné (Housing for Smarties), and
• Stephen Malpezzi (The Crisis in Housing & Financial Markets: How Did We Get Here? Which Way Out?).

Videos of these presentations are available through the links above.

Senior housing gets ready for a boom

The Graaskamp Center and the Wisconsin Real Estate Club were very glad to host executives from top senior housing and care real estate firms this week. The panel--including Ray Lewis, president of Ventas, Randy Richardson, president of Vi, and Ed Kenny, president of Life Care Services--was led by Robert Kramer, president of the National Investment Center for the Seniors Housing & Care Industry.

Their presentation to the club is available here. As you can see, the outlook is good for opportunities in a variety of senior housing types, driven by demographic trends. We look forward to watching developments in this sector.

MAPIC 2010: Retail developments in an uncertain world

Updated to post final version of presentation

To watch video of the presentation, click to visit the MAPIC website.

Senior Housing/Care Symposium Tonight!

Alumni and friends of the Wisconsin Real Estate Program are invited to attend a special Real Estate Club meeting on tonight (Thursday, November 18) featuring a panel of four executives from top senior housing and care real estate firms. They will discuss the quickly changing and rapidly growing health care sector. You will learn how the Baby Boomers are already driving major changes in the product and how this combination of real estate and services is an explosive growth arena. Panelists include:

Randy Richardson, President, Vi
Ray Lewis, President, Ventas Healthcare Properties
Ed Kenny, President and CEO, Life Care Services
Robert G. Kramer, President, National Investment Center for the Seniors Housing & Care Industry

When: 6:30pm on Thursday, November 18th
Where: Pyle Center on 702 Langdon Street, Madison, WI
Attire: Business casual
RSVP: No RSVP necessary

MIPIM Asia 2010: Uncertainty and Self Confidence in Asia Pacific

To watch highlight video of the presentation, click to visit MIPIM Asia website.

MIPIM Asia 2010: Keywords redevelopment and sustainability

Wisconsin Real Estate is participating in MIPIM Asia 2010 this week in Hong Kong. In the first day of the conference, keywords that have already emerged are "redevelopment" and "sustainability."

Asia as a whole offers attractive investment opportunities and returns in a global economy still in recovery. Growing urban areas in China and other countries are ripe for redevelopment to meet the needs of the 21st century with an emphasis on green building techniques and "livability."

China remains the primary magnet for capital in the region with second tier cities commanding more attention as top tier cities heat up. Other markets also attracting interest include Vietnam, Singapore and Tokyo.

The U.S. economy has not been a top topic of conversation so far. However Nobel laureate in economics Professor Joseph Stiglitz is due to deliver a morning keynote address on Thursday on his thoughts on the U.S. and global economies and the outlook for recovery.

Wisconsin Real Estate is at the show conducting a survey of conference participants' investment targets and concerns and their opinions on investment prospects over the next 2-3 years. Results of the survey will be presented by Professor Francois Ortalo-Magne at the wrap-up keynote on Friday along with Nick Axford, CBRE Hong Kong.

Mark Olinger Talks About Madison's Plans for the Capitol East District

Join the Wisconsin Real Estate Alumni Association's Western Wisconsin Fall Program & Networking Event tomorrow night November 4th for a discussion of new directions in infrastructure investing.

Guest speaker Mark Olinger, Acting Director of Planning and Community and Economic Development for the City of Madison. Mark discussed the city of Madison's plans for the Capitol East District.

The event starts at 5:30 pm at the Brink Lounge in Madison.


The WREAA serves as a vital link between the university, students, the real estate market, and its membership. Membership in the Wisconsin Real Estate Alumni Association (WREAA) is open to all graduates of the University of Wisconsin Real Estate and Urban Land Economics Program and to individuals who are currently working in and share our passion for the industry and also share a strong interest in advancing the University of Wisconsin Real Estate Program.

If you're not already a member, becoming one is easy and the benefits are great! Learn how to join today!

Economics and elections

by Stephen Malpezzi, Professor and Lorin and Marjorie Tiefenthaler Distinguished Chair in Real Estate

One of the goals of my urban economics classes is to demonstrate how we can use economics, and data analysis, to understand a range of events in real estate markets, in cities, and in our society more broadly.

Tomorrow's midterm election provides us with a great set of teachable moments. I'm using the effect the economy can have on the election to illustrate some basic techniques of data analysis, critical thinking, and "storytelling;" and, as always, how "Reading for Life" can help us make sense of the world.

Today, I'd like to share just a few of these points, focusing less on the data analysis techniques and more on some interesting stylized facts and research results (mainly results from other people's research).

While much debate surrounds causes, timing, and attribution, the objective fact is that, by some measures, the economy is in the worst shape since the Depression. The next two figures show how two indicators, growth in GDP per capita and inflation, fared during the terms of the postwar presidents since Truman. (The data go back to 1947 and so the early part of Truman's term is omitted. The data run through Q2 of 2010, so the last few months of the Obama administration are also omitted). Let me start with two indicators that previous research has tied to electoral performance.FIGURE 1. President Obama, so far, has faced a lower growth rate of GDP per capita than any other postwar president. Of course, it's early days, and whatever our partisan leanings, we all hope for better performance in the next two years. Nevertheless, the anemic performance of GDP growth is a challenge for Democrats (who, of course, also control the House and the Senate, at least by the simple definitions of "control.")
FIGURE 2. On the other hand, Obama has held office during a period that's exhibited lower average inflation than we've seen during any other postwar President's term.

Are Presidents responsible for “their” economic averages?
A huge body of research argues the effects of economic policies (taxes, subsidies, deficits, regulations…) and Presidents (and other politicians) do affect these policies. However, the economy has a lot of inertia (lags) built in, and there is a lot of luck involved. (Luck, of course, can be good or bad.) Policies have their lags, too. The economy can react to the perception of future policies and uncertainty in the same. But fair, or not, there is a lot of evidence that election outcomes are affected by the performance of the economy, even over short periods.

Economist Ray Fair (Yale) has published several papers and a book about how to forecast U.S. elections according to the state of the economy. Recently he extended his work from Presidential elections (as in his book) to House elections, in “Presidential and Congressional Vote-Share Equations,” American Journal of Political Science, 53(1), January 2009, pp. 55-72

Ray Fair’s prediction of this week’s Congressional election
Fair’s model has three equations: for the Presidential vote, the “on-term” House vote, and the midterm House vote. The economic variables are derived mainly from growth in GDP per capita and inflation. Other variables include whether there is a Presidential election, and if there’s a war on. Fair’s latest forecast (10/29/10) is that the Democratic share of the House vote will be 49.2%, i.e. a razor-thin Republican majority. He doesn’t forecast Senate results.

What about unemployment?
Fair’s model shows the House vote as closer than most political pundits. The two main economic drivers in his model are GDP per capita growth and inflation. Current low inflation numbers are helping to keep it close. I think the other thing this model misses is our high unemployment and its extraordinary average duration. See the next two figures:


These are even worse than might be expected from our recent growth in GDP; see for example the analysis by the Federal Reserve Bank of San Francisco. High unemployment, and high duration, and how they are now driving foreclosures, are subjects my colleagues and I have discussed elsewhere.

Debate will continue on the efficacy of the policies of the Administration and Congress; between Republicans and Democrats; and the debate that’s always on within the parties.

Despite my PhD in economics, I’d never argue that elections are only about my favorite subject.

But objective data, and past research on elections, show that the state of the economy has an important effect on the electoral fortunes of the party in power. Fairly or not, economic conditions favor the Republicans this time around.


More "Reading for Life"

• Fair, Ray C. Predicting Presidential Elections, and Other Things. Stanford University Press, 2002.
• Gelman, Andrew. Red State, Blue State, Rich State, Poor State. Princeton University Press, 2008.
• Tim Besley's 2002 Lindahl Lecture, Principled Agents.
• William Easterly, Michael Kremerb, Lant Pritch and Lawrence Summers, Good policy or good luck? Country growth performance and temporary shocks. Journal of Monetary Economics, 32(3) December 1993, pp. 459-483.
  

ULI Fall Meeting-Intensive but Enjoyable

Continuing Series: Meet Our Current Students

A small group of MBA students and I spent three days in Washington, DC for ULI’s Fall Meeting. The time there was very intense but very enjoyable. More than 5,000 people attended this year’s meeting, and I had the chance to enjoy all kinds of insightful panels. I think it was a good opportunity for me to understand real estate markets as well as a good networking opportunity to reach out and get to know industry leaders.

It was really difficult task to choose the panels to attend as there were so many good ones. So we turned to Graaskamp Center Executive Director Michael Brennan for help. He went through the panel schedule with me and suggested some good choices; my personal favorites: “Capital Market: What Do Today and Tomorrow Look Like” and the “Office Trends: Here, Now, and Beyond”. The first one gave me an overview of the current market and the investment opportunities in the emerging market such as China, while the second one helped me dig deeper into the office market. Wisconsin alumni Brian D. Berry, Managing Director of Tishman Speyer, was the discussion leader for the “Office Trends” panel. He shared his industry experience and his viewpoints for the office market. He thought there would heavy demand for flexibility of the office space as corporate clients are more efficient than before.

Wisconsin Real Estate had a booth in university row in the main expo hall which welcomed alumni and potential applicants. We also got to know some of the graduate students from other real estate programs such as Columbia, MIT and Cornell. We had a good discussion on the international capital market and its impact on the global real estate industry. I think ULI is a good platform for us to get to know more friends and to learn from each other.

On Thursday October 14th, the WREAA and the Graaskamp Center hosted a networking reception. It was a big success, attended by over 50 alumni and potential applicants for the program. We met some people interested in our program, and we were glad to introduce our wonderful experience as a first year MBA students. Backed up by Professor and Academic Director Stephen Malpezzi who explained further about the program’s curriculum and the strength of the program.

If you would like to learn more about the Wisconsin MBA program or about upcoming events, visit our website at www.bus.wisc.edu/realestate.

Julia Xia is a first-year MBA student in the James A. Graaskamp Center for Real Estate. Formerly a real estate consultant and asset manager in Beijing, Julia graduated from Peking University with a bachelor's degree in finance and banking.

Business and personal priorities in a 40-year career

by Michael Brennan, Executive Director of the Graaskamp Center for Real Estate

James P. Grusecki, Chairman and CEO of Northern Builders, was the honoree of the E.J. Plesko Distinguished Speaker in Real Estate Development Award given to those who embody the Wisconsin Tradition in their spirit, imagination, entrepreneurial skills and enthusiasm for improving the built environment. The event was held on October 22, 2010 at the Fluno Center and was attended by both MBA and undergraduate real estate majors, members of faculty, and numerous outside guests interested in learning more about the successful history of one of Chicago’s leading industrial development companies.

The E.J. Plesko Speaker Series is funded by a gift from developer E.J. Plesko, a Graaskamp Center Board Member and President of E.J. Plesko & Associates, a real estate development and management company based in Madison.

Jim’s talk revealed the remarkable growth not only of Northern Builders, but of Jim’s personal growth as a businessman and an executive leader of his firm.

Northern Builders was started in the late 1920’s by Mr. Grusecki’s father, originally in the residential business, slowly making the transition into industrial development and ownership. “In the beginning, we were a family business in every sense. On our first build-to-suit with Ingersoll-Rand, my mom, dad, and my siblings were all partners. My dad told me that I would have to pay $24,000 for my share of the deal. Somehow, I scraped it together. Those days taught me valuable lessons.” Northern Builders today owns over 5 million square feet of Class A industrial property, as well as a few office and retail properties.

Jim offered a few personal insights, on aspects of his life he was most proud of and suggestions for those starting their careers. “I take great pride in meeting my obligations…Northern has never given back a property to a lender.” Jim continued by saying that while he certainly faced times of adversity, the business model of savings, and reinvestment, helped them weather the often severe cycles of development.

Jim offered several interesting perspectives for those beginning their careers. “Do not become impatient in your career…opportunities open up for those who are dedicated.” Jim further remarked that “there is an interconnected, three-legged stool- family, business, health – that has to be properly balanced. Each one affects the other.”

Jim Grusecki resides in Chicago and has now assumed the role of non-executive chairman of Northern Builders. Jim is active in numerous civic and charitable organizations including a family foundation whose mission is to support education, the arts, and to provide housing to single parent households.

The next E.J. Plesko Series Speaker event will occur in the Spring of 2011.

Photo of James Grusecki, flanked by E.J. Plesko (left), Stephen Malpezzi (right) and Michael Brennan (far right).

Setting off for Seattle

Students and members of the UW Real Estate Club are traveling to Seattle this week on the fall semester field trip.

With support and assistance from local alumni, over two days, they will visit sites including Russell Investments Center, Bellevue Towers, Melrose Market, and others. The Wisconsin Real Estate Alumni Association has organized a welcome reception for the club Wednesday evening October 27th. Please visit wreaa.org for details and to register.

The Real Estate Club, which is open to both undergraduate and MBA students in real estate, takes a field trip to a key U.S. real estate market each semester. Previous trips have visited Los Angeles, Chicago, Boston and New York to name a few.

Photo by Robert Badgley via stock.xchng

Back from ULI Fall 2010

The Wisconsin Real Estate delegation of students and staff is back in Madison after a successful visit to Washington, DC for the Fall 2010 meeting of the Urban Land Institute. Having attended the show for a long time, we decided this year to set up a booth in the expo hall as well. And we're so glad we did! Not only did we attend some very informative sessions, we had a central gathering point for alumni, board members, prospective employers, potential students and more. Wisconsin Real Estate was well represented at the show!

Some members of our board of advisors attended the ULI Foundation's retreat where even ULI's CEO Patrick Phillips sported Wisconsin Real Estate red!

Maybe that was the extra karma needed to help put the Badgers over the Buckeyes last weekend--the lead-up to the game was a hot topic of conversation at the show.

If you didn't have a chance to stop by our booth or join the Center's and WREAA's reception or even if you didn't attend the show, we'd like to connect with you. Bookmark this blog, sign up for our monthly newsletter (via Constant Contact), follow us on Facebook or Twitter--whatever you prefer!

On Wisconsin!

An Action-Packed Week at the Graaskamp Center!

Today, first-year MBA student Ben Schmidt contributes a post to our Meet Our Current Students series:

As Eric talked about in his recent post, we’ve been fortunate to host a steady stream of guests at the Grasskamp Center recently. This week it’s time to turn the tables: instead of numerous alumni and guest speakers coming to campus, the Graaskamp Center is hitting the road!

A number of faculty, staff and students--including Academic Director Stephen Malpezzi, Executive Director Michael Brennan, Senior Associate Director Kris Hammargren and fellow first-year MBA student Julia Xia --are attending ULI’s Fall Conference this week in Washington, D.C.

The Graaskamp Center will be hosting a networking reception TODAY (October 14) from 6:00-8:00 PM in Room 209C of the convention center. Alumni, board members, and friends of the Wisconsin Real Estate Program are welcome -- you need not be a Conference participant to attend. We hope you will also say hello at the Graaskamp Center booth (#723 in the convention center).

While many of us will be traveling this week, that’s not to say that life around campus will slow down at all. In fact, we’ve hit that point in the semester where things really start to ramp up. The foundations were laid in the first few weeks of classes, and now we students are being called upon to apply what we’ve learned. That means assignments and exams: Monday was our first midterm exam in Accounting, last week required the submission of our first Data to Decisions (data analysis) assignment, and we have two assignments due this week in Real Estate Finance.

In between, we’re getting another visitor: alumnus Terrance Wall, Founder, Chairman and CEO of T. Wall Properties, will be speaking to our Real Estate Finance class while Professor Abdullah Yavas will be attending to his duties as a member of the Monetary Policy Committee with the Central Bank of Turkey.

So things are busy for everyone! Hopefully, you’re staying just as busy, too.

Wisconsin at ULI Fall 2010!

Wisconsin Real Estate will be in Washington DC next week at ULI's Fall 2010 Meeting. Visit our booth #723 in the Expo Hall.

And join us Thursday evening October 14th 6:00-8:00 pm in Room 209C for a reception for alumni and friends of the program.

We hope to see you there!

No slowing down

Today, first-year MBA student Eric Dowling contributes a post to our Meet Our Current Students series:

Our first week of classes was just four weeks ago, and real estate MBA students like me have gotten off to a very busy start on top of the rigors of classes. On Wednesday, September 15, approximately 35 members of the James A. Graaskamp Center for Real Estate Board of Advisors met in Madison, along with distinguished guests and panelists, current MBA students, and faculty and staff, at the Fluno Center to kick off the fall board meeting. After a reception and dinner, there was a presentation by Alan Berube, Senior Fellow and Research Director, Metropolitan Policy Program at the Brookings Institution, on the changing demographics within the United States. The following day’s activities included several panel discussions and a networking session.

But it didn't stop there. The evening of Thursday, September 16 brought over 300 Wisconsin real estate alumni to Madison for the Wisconsin Real Estate Alumni Association Biennial Conference. One of the highlights was the presentation of the Wisconsin Award, the WREAA's highest recognition of a distinguished member of the real estate community who has successfully and creatively integrated both a business and social ethic within the real estate process. This year's honoree was the evening’s keynote speaker John Buck, Chairman and CEO of The John Buck Company. Even the university’s marching band joined in the festivities at the end of the night by playing a few songs, including, of course, “On, Wisconsin!” Throughout the day on Friday, September 17, there were several panel discussions, speeches, and networking sessions. There was also a tailgate for the real estate alumni held on Saturday for the football game against the Arizona State Sun Devils. The Badgers won…by one point.

Several speakers have also visited campus this month. Brad Olsen, Managing Partner and CEO of Atlantic Partners, spoke to undergraduate and graduate real estate students on Wednesday the 22nd about international real estate. Topics included everything from the possible effects of the troubles in the EMU to growth possibilities in China and India. The next night at the students' Real Estate Club meeting, David Brain, President and CEO of Entertainment Properties Trust (NYSE: EPR), received the Innovator Award, which is given in recognition of outstanding individuals who have made a creative mark on the real estate industry. Mr. Brain spoke at length to the club about how EPR has developed, its current opportunities and obstacles, and its future growth possibilities. Chuck Carpenter, Managing Director of the State of Wisconsin Investment Board and a UW alum, spoke to real estate students on Friday, September 24 about what SWIB is and their overall market and investment viewpoint. And finally, on Thursday the 30th, representatives from developer Tishman Speyer were on campus to talk to the Real Estate Club about their firm and discuss financing strategies that they have used during the economic downturn.

There is no slowing down heading into October for the MBA real estate students. Paul Boneham, SVP of Acquisitions at Kennedy Associates, will speak on Friday, October 15th. Simon Property Group will be on campus towards the end of the month. And finally the Real Estate Club is leading a two-night trip to Seattle where current students will meet with industry alumni as well as tour commercial real estate projects in the area.

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.


Visit the Wisconsin Real Estate Program website for news and upcoming events. Join our mailing list (via Constant Contact) to receive our monthly newsletter and invitations to our public events.

Some Personal Observations Inspired by President Obama's Visit

by Stephen Malpezzi, Professor and Lorin and Marjorie Tiefenthaler Distinguished Chair in Real Estate

Tuesday night I took a break from catching up on emails and letters (nope, still not caught up!) and on the spur of the moment called my wife Joan, who works across the street, to see if we could catch President Obama's speech a block away at library mall. (Obama's University Visit Was Not Simple, NYT 9/28/10; Obama rallies Democrats in Madison, Wisconsin State Journal 9/28/10)

As we had guessed, at 5:45 it was way past the time you could actually get to the mall around the fountain, between Memorial and Historical Society Libraries. So we headed up Bascom Hill, and found a nice spot about half way up. We could hear (barely). We couldn't see, of course, except we had a very clear view of the heavily armed security forces atop Memorial Library. (To some, the sight might remind them of 9/11, but to those of us of a certain age, it brings back an equally searing memory of 1963; the security's so necessary, more's the pity).

It was a perfectly crisp night, and the crowd was in a good mood, even those carrying Scott Walker signs (the Republican candidate for Wisconsin governor) in the middle of a crowd comprised (I am sure) mostly of Obama supporters.

It was billed as a campaign speech, of course. As a professional economist, when I listen to a political speech, whether Republican or Democrat, liberal or conservative, I go prepared to be disappointed by the level of discourse and policy prescriptions. As usual, my expectations were fulfilled. As far as I could tell from the speech, the major issue facing the republic -- other than excessive numbers of Republicans -- was the availability of student loans. While the sound was garbled at times, I think the financing of higher education rated at least 3 and maybe 4 mentions; an important issue to be sure, but I didn't know it was so important that it left no time for lesser issues like funding social security and medicare, or the right course for our efforts in Afghanistan.

Lest you think, "I knew it, Malpezzi's a raging tool of Karl Rove, I've even seen tea bags in his office"--well, no. I can dish it out equally when confronted with, say, John Boehner's recent speech on "economic policy" which contained little in the way of either economics or policy (Boehner Urges Ax For Economy Team, WSJ 8/25/10). (Although I must admit to some sympathy to his idea of showing Treasury Secretary Tim Geithner the door, given Treasury's repeated and willful refusal to do replace HAMP and its variations with an effective program to stem the huge external costs from record foreclosures--see our proposed Wisconsin Foreclosure and Unemployment Relief plan.)

In class, I often comment on public policy ideas, and on how to think about decisions, whether in business or the public arena, rationally and thoughtfully. I pride myself on choosing examples of good and bad ideas from across the political spectrum. Especially when I'm looking for bad ideas, I suffer from an embarrassment of riches, served up to our class by Republicans and Democrats alike. Maybe I don't always succeed in my goal of political even-handedness, but when I gave a class of 200 the chance to guess my vote in the 1991 election, they came within 5 votes of an even 3-way split between Bush, Clinton and Perot. (No, I won't tell you my vote. Well, I'll give you this one -- I didn't vote for Perot, and even I was a little surprised that I could mask my views enough for a third of the class to think I voted for him).

This posting might seem cranky so far, but I'm not really feeling cranky. Despite the disappointments on the policy side, I enjoyed the hour I spent on Bascom Hill with Joan and 26,000 of our closest friends. It was good to see a crowd revved up, yet -- dare I say it -- respectful? Maybe I need to adjust my expectations -- would I really want a world where politics was the province of economists? Should I really get cranky about the fact that we so often drop the gloves in political arguments and go all ad hominem on our opponents? It's a long tradition in our politics. If you think we're un-civil now, go read up on the raging fights, calumnies even, whenever some combination of Adams, Jefferson, Hamilton, Madison were in the room. Even Washington, trying so hard to stay above the fray, threw some elbows now and then. And Burr shot Hamilton, for heaven's sake. In the run-up to the Civil War, congressmen beat each other with sticks on the floor of the house. They had some real issues to fight about, not least slavery. And -- wait a minute -- we had a civil war! Bad as our recent wars have been, more Americans were killed in that combat than all our other wars combined, if we exclude World War II. So maybe I should get a little perspective. We're robust. Our country has survived worse than what's being thrown at it now, from within, and without. That doesn't mean we shouldn't push to raise our standards, but despite my frequent complaints about this or that policy decision, there's every reason for some optimism.

Of course the U.S. is not the only "robust society." I'll tackle a few international comparisons in a future post.

Honoring Fred Petri, tireless supporter of real estate education at Wisconsin

On Wednesday September 15, 2010, members of the Graaskamp Center Board of Advisors honored Fred Petri, President of Housing Capital Co., lifetime member of the board and long-time supporter of the real estate program at the Wisconsin School of Business. Professor François Ortalo-Magné, chairman of the department of real estate and urban land economics at the Wisconsin School of Business delivered the following remarks.

“I would like my words to convey to Fred Petri my utmost gratitude for his quiet and humble contribution to the real estate program here at the Wisconsin School of Business. In deference to his wishes, we are honoring him tonight by simply being here, around him; no roast, no toast, no lifetime achievement award. Any such award would be unfair because we cannot yet measure the full impact of his contribution.

We would not be here tonight if he had not worked tirelessly and successfully, by himself and with his friends, to convince the UW and the School of Business to stay involved in real estate education once Jim Graaskamp passed away. Fred set the foundation for the post-Graaskamp era, putting us on a path whereby today we have a legitimate claim at global leadership in real estate education.

Once the program was secure, he innovated with his friend Jim Curtis to create and fund (with additional help from E.J. Plesko) the Applied Real Estate Investment Trust (AREIT) training program, one of the distinguishing features of our real estate MBA program. This program is so valuable that last year we extended its reach to include undergraduate students – a gift that keeps on giving.

Fred Petri has done much more for us, some of it only the chairman of the department will ever get to measure and appreciate.

Personally, I want to thank you, Fred, for two things. First, a month after I started at Wisconsin, we bumped into each other at the Madison airport. You sat me down and gave me the lay of the land. I left twenty minutes later thinking: these guys are really passionate about their real estate program, I’d better do my best. Second, today I am here as chair of possibly the best real estate program in the U.S., arguably the best in the world. Through the Global Real Estate Master (GREM) partnership, we are establishing ourselves as the real estate department to the number one business schools in Asia, Latin America and Europe. Without your inspiration to my career here, without your influence on the program, I would not have the privilege today to share the evening with you and so many of your friends dedicated to training the most competent, professional and passionate real estate leaders around the world.

So on behalf of all of us, on behalf of our Dean Mike Knetter who could not be here tonight, and on behalf of the university, thank you.”

Photo by Martha Busse of Fred Petri (center) with friends and family at the fall meeting of the Graaskamp Center Board of Advisors.

Well begun is half done: Pleasant surprises in Madison

The new school year has begun, and we are continuing a series that we started last year called Meet Our Current Students where we hear from current real estate MBA students about their experiences in the program. We kick things off in fall 2010 with a post from Class of 2012 MBA candidate Julia Xia:

This was my first trip to the U.S., and I had expected that adjusting to things would be more difficult for me. However, Madison has had this magic power to make me feel at home, and I fell in love with this city at first sight. In fact, it has never stopped giving me little pleasant surprises throughout my first month on campus.

The first surprise is the high quality of the students and the close-knit community. This year, the Graaskamp Center has recruited 3 international students to the real estate MBA program, all graduates from top colleges in their home countries. All first-year real estate MBA students have strong and diverse professional backgrounds in the real estate industry. They hail from private equity funds, development companies, and consulting firms. During the first week, the second-year real estate MBA students welcomed us with a party at a classmate’s home where I got a detailed introduction to school life. I felt that we were already closely connected, and I am glad to be studying along side these smart people.

The school year started with a nice orientation to help familiarize us with the campus, classmates, professors and resources. During the orientation, we had a great night at a welcome reception hosted by Graaskamp Center Assistant Director Sharon McCabe’s home, meeting and talking to the faculty of the Center. I was impressed by their insightful views about the real estate market not only in the U.S. but also in other emerging markets such as China. We have a small group of real estate MBAs which allows the Center to help me reevaluate my career path one-on-one and set the direction for future improvement.

The supportive alumni of the Wisconsin Real Estate Program also gave me a warm surprise. We had a nice welcome party with local alumni during the orientation week, and we connected with some other alumni after that. They took us to a football game; it was the first time I watched an American football game. It’s a great game and has helped me understand the tradition and culture of Wisconsin better. During the recent meeting of the Graaskamp Center Board of Advisors, I had the chance to talk with several leaders about their fruitful experience in the real estate industry. Again to my surprise, everyone was very patient and helpful and shared knowledge from their real estate practice, which I can’t learn anywhere else.

The class schedule is busy but very useful. In the first semester, we are taking general business courses plus one course within the real estate specialization. I feel that all the courses are designed with a purpose to guide us in the real business world and to help us to make effective decisions in our future careers. I especially like Real Estate Finance and Investment. Professor Abdullah Yavas is skilled at teaching the real world applications of our curriculum.

As we say in my country, “Well begun is half done!” I have had a good start, and I’m looking forward to the next two years of life studying here in Madison!

Julia Xia is a first-year MBA student in the James A. Graaskamp Center for Real Estate. Formerly a real estate consultant and asset manager in Beijing, Julia graduated from Peking University with a bachelor's degree in finance and banking.

Professor Riddiough Returns from Sabbatical

The fall 2010 semester is underway, and the Graaskamp Center's busy calendar of events has already checked off a meeting with our Board of Advisors and the alumni biennial conference with the WREAA. Also busy are our faculty.

Professor and E.J. Plesko Chair of Real Estate and Urban Land Economics Tim Riddiough is back on campus after an ambitious agenda of research, presentations and discussions among the international real estate community during a year-long sabbatical. He had served previously for five years as academic director for the Center.

Among his accomplishments this past year:

• Cutting-edge research and global research connections
• Speaking opportunities
• Teaching
• Leadership in the real estate industry

This fall, Tim is advising students in the Applied Real Estate Investment Track (AREIT) program, a demanding and highly-selective program within the Wisconsin Real Estate MBA. Through the program, students develop fundamental research and portfolio management skills by combining a theoretical foundation with the first-hand experience and challenges of managing real money in a live REIT portfolio.

Read more about Tim's activities in the September edition of our newsletter. (Join our mailing list with Constant Contact to receive our newsletter in your inbox every month!)


You can also read about the summer activities of other faculty members Stephen Malpezzi and François Ortalo-Magné in previous blog entries.

Join the Millenium Graduates Challenge Campaign!

The Millennium Graduates Challenge Campaign is heating up in the last few days before the real estate alumni biennial conference in Madison on Thursday and Friday.

The results for each class year will be announced at the meeting later this week. You can see how your class stacks up against pledges made by other years by clicking through to the campaign website.

There is still time to participate! Make your pledge today. Help your class and help the next generation of real estate leaders who benefit from the world-class Wisconsin Real Estate Program which was again ranked #2 by U.S. News & World Report.

On Wisconsin!