MIT Reports to the President 1996-97


The Center for Real Estate (MIT/CRE) was founded in 1984. The mission of the center is to improve the quality of the built environment through education and research and by facilitating communication among members of the real estate industry worldwide. To this end, it carries out research and teaching programs in the field of real estate development, investment, and management. It also provides a forum for the exchange of information and the discussion of issues by real estate professionals from around the world. The center's principal activities include an 11-month professional degree program leading to a Master of Science in Real Estate Development and a research agenda of issues relating to the planning, development and management of real estate, including its financial performance.


Thirty-five members of the twelfth class of MIT/CRE graduates received their SM degrees in Real Estate Development in September, 1996. Another student completed his thesis and received his degree in February, 1997. The 33 members of the incoming Class of 1998, which includes three joint degree candidates, were selected from a somewhat smaller than usual although still strong applicant pool in March. The new class of ten women and 23 men includes four international students and two others who have worked abroad for significant lengths of time. Although the average age of class members is still 29 years, the class is more experienced than usual, with nine members who have ten or more years experience in one or another aspect of the real estate industry.

Although there were no major changes to core courses this year, course content continues to evolve as the real estate industry changes. For example, the reader for course 11.432 Real Estate Capital Markets, taught by Assistant Professor Timothy J. Riddiough, has been almost completely revised each of the three years since the course was established as the role of the public markets in providing capital to real estate becomes more established.


The Center hosted two visiting scholars this year. Professor of Real Estate Finance, Dennis Capozza, on sabbatical from the University of Michigan School of Business, spent six weeks at the Center during the fall term. He presented his recent work on the value of focus in real estate enterprises in a seminar for faculty and graduate students at the end of October. Henry Pollakowski, a housing economist and editor of the Journal of Housing Economics, has been in residence since September. His research on the effects of rent decontrol in New York City and the Boston area provided material for a cover story in the New York Times Sunday magazine in June. The findings of the New York research are published as a Center working paper.

The Center published three working papers, all co-authored by Assistant Professor Riddiough, in addition to the one mentioned above by Professor Pollakowski. Professor Riddiough's work focused on various aspects of commercial mortgage backed securities. One paper concerned the impact on retail centers of financing debt through the public markets; a second study compared the risks associated with real estate debt securities and bonds; and a third investigated the effects of a lack of reliable asset price information on the trading of real estate debt securities.

Sandra Lambert, a Lecturer in the Department of Urban Studies and Planning continues her research on the management of corporate real estate. Two reports are due out later this year: one on how leading real estate practitioners are providing corporate real estate services; and another on how companies surmount the challenges of managing real estate globally. Both reports are co-authored by Jean Poteete, a graduate of the MSRED program. The "CRE 2000" project is sponsored by the Industrial Development Research Council and Foundation.


The twelfth summer of professional development courses brought more than 400 attendees to campus in June and July of 1996, a slight increase over the previous summer. Four of the seven courses were filled to capacity and had wait lists. A new course on due diligence and building systems, presented by John Macomber, Lecturer in the Department of Civil and Environmental Engineering, was particularly in demand. Demand for the Center's 1997 Summer Institute courses continues strong. Enrollment by the end of June equaled total enrollment for 1996. The center scheduled an extra section of Fundamentals of Real Estate Finance, taught by W. Tod McGrath, Lecturer in the Department of Urban Studies and Planning, to run in August to accommodate the overflow. That course has been a staple offering which increases in popularity when the real estate cycle is in the ascendant, as now.


Income from membership held virtually steady as the center closed the year with 80 supporting members (including ten international members). With leadership from Blake Eagle, Chairman, the center added 12 new members but lost 20 as the ten Epoch Foundation firms (Taiwan-based corporations with real estate interests who had joined the center via the ILP) withdrew from membership. In addition to annual fees, many members supported the center in non-financial ways by providing case study sites, lecturing in classes and in the Lunchbox Lecture series, and supporting student thesis work. This year, Robert Danziger, retiring Chairman of Northland Development, organized and led a well-received occasional seminar called Real Deals, in which guest speakers dissected a specific real estate transaction at length.

The center hosted two members' meetings. The November meeting on "Technology and the Future of Real Estate" featured Brandeis Associate Professor of Economics Adam Jaffe discussing the association of technology and economic growth based on his ground breaking research tracking the location of patent applicants and start-up firms. The morning program included an all-MIT roster of presenters who looked twenty years down the road and, based on their current research, projected likely developments in the areas of computers and telecommunications, building technology, logistics and inventory management, and organizational structure, all topics of some interest to the real estate industry as it thinks about space needs in the future. The May meeting focused on the hot topic of the securitization of real estate assets and asked the question, "Are the Public Markets Winning the Capital Race?" The evening speaker, G.Y. Billard Professor of Finance Stewart C. Myers, explained his theory of why companies go public and opined that it probably didn't make sense for much real estate to be publicly held. The morning speakers all opted for the alternate position, holding for a variety of reasons, that securitization, whether as equity or debt, was a growing and logical trend for real estate assets. Three of the speakers were from the securities industry, all of them leaders in the development of the new real estate equity and debt instruments. The fourth speaker, Assistant Professor Riddiough, cautioned that what makes sense in a growth cycle may have serious flaws in a real estate contraction, though he too believes the public markets will continue to be a growing source of capital for the industry.


Patricia Brady, MIT MSRED '88, Associate Director of the Center, accepted a position as Team Leader for MIT's Human Resource Practices Reengineering Team, in March. She had been working with the team on a part-time basis throughout the year. Her successor as Associate Director is Kathleen C. MacNeil, also MIT MSRED '88. Ms. MacNeil was formerly a project manager for Macomber Development Associates and for the Massachusetts Water Resources Authority. She is responsible for operations of the center, career services, and alumni relations.

Information about center programs and activities is published on the Web ( This is a growing source of inquiries from the public about the MSRED program, professional development courses, and working papers.

William C. Wheaton

MIT Reports to the President 1996-97