By Erwan Quintin, Assistant Professor of Real Estate at the Wisconsin School of Business
At a time where a wall of cash is sitting on the sidelines looking for yield, mortgage REITs have garnered a lot of attention. The recipe is simple: 1) borrow short term at rates currently near 0% and invest in mortgages or mortgage-backed securities, 2) lever highly, and voila, dividend yields close to or in excess of 20%.
The catch behind these lofty yields, of course and as always, is risk. Minor changes in the spread between mortgage rates and short rates can cause yields and market valuations to fluctuate wildly. The past few weeks are evidence of that, as the Motley Fool explains here.
At this juncture, a mortgage REIT play is a bet that the yield curve will continue to slope sufficiently up for sufficiently long. The Fed has promised to keep the short-end down until 2013 but, at the same time, has announced its intentions to bring the long-end down. Its ability to deliver on both objectives will define mortgage REIT returns over the next few quarters. As the Motley Fool writes, REITs can take steps to mitigate their exposure to yield curve inflections, choose their preferred location on the yield/risk menu, and in the process target investors with different tolerances for risk.
Thursday, October 27, 2011
Wednesday, October 19, 2011
Discussing causes and consequences of the housing crisis at the Chicago Fed
By Erwan Quintin, Assistant Professor of Real Estate at the Wisconsin School of Business
The Real Estate Department's Housing-Urban-Labor-Macro (HULM) conference took place this weekend at the Federal Reserve Bank of Chicago. The conference, a bi-annual event founded three years ago by my colleague Morris A. Davis, brings together individuals who are pushing the frontier in all aspects of real estate research. It is now recognized in academic circles as one of the premier events in urban and housing finance research.
As one would expect, much of the event focused once again on the causes and consequences of the recent housing crisis. No fewer than three competing explanations were proposed for the run-up of home prices until mid-2006 and their sharp collapse thereafter: the unintended consequences of the toughening of personal bankruptcy statutes in 2005, the role of speculators on the way up and the way down, and plain-old herd behavior. A session -- highlighted by presentations by UW's own Randy Wright and Morris Davis -- discussed the impact of inflation on housing investment and prices. Several papers also took on standard themes in urban research: Why do productivity and wages differs so much across cities? What accounts for patterns of trade across cities? Details and papers are here.
A unique aspect of this event is the collaboration it fosters between academic researchers who study optimal policy responses to various real estate events and the very people who implement these policy responses, including not only Federal Reserve economists but also researchers from government-sponsored agencies (GSA). The next installment of the conference will take place at the Federal Reserve Bank of Boston in March 2012.
The Real Estate Department's Housing-Urban-Labor-Macro (HULM) conference took place this weekend at the Federal Reserve Bank of Chicago. The conference, a bi-annual event founded three years ago by my colleague Morris A. Davis, brings together individuals who are pushing the frontier in all aspects of real estate research. It is now recognized in academic circles as one of the premier events in urban and housing finance research.
As one would expect, much of the event focused once again on the causes and consequences of the recent housing crisis. No fewer than three competing explanations were proposed for the run-up of home prices until mid-2006 and their sharp collapse thereafter: the unintended consequences of the toughening of personal bankruptcy statutes in 2005, the role of speculators on the way up and the way down, and plain-old herd behavior. A session -- highlighted by presentations by UW's own Randy Wright and Morris Davis -- discussed the impact of inflation on housing investment and prices. Several papers also took on standard themes in urban research: Why do productivity and wages differs so much across cities? What accounts for patterns of trade across cities? Details and papers are here.
A unique aspect of this event is the collaboration it fosters between academic researchers who study optimal policy responses to various real estate events and the very people who implement these policy responses, including not only Federal Reserve economists but also researchers from government-sponsored agencies (GSA). The next installment of the conference will take place at the Federal Reserve Bank of Boston in March 2012.
Friday, October 7, 2011
Applying for the Wisconsin MBA in Real Estate: Tips from the Associate Director of Recruiting
The application season for Fall 2012 admission to the Wisconsin MBA is now underway. The first round deadline is November 4, 2011. We sat down with Sharon McCabe, Associate Director of Recruiting and Career Services for the Graaskamp Center, to talk about the admissions process and her suggestions for candidates for an MBA in Real Estate.
Is a business background required and how much work experience should a candidate have?
In general, our MBA students in real estate have 4-5 years of professional work experience; the Wisconsin MBA requires a minimum of two years. Some students come from real estate or finance related functions. But just as real estate is a multi-faceted industry, our students come from many backgrounds including economics, engineering and law, even politics.
What I think is more important than a specific type of past training, is life experience. We believe that the real-life experience that every student brings into the classroom is very important. Our students come to Wisconsin with strengths along different dimensions, and through our program round out their skill set in real estate.
What GMAT or GRE score is needed?
A Graduate Management Admissions Test (GMAT) score taken within the past five years is required. The GRE may be accepted, on a case by case basis, in lieu of the GMAT. The real estate program is very competitive with average GMAT scores in the upper 600s, but the range for individual students is broad. We look beyond test scores to a candidate's whole application when making our admissions decisions. However, we do give particular attention to the quantitative dimension of the score. Familiarity with quantitative concepts-business ratios and balance sheet basics-is a good foundation to have. While real estate may be a relationship driven business, it's a practical, numbers driven business too.
What else do you look for in a candidate?
I think, most of all, the thread that connects the most successful practitioners in real estate is passion for the craft. That passion can manifest itself in different ways. For some, it starts as an interest in construction, how things get built. For others, it's a consciousness of the built environment or an appreciation of how development can affect a neighborhood or community. For still others, it is the realization that real estate investment can be both tangible and profitable. I think it's important for MBA candidates to be aware of their own journey to this point and to be able to articulate their unique passion for real estate.
What career options are available for graduates with an MBA in real estate?
The Wisconsin MBA in Real Estate is designed to challenge our students to reach their potential as talented, passionate and socially responsible leaders in real estate. Through the exceptional breadth and depth of our curriculum, access to world-class faculty and practitioners, and our global alumni and industry connections, our students are uniquely prepared for their careers and to make their mark on the urban landscape. Graduates commonly follow five basic career paths: development, lending and financing, asset and portfolio management, advisory services, and economic development and public policy. They also have access to a wide variety of resources to support them during the job placement process.
I have seen an increasing number of opportunities available to our students, even as the challenges to the economy continue. Real estate is a fundamental part of the economy; everybody needs it. Trends in population growth indicate an expanding need for both residential and commercial space. Even if population growth stopped, buildings age and need replacing, technology changes and facilities need upgrading. Real estate as an industry is remarkably resilient.
What's the best way to find out more about the Wisconsin MBA in Real Estate?
Come to campus! We're available Tuesdays and Thursdays during the fall semester to host prospective students. Sign up online for a day on our campus in Madison which includes a visit to a class, lunch with a current MBA student, and interviews with me and with the admissions office for the Wisconsin MBA. I think it's a fantastic opportunity to see our beautiful campus in person and to help us get to know our candidates better. But if coming to Madison isn't possible, I am happy to talk with prospective students over the phone or I can connect candidates with one of our real estate alumni in their area. We have some of the most active and engaged alumni in the industry who are amazing ambassadors for our program.
When should candidates apply?
We are taking applications now for the Fall 2012 intake. Wisconsin offers four application rounds; the first round deadline is November 4th. Candidates can visit the Wisconsin MBA Admission web page for dates and more information on the application process. While we look for the best candidates throughout the process, I would encourage candidates in real estate to apply in the first two rounds.
The decision to pursue an advanced degree in real estate is a personal one, and the reasons vary widely. What the Wisconsin MBA in Real Estate offers is this: the foundation in business of an MBA and the specialized focus of a master's degree in real estate. The innovative and top-ranked program at Wisconsin is an in-depth real estate graduate education experience you won't get anywhere else.
Contact us today:
Sharon McCabe
Associate Director of Recruiting and Career Services.
Phone: 608/890-2493
Email: smccabe@bus.wisc.edu
Sharon L. McCabe is an associate director within the Graaskamp Center for Real Estate and a faculty associate in the Real Estate and Urban Land Economics Department, both in the University of Wisconsin-Madison School of Business. Over the last ten years, Sharon has taught several different classes at both the graduate and undergraduate level. Sharon also is actively involved in the recruitment, retention and placement of the real estate MBAs in the program.
Sharon has spent over 20 years in the real estate industry as a market analyst, appraiser, assessor and instructor. She has experience valuing all types of commercial properties including shopping centers, hotels, office buildings and both market-rate and subsidized apartment buildings. As a commercial assessor for the city of Madison, she was responsible for valuing over 1,000 properties worth over $1 Billion dollars for ad valorem taxation purposes.
Sharon has a Bachelor’s of Science degree in Urban Land Economics and a Master’s of Science degree in Real Estate Appraisal and Investment Analysis, both from the University of Wisconsin- Madison. She is a real estate broker, certified general appraiser and a licensed real property assessor.
Is a business background required and how much work experience should a candidate have?In general, our MBA students in real estate have 4-5 years of professional work experience; the Wisconsin MBA requires a minimum of two years. Some students come from real estate or finance related functions. But just as real estate is a multi-faceted industry, our students come from many backgrounds including economics, engineering and law, even politics.
What I think is more important than a specific type of past training, is life experience. We believe that the real-life experience that every student brings into the classroom is very important. Our students come to Wisconsin with strengths along different dimensions, and through our program round out their skill set in real estate.
What GMAT or GRE score is needed?
A Graduate Management Admissions Test (GMAT) score taken within the past five years is required. The GRE may be accepted, on a case by case basis, in lieu of the GMAT. The real estate program is very competitive with average GMAT scores in the upper 600s, but the range for individual students is broad. We look beyond test scores to a candidate's whole application when making our admissions decisions. However, we do give particular attention to the quantitative dimension of the score. Familiarity with quantitative concepts-business ratios and balance sheet basics-is a good foundation to have. While real estate may be a relationship driven business, it's a practical, numbers driven business too.
What else do you look for in a candidate?
I think, most of all, the thread that connects the most successful practitioners in real estate is passion for the craft. That passion can manifest itself in different ways. For some, it starts as an interest in construction, how things get built. For others, it's a consciousness of the built environment or an appreciation of how development can affect a neighborhood or community. For still others, it is the realization that real estate investment can be both tangible and profitable. I think it's important for MBA candidates to be aware of their own journey to this point and to be able to articulate their unique passion for real estate.
What career options are available for graduates with an MBA in real estate?
The Wisconsin MBA in Real Estate is designed to challenge our students to reach their potential as talented, passionate and socially responsible leaders in real estate. Through the exceptional breadth and depth of our curriculum, access to world-class faculty and practitioners, and our global alumni and industry connections, our students are uniquely prepared for their careers and to make their mark on the urban landscape. Graduates commonly follow five basic career paths: development, lending and financing, asset and portfolio management, advisory services, and economic development and public policy. They also have access to a wide variety of resources to support them during the job placement process.
I have seen an increasing number of opportunities available to our students, even as the challenges to the economy continue. Real estate is a fundamental part of the economy; everybody needs it. Trends in population growth indicate an expanding need for both residential and commercial space. Even if population growth stopped, buildings age and need replacing, technology changes and facilities need upgrading. Real estate as an industry is remarkably resilient.
What's the best way to find out more about the Wisconsin MBA in Real Estate?
Come to campus! We're available Tuesdays and Thursdays during the fall semester to host prospective students. Sign up online for a day on our campus in Madison which includes a visit to a class, lunch with a current MBA student, and interviews with me and with the admissions office for the Wisconsin MBA. I think it's a fantastic opportunity to see our beautiful campus in person and to help us get to know our candidates better. But if coming to Madison isn't possible, I am happy to talk with prospective students over the phone or I can connect candidates with one of our real estate alumni in their area. We have some of the most active and engaged alumni in the industry who are amazing ambassadors for our program.
When should candidates apply?
We are taking applications now for the Fall 2012 intake. Wisconsin offers four application rounds; the first round deadline is November 4th. Candidates can visit the Wisconsin MBA Admission web page for dates and more information on the application process. While we look for the best candidates throughout the process, I would encourage candidates in real estate to apply in the first two rounds.
The decision to pursue an advanced degree in real estate is a personal one, and the reasons vary widely. What the Wisconsin MBA in Real Estate offers is this: the foundation in business of an MBA and the specialized focus of a master's degree in real estate. The innovative and top-ranked program at Wisconsin is an in-depth real estate graduate education experience you won't get anywhere else.
Contact us today:
Sharon McCabe
Associate Director of Recruiting and Career Services.
Phone: 608/890-2493
Email: smccabe@bus.wisc.edu
Sharon L. McCabe is an associate director within the Graaskamp Center for Real Estate and a faculty associate in the Real Estate and Urban Land Economics Department, both in the University of Wisconsin-Madison School of Business. Over the last ten years, Sharon has taught several different classes at both the graduate and undergraduate level. Sharon also is actively involved in the recruitment, retention and placement of the real estate MBAs in the program.
Sharon has spent over 20 years in the real estate industry as a market analyst, appraiser, assessor and instructor. She has experience valuing all types of commercial properties including shopping centers, hotels, office buildings and both market-rate and subsidized apartment buildings. As a commercial assessor for the city of Madison, she was responsible for valuing over 1,000 properties worth over $1 Billion dollars for ad valorem taxation purposes.
Sharon has a Bachelor’s of Science degree in Urban Land Economics and a Master’s of Science degree in Real Estate Appraisal and Investment Analysis, both from the University of Wisconsin- Madison. She is a real estate broker, certified general appraiser and a licensed real property assessor.
Wednesday, October 5, 2011
Innovator award recipient Michael Ashner shares career insights with students
As part of our Meet Our Current Students series, first-year real estate MBA student Jordan Denzer reports on the fall presentation of our Innovator Award.
Michael Ashner, Chairman and CEO of Winthrop Realty Trust received the Real Estate Club's Innovator Award at its first official meeting of the Fall 2011 semester on September 23rd at the Pyle Center. Truly an innovator in the real estate industry, Ashner was chosen for the award for founding the first ever group of tender offers for publically traded real estate companies.
Serving as the Chairman and Chief Executive Officer of Winthrop Realty Trust since 2004, Ashner's company acquired over $12 billion of real estate, including 85,000 apartment units, 50 million square feet of office, retail, and industrial assets and 1,000 hotel rooms. Ashner also served as the Chairman and Chief Executive Officer of Winthrop Realty Partners, L.P., a vertically integrated property management firm, since 1996. Winthrop Realty Partners has managed more than 500 limited partnerships, of which in excess of 50 were publicly reporting with over 100,000 investors, as well as five publicly traded REITs.
Graaskamp Center Executive Director Michael Brennan began the evening's discussion by citing Alexis de Tocqueville's statement, "we bear the mark of our origins" and asked Ashner to discuss his roots and his career progression to where he is today. Ashner began by saying that after he received his undergraduate degree in philosophy from Cornell, he quickly "realized a need to eat and to have shelter," so he decided to pursue his JD at the University of Miami.
Ashner initially worked as an attorney in corporate securities, where he learned about REITs and real estate syndication. This experience eventually led him to leave the legal professional and become a buyer of failing real estate syndications. He quickly learned how to value real estate and the nature of how markets ebb and flow. Ashner said he does not believe in efficient-market theory, "Value investing is a proposition in which the investor is betting against the generally held beliefs of other investors, as indicated by their actions in the market. If you think where you are is correct, and you've done the valuation, then make the bet."
He also discussed the difficulties in the valuation effort, stating that valuations will always be wrong because no one can accurately forecast value. Despite all number crunching and scenario analyses, "if a butterfly burps in China, then your Argus evaluation is going to be wrong."
Ashner's candor and insight was both captivating and instructional for students and staff alike. The Real Estate Club thoroughly enjoyed his visit and we are proud to have been able to present him with the Innovator Award.
The Innovator Series Award was conceived from the paper entitled "The Wisconsin Program in Real Estate and Urban Land Economics: A Century of Tradition and Innovation," written by Stephen Malpezzi, Chair of the Real Estate Department. The paper's central theme is that a rich history cannot be established without continually implementing innovation. Previous recipients of the award include Nicholas Billotti of Turner Construction, Laurence Geller of Strategic Hotels and Resorts, David Brain of Entertainment Properties Trust and Hersch Klaff of Klaff Realty.
Jordan Denzer is a first-year MBA student in the James A. Graaskamp Center for Real Estate. Jordan arrived in Madison from Dallas, where he previously worked in the benefits administration field for CONEXIS. He obtained his BBA in International Business from Stephen F. Austin State University.
Michael Ashner, Chairman and CEO of Winthrop Realty Trust received the Real Estate Club's Innovator Award at its first official meeting of the Fall 2011 semester on September 23rd at the Pyle Center. Truly an innovator in the real estate industry, Ashner was chosen for the award for founding the first ever group of tender offers for publically traded real estate companies.Serving as the Chairman and Chief Executive Officer of Winthrop Realty Trust since 2004, Ashner's company acquired over $12 billion of real estate, including 85,000 apartment units, 50 million square feet of office, retail, and industrial assets and 1,000 hotel rooms. Ashner also served as the Chairman and Chief Executive Officer of Winthrop Realty Partners, L.P., a vertically integrated property management firm, since 1996. Winthrop Realty Partners has managed more than 500 limited partnerships, of which in excess of 50 were publicly reporting with over 100,000 investors, as well as five publicly traded REITs.
Graaskamp Center Executive Director Michael Brennan began the evening's discussion by citing Alexis de Tocqueville's statement, "we bear the mark of our origins" and asked Ashner to discuss his roots and his career progression to where he is today. Ashner began by saying that after he received his undergraduate degree in philosophy from Cornell, he quickly "realized a need to eat and to have shelter," so he decided to pursue his JD at the University of Miami.
Ashner initially worked as an attorney in corporate securities, where he learned about REITs and real estate syndication. This experience eventually led him to leave the legal professional and become a buyer of failing real estate syndications. He quickly learned how to value real estate and the nature of how markets ebb and flow. Ashner said he does not believe in efficient-market theory, "Value investing is a proposition in which the investor is betting against the generally held beliefs of other investors, as indicated by their actions in the market. If you think where you are is correct, and you've done the valuation, then make the bet."
He also discussed the difficulties in the valuation effort, stating that valuations will always be wrong because no one can accurately forecast value. Despite all number crunching and scenario analyses, "if a butterfly burps in China, then your Argus evaluation is going to be wrong."
Ashner's candor and insight was both captivating and instructional for students and staff alike. The Real Estate Club thoroughly enjoyed his visit and we are proud to have been able to present him with the Innovator Award.
The Innovator Series Award was conceived from the paper entitled "The Wisconsin Program in Real Estate and Urban Land Economics: A Century of Tradition and Innovation," written by Stephen Malpezzi, Chair of the Real Estate Department. The paper's central theme is that a rich history cannot be established without continually implementing innovation. Previous recipients of the award include Nicholas Billotti of Turner Construction, Laurence Geller of Strategic Hotels and Resorts, David Brain of Entertainment Properties Trust and Hersch Klaff of Klaff Realty.
Jordan Denzer is a first-year MBA student in the James A. Graaskamp Center for Real Estate. Jordan arrived in Madison from Dallas, where he previously worked in the benefits administration field for CONEXIS. He obtained his BBA in International Business from Stephen F. Austin State University.
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