Thesis Research
2012 Theses
Following are a selection of theses abstracts by members of the Class of 2012. Alums and Partners, join MITREX (The MIT Real Estate Exchange) to download complete theses. For non MITREX members, theses can be purchased from the MIT Libraries.
Application of the Design Structure Matrix (DSM) to the Real Estate Development Process using Modular Construction Methods
Steven V. Bonelli
Adrian M. Gonzalez Guerra
Abstract
Determinants of the Spatial Dynamics of Housing Prices in Chengdu, China, 2005 – 2010
Jin Chen
Abstract
Examining Liquidity in Non-Controlling Joint Venture Partnership Interests at the Asset Level
Matthew DePucchio
Abstract
The Dodd-Frank Act: Impact on Real Estate Equity Investment Entities
Michael DiMinico
John Edward Lubitz
Abstract
The Dodd Frank Act: How Will It Affect the Real Estate Securitization Market
Paul C. Grayson
Kelly G. Frazier
Abstract
Organizational Structure in the Hospitality Industry: A Comparative Analysis of Hotel Real Estate Investment Trusts (REITs) and Hotel C-Corporations
Purva Gujar
Abstract
Back to the City: Differences in Economic and Investment Performances between Downtowns and Suburbs
Inae Hwang
Abstract
Risk and Return in Institutional Commercial Real Estate: A Fresh Look with New Data
Ryan Hunter Jones
Abstract
Growing Value Organically; Sustainable Real Estate Development and Long Term Value Creation in Rural Agricultural Communities on the North Shore of Oahu, Hawaii
Gordon Karau
Abstract
Beyond Real Estate: Examining Global Real Asset Allocation Frameworks for Institutional Investors
Xiangyu Li
Abstract
Not Just About the Money: Managing Beyond Extrinsic Rewards to Thrive in the Real Estate Industry
Edwin En-Wei Liang
Abstract
Real Estate Development for 21st Century Industry Cluster Projects – Concepts, Products, and Strategies
Ajayprasad Padmaprasad
Abstract
Corporate Portfolio Management within Japanese Diversified Trading & Investment Companies - What Role Does Real Estate Play?
Takanori Ono
Abstract
Distressed Conversions
Canan Ceylan Safar
Daniel Pollard
Abstract
The Potential Use of Land Readjustment as an Urban Redevelopment Strategy in the United States: Assessing Net Economic Value
Melissa Schrock
Abstract
GHOST IN THE SHELL
Econometric Forecast of Singapore's Office Market and Where is Architect in Financial Time
Aoran Alex Sun
Abstract
Feasibility, Benefits And Challenges Of Modular Construction In High Rise Development In The United States: A Developer’s Perspective
Sri Velamati
Abstract
Recognition of Business Oportuniteis for Chinese Private Investors in U.S. Real Estate Market
Ya Wang
Abstract
The Market of Medical Office Buildings
Yu-Hua Wei
Abstract
NYC Property Tax Exemption Program: Existing Policies and Future Planning
Jenny Chiani Wu
Abstract
Application of the Design Structure Matrix (DSM) to the Real Estate Development Process using Modular Construction Methods
Steven V. Bonelli
Adrian M. Gonzalez Guerra
Advisor: Steven D. Eppinger, Professor of Management Science and Innovation
Real estate development (RED) has traditionally been a very dynamic business, where real estate developers strive to turn an idea into a real asset, by delivering a quality project on time and on budget. In recent years, Modular Construction Methods (MCM) has arisen as an innovative solution to commercial RED projects that require higher levels of the three aforementioned factors, with a special emphasis placed on time.
The purpose of our thesis is to explain MCM and its impact on RED by analyzing the interdependent relationships between the different tasks performed during the course of a development. We have accomplished this by using the Design Structure Matrix (DSM), a systems engineering tool, to map out the dependencies between development tasks in a graphical manner.
To develop our DSM model for an RED process that uses MCM we conducted interviews with the senior management at RJ Finlay, a New Hampshire based full service real estate firm and Keiser Industries, a modular manufacturing company that operates in Maine and is owned by RJ Finlay.
To fully understand the real application of the MCM process to RED, we met with the general contractor, lead architect and project management team for 30 Haven, a commercial RED that uses MCM. 30 Haven is located in Reading, Massachusetts and has been co-developed through an integrated project delivery (IPD) process by RJ Finlay and Oaktree development, using an in-house general contractor and Keiser Industries as its modular manufacturer. Our interviews occurred weeks before the project was completed in the summer of 2012. This allowed us to interview the involved parties about the whole process from inception to construction completion. This helped us further understand the actual problems a RED process using MCM can face throughout the preconstruction and construction processes.
We then developed a DSM that showcases the different stages that a RED process using MCM have to go through and the planned and unplanned iterative processes for each stage. Planned iterations are feedback loops between tasks that are meant to rework tasks that forcibly need it, while unplanned iterations reflect feedback loops that occur because of unexpected events.
Our thesis has focused on proposing proactive solutions to the unexpected events (referred to as “failure modes”) a RED process using MCM can face, by either eliminating them or minimizing their likelihood and impact. The DSM helped facilitate the development of both a normative model and an optimal one, where our solutions for the unplanned iterations were applied. We complemented our findings with a hypothetical financial model that uses the normative and optimal DSM models to show the difference between both in terms of the returns, time and cost for a generic multifamily RED that uses MCM.
Determinants of the Spatial Dynamics of Housing Prices in Chengdu, China, 2005 – 2010
Jin Chen
Advisor: David Geltner, Professor of Real Estate Finance, Chair of MSRED Committee
Massachusetts Institute of Technology
Housing unit prices differ among 75 street blocks per time period in Chengdu, China. Housing unit price’s appreciation also moves differently in the 75 street blocks between 2005 and 2010. With solid transaction data acquired from Chengdu Housing Administration Department, two regression models, Level Model and Change Model are exercised to explore two questions: What are determinants of cross-section housing unit price difference and what are determinants of housing unit price movement in time? The findings are consistent with urban economic theory and actual practice in the market. In conjunction with physical attributes and locational features, the thesis found from the Level Model that economic and demographic characteristics, which are representations of urban economic growth, industrial restructuring and demographic transformation, are also significant determinants that have been capitalized into housing unit price at various levels. In a rapid developing city like Chengdu, the thesis found from the Change Model that instead of the change of various factors, inherent locational features and the initial price per street block play significant roles moving unit price upward in both short-term (1-year) and relatively long-term (5-year). Such finding exhibits consistent market anticipation that housing and amenity demand constantly outpace its supply in Chengdu. Additional Level Models defined by unit size reveal differentiated capitalization effects from same group of locational features. The result ties various sizes of units with corresponding housing products. Subsequently it proves that demographic structure is a significant determinant of housing price dynamics. Field trip and interview are conducted to bridge academic analysis with real market. The findings from qualitative research contribute valuable inputs to improve the models. Understanding determinants that are capitalized into price and move price appreciation is useful to household to guide wise investment. The research is also referable to developer who can make sound assessment on developable land with better understanding of its potential value. The more inclusive analysis of spatial housing price dynamics will assist policy maker to establish proper urban policy in the effort to balance urban structure between housing and jobs.
Examining Liquidity in Non-Controlling Joint Venture Partnership Interests at the Asset Level
Matthew DePucchio
Advisor: John Kennedy, Lecturer, Center for Real Estate
Compared to traditional investment options, such as stocks and bonds, direct real estate investments are illiquid. This problem is magnified in joint venture partnerships. Non-managing member partnership interest holders typically do not have a way to dispose of their interest (thereby unlocking any residual value) prior to a capital event at the property level. Even with a forced sale mechanism included in the joint venture agreement (buy/sell agreement, ROFO, etc.), the non-managing member partnership interest holder is disincentived to exercise the option without the expertise to manage the investment. Depending on the long term strategy (buy/hold/sell) of the managing member, the non-managing member partnership interest could remain virtually illiquid over the entire holding period. The thesis will answer whether or not the non-managing member partnership interests can be transferred more efficiently (and, therefore, more fully valued prior to capital event) via specialized investment platform and, if so, what changes will need to be adopted in the market and within partnership agreements to facilitate such transfers. Specifically, this thesis will examine the feasibility of creating and implementing a new, market-creating enterprise that purchases and trades non-managing member partnership interests.
This topic is especially relevant today given the recent turmoil in the private real estate investment market and the prevalence of cash-strapped non-managing member partnership interest investors (institutions as well as individuals) seeking to unlock their wealth, as well as managing members desiring to preserve their ownership in real estate they believe will rebound with the market.
The Dodd-Frank Act: Impact on Real Estate Equity Investment Entities
Michael DiMinico
John Edward Lubitz
Advisor: W. Tod McGrath, Lecturer, Center for Real Estate
On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (The Act), which was developed by Congress in response to the financial crisis of 2008. In this paper we briefly discuss the history of U.S. financial regulation, the events leading up to the Dodd-Frank Act, and the intent of the new regulation. We note key events and industry types that contributed to the financial collapse of 2008. We also identify the provisions within the Act that will impact private and publically traded real estate investment entities and analyze the extent of any such impact. The hypothesis of this paper is that certain real estate investment entities are not systemic to the U.S. financial system and if new regulation designed to reform Wall Street and protect consumers is placing a significant burden on these firms without accomplishing the goals of the Act, then real estate investment entities should not be subject to such regulation.
The analytic approach of this paper is to: 1) identify the provisions within the Act that will impact real estate equity entities (i.e., private real estate private funds and REITs), 2) conduct industry interviews to identify the likely short-term magnitude of the impacts due to new regulation and, 3) offer a conclusion as to whether the Act will have a substantial negative effect on the industry.
In conclusion, with respect to these investment entities, we found that the Dodd-Frank Act has improved transparency to investors through increased disclosures. However, the allencompassing nature of the Act has forced fund managers who were previously exempt from SEC registration to comply with securities regulations regardless of the systemic nature, or lack thereof, of their business practices. While such compliance will not have a substantial negative effect on the industry, we find that the regulation of private real estate funds does not help further the goals of the Dodd-Frank Act.
The Dodd Frank Act: How Will It Affect the Real Estate Securitization Market
Paul C. Grayson
Kelly G. Frazier
Advisor: David Geltner, Professor of Real Estate Finance, Thesis Supervisor
This thesis investigates one of the United States’ most sweeping regulatory responses since the New Deal legislation passed in the 1930’s, the Dodd Frank Act. While the Dodd Frank Act will affect numerous financial markets, this thesis will focus on the implications of this regulation on the real estate securitization market.
To better understand the regulatory response towards real estate securitization, we will clarify some of the key definitions, explain the history of securitization and describe the fundamental issues that led to the real estate securitization boom and subsequent bust as well as its implications on the financial crisis in the late 2000s.
We will then summarize in detail the key provisions in the Dodd Frank Act associated with real estate securitization and describe the framework for which these provisions were formed. In conclusion, we will examine the implications of these provisions and explain our position of how the Dodd Frank Act will not achieve its desired effect on the real estate securitization market as drafted.
Organizational Structure in the Hospitality Industry: A Comparative Analysis of Hotel Real Estate Investment Trusts (REITs) and Hotel C-Corporations
Purva Gujar
Advisor: Stewart C. Myers, Robert C. Merton (1970) Professor of Finance
MIT Sloan School of Management, Massachusetts Institute of Technology
Current legislation has made it possible for real estate investment trusts (REITs) to earn income beyond purely passive sources such as rents from real property or interest from mortgages on real property. As a result, both the number and market capitalization of hotel REITs have substantially increased, and the difference between hotel REITs and hotel C-corporations has narrowed. However, companies such as Starwood Hotels have reverted back to the C-corporation structure. Given these organizational changes and the increasing dominance of hotel REITs, there is a need to analyze hotel REITs and hotel C-corporations in a comparative framework.
Equity REITs and C-corporations have been studied extensively. However, research on various organizational forms in the hospitality industry is somewhat limited. This study attempts to fill this gap by comparing the stock market performance of publicly traded hotel REITs with hotel C-Corporations from 1993 to 2011. Furthermore, the impact of significant events such as mergers and acquisitions and legislative amendments on firms’ stock price are also observed. Finally, detailed case studies of companies that underwent corporate restructuring are conducted. The research objective of this thesis is to examine (a) whether REITs are an efficient organizational structure for the lodging industry; and (b) whether the tax benefits of REITs offset the regulatory constraints they face.
The study infers that REIT acquirers have an advantage in mergers and acquisitions, but in all other situations, the net benefits of REITs are not as clear. On market cap basis, the performance of hotel REITs and hotel C-Corporations was almost identical, however when equally weighted, hotel REITs outperformed their C-Corporation counterparts. In addition, the results show that the REIT returns are highly volatile. On a broad level the hospitality business has two distinct segments – ownership of hotels and management of hotels and the degree of operating flexibility offered is one of the main factors that differentiate REITs from the C-Corporation counterparts. Therefore, this study concludes that the choice of corporate structure depends greatly on a firm’s business strategy.
Back to the City: Differences in Economic and Investment Performances between Downtowns and Suburbs
Inae Hwang
Advisor: William C. Wheaton, Professor of Economics, Department of Economics
Recently, we have observed significant changes in which corporate offices and residential buildings have been relocated from the suburbs back into the city. Does the observation mean that there is a real economic movement back into the cities by firms or households? If there is any movement, how does this trend drive any changes in the commercial real estate properties? Does it significantly affect the performance of properties in the cities as opposed to the other areas? Does the performance of the properties in the city exert any influence on the investors who prefer commercial real estates in the US metropolitan areas?
This thesis aims to provide answers to the major question on the “back to the city” movement and its influence on real estate markets. The answers are summarized as five major conclusions. First, the result of this study clearly points out that there is the “back to the city” movement although the change has happened only in the Urban Cores (UC) not the entire Metropolitan Statistical Area (MSA). Second, the economic performances between UC and MSA maintain a close link with each other. However, the volatility of the office net rental rate is much less in UC while the change in gross rental growth is almost same between UC and MSA. The UC rental growth of the multifamily is a little less volatile than the MSA growth. Third, the investment performances in MSA closely relates with the capitalization rate of UC. While the level of cap rates of UC offices is more volatile, the UC cap rate of apartments is more stable than the MSA rate. Fourth, the effects of population and employment on the real estate market enable the research to understand the current pricing behaviors. The difference in population and employment between UC and MSA explains the disparity in investment performances of the two areas. However, while the MSA rental growth explains the movements in the cap rate of MSA in accordance with the “rational” pricing, the effect of UC rental growth rates on the cap rate doesn’t match with the pricing model, indicating that the rental growth rate of UC empirically leads to increases in the cap rate of the area. The nature of these outcomes offers that the UC market is not explicable by the “rational” pricing model. The result also indicates that the difference in rental growth rates reveals the positive relation with the gap in cap rates, which is complete opposite to the “rational” investors’ behavior. Lastly, finding the differences in economic and investment performances between UC and MSA motivates to explore the determinants of the relationship. Although the study experiments the effects of manifold market characteristics, the explanatory variables used in the model do not fully explain the inequality between two specific markets. Thus, it is required to study further the determinants.
Risk and Return in Institutional Commercial Real Estate: A Fresh Look with New Data
Ryan Hunter Jones
Advisor: David Geltner, Professor of Real Estate Finance, Department of Urban Studies and Planning
Commercial Real Estate is a large asset class, increasingly owned by professional investment managers. Investment managers need a thorough understanding of the riskUreturn relationship and tools to adequate implement sound investing, portfolio management and risk management strategies. Equilibrium asset pricing models are tools that identify and quantify the risk factors priced by the capital market and establish risk adjusted longUrun expected returns. This thesis creates portfolios of properties by property type, geographic location and asset size. Total return indices are created for each portfolio to test single factor and multifactor asset pricing models cross-sectionally within the commercial real estate asset class. Historical total return data is used from three sources including: NCREIF; the stock marketUbased FTSE NAREIT PureProperty Index Series; and a novel “synthetic” total return index created by the researcher from the repeat sale transactionUbased Moody’s/RCA CPPI Indices.
The asset pricing model test results for the NCREIF and PureProperty indices show that a substantial amount of the variation in longUrun total return can be explained by a portfolio’s beta with respect to a market index and property specific variables such as property type, location and asset size. The asset pricing model test results for the RCA indices were poor and failed to explain the crossUsection of commercial real estate returns. Thus, it appears that certain parts of the commercial real estate market may be operating without a systematic relationship of risk and return.
Growing Value Organically; Sustainable Real Estate Development and Long Term Value Creation in Rural Agricultural Communities on the North Shore of Oahu, Hawaii
Gordon Karau
Advisor: Dennis Frenchman, Leventhal Professor of Urban Design and Planning
The topics explored in this thesis are first how the value inherent in agriculturally zoned land can be used to support the development of an organic farm and sustainable living demonstration center; and second, whether or not the existence of an organic farm can be considered a high value residential amenity - can access to fresh food, a strong local community, and a lush, bountiful, chemical free environment support 15-20% average yearly growth in real estate values? Or more succinctly, is it possible to ‘grow’ real estate values organically?
Beyond Real Estate: Examining Global Real Asset Allocation Frameworks for Institutional Investors
Xiangyu Li
Advisor: David Geltner, Title: Professor of Real Estate Finance
Real estate is often considered an asset to provide long term value enhancement and to protect institutional investors against inflation risk. It is a typical real asset due to the physical form and fixed geographic location with a steady return. However, real estate has its limitations. Risks associated with it such as lack of trading flexibility, special property management expertise required, and a growth prospect not always applicable towards the short term favor have impeded certain institutional investors from allocating major investment in real estate.
In management of a dynamic investment portfolio, how institutional investors look at certain real assets is the key issue discussed in this thesis. Infrastructure, for instance, which can refer to roll roads, shipping or railways, is a comparable asset with real estate as it demonstrates a term with physical form and stable income stream. There are other types of real assets such as commodity, regulated utilities, and maritime assets which are also studied.
This thesis delves into the dynamic structure of an institutional investment portfolio and targets to explore the following questions: What do real assets contribute to institutional investors’ traditional stock-andbond portfolio? What kinds of correlations do real assets have with typical equity and fix-income assets? How do institutional investors strategize their investment plan by allocating real assets in their global portfolio?
The thesis is designed to study the underlying factors for determining the asset allocation framework from both a qualitative and a quantitative perspective. A quantitative analysis including mean-variance optimization, downside risk, correlations, risk parity and Value at Risk will test out how various asset allocation frameworks position real assets in a portfolio. The study also brings in selected real estate indexes to examine how different parings compare with each other and what impact does illiquidity exhibits on portfolio management. An interview-based research is designed to provide understanding of institutional investors’ perspective on how they apply the theoretical framework to the real world practice and how they strategize the management of investment portfolios.
Not Just About the Money: Managing Beyond Extrinsic Rewards to Thrive in the Real Estate Industry
Edwin En-Wei Liang
Advisor: Thesis Supervisor: Gloria Schuck, Lecturer, Center for Real Estate
Companies in the 21st century are increasingly relying on knowledge workers—people who put to work what they have learned from systematic education as opposed to manual skills—for value creation. Knowledge workers are the link to all of the company’s other investments, managing and processing them to achieve company objectives. But because people, rather than things, are the means of value creation, they are mobile and must exercise choice to join, stay, and work hard for a particular company above all others. A company’s survival in the knowledge-based economy is therefore contingent upon its comparative advantage to attract, retain, and make productive its people.
This thesis seeks to develop an understanding of the motivational systems and strategies available to companies for sustained value-creation, and the extent to which they can be applied to the real estate industry. To accomplish the latter, the thesis conducts a case study on a leading real estate development and investment company. Through interviewing senior managers and high-performing employees, the thesis explores the specific systems and strategies implemented, and their implications for motivating attraction, retention, and superior value creation.
After surveying the relevant literature and analyzing the theory in practice, the thesis concludes that extrinsic rewards and intrinsic motivation are complementary features of highperforming organizations. The case study further suggests that real estate companies need to thoroughly understand their working culture and business model in order to craft tailored motivational strategies that support their high performers and the way they work. Only then can companies move away from merely managing the work of its people to successfully managing for lasting performance.
Real Estate Development for 21st Century Industry Cluster Projects – Concepts, Products, and Strategies
Ajayprasad Padmaprasad
Across the world, a new paradigm of real estate development is emerging that involves large scale developments created to cater to new industries which are based on intellectual capital and human resources. These projects embrace the nature of the industries that they support and act not only as business clusters but also as communities that can attract and/or sustain the high-quality talent essential for the businesses to succeed.
This study endeavors to determine what real estate development model and real estate product can create the most value from these 21st Century industries. It also reviews their underlying economic value drivers, implementation strategies and how such projects integrate with their surrounding cities, as well as the role of urban design, real estate product mix, and technology in these projects. Finally, the study also explores how these cluster projects create value for their stakeholders – through agglomeration, economies of scale in energy systems, product differentiation, and branding.
The concepts identified in the study are applied to three case studies: A large-scale, integrated development in Trivandrum, India that is based on the information technology, research and development, a large-scale high-rise development in Manhattan, and the proposal for a massive, mixed-use development in MIT’s East Campus.
The key outcome of the study is a conceptual model for the development of 21st century industry cluster projects, incorporating the real estate product, the underlying context, the focus industry or industries, and the development strategy. The study also identifies the following areas of focus for 21st Century Industry cluster projects:
- The importance of state-of-the-art concepts in modern workplace design;
- Work-life integration as a necessary amenity to attract the modern knowledge worker;
- Reducing the cost of occupancy through more efficient, large scale energy systems;
- The importance of the cluster not just for its ability to foster collaboration and innovation but as a superior real estate product which can deliver a better value proposition for the developer, tenant, and community alike.
Corporate Portfolio Management within Japanese Diversified Trading & Investment Companies - What Role Does Real Estate Play?
Takanori Ono
Advisor: David Geltner, Professor of Real Estate Finance
This paper discusses possible optimal corporate portfolio composition for Japanese trading and investment firms from stakeholders’ (specifically shareholders and employees) value maximization perspective. Based on the historical returns of diversified business units of 4 subject companies, performances of individual business units and three portfolios (current, tangency, and “suboptimal”) are analyzed and compared. The study suggests adjusting suboptimal portfolio composition based on each business unit’s systematic risk and excess market return relative to its systematic risk and industry average. A firm also needs consideration on how the composition adjustment would affect diversification benefits the firm now enjoys and also on its overall management strategy.
Distressed Conversions
Canan Ceylan Safar
Daniel Pollard
Advisor: William Wheaton, Professor of Economics
This thesis analyzes condominium and apartment development in the downtown Chicago residential market between 1997 and 2011. Specifically, it focuses on developments that converted from apartments to condominiums mainly during the boom years between 1997 and 2007 and developments that converted from condominiums to apartments during the bust years between 2008 and 2011. In the case of the latter, this thesis seeks to determine the reason or reasons that these developments had to convert from condominiums to apartments through a detailed analysis of four such developments. This analysis addresses development drivers including timing, pricing, and location. Additionally, this thesis considers the overall market conditions including supply, demand, economics, and demographics to determine what caused the boom and the ultimate bust of the market and these developments.
The Potential Use of Land Readjustment as an Urban Redevelopment Strategy in the United States: Assessing Net Economic Value
Melissa Schrock
Advisor: Yu-Hung Hong, Visiting Assistant Professor
The land readjustment method of land assembly has an extensive international history, but is virtually unknown to professional planners and real estate developers in the United States. Its potential benefits are many. It promises to produce efficient development patterns, maximize value creation, minimize population displacement, fund the construction of project-related infrastructure and public facilities and protect the rights of property owners. Decades of experience in Japan and Germany, among other countries, have shown land readjustment to be a flexible tool adaptable to many development scenarios and cultural contexts.
As part of a joint effort with planners from the Metropolitan Area Planning Council (MAPC), the regional planning body serving the 101 cities and towns of Metropolitan Boston, this investigation seeks to provide insight into the financial economics of land readjustment and to provide guidance on how the tool could be employed in Massachusetts.
A case is made for the use of land readjustment in urban redevelopment scenarios in Massachusetts. As socio-demographic changes put pressure on our urban cores, the need for strategic redevelopment of urbanized areas will be reinforced. The land readjustment mechanism can simultaneously address the needs of affected communities and the development goals of the municipality in a consensus-based environment. This investigation uses the Four Corners area of Dorchester in Boston as a hypothetical case study for land readjustment in an urban redevelopment context. A comparative financial analysis is produced to contrast the net economic benefits created by a conventional piecemeal land assembly with as-of-right development to those created by a comprehensive land readjustment process through which community development goals are achieved. The investigation concludes with a discussion of the distribution of these economic benefits. The financial analysis tool created by the researcher is provided in the accompanying spreadsheet.
GHOST IN THE SHELL
Econometric Forecast of Singapore's Office Market and Where is Architect in Financial Time
Aoran Alex Sun
Advisor: William C. Wheaton, Professor of Economics
Michael Dennis, Professor of Architecture
Inspired by Singapore's recent effort in building its new skyline in Maria Bay, the thesis intends to employ econometric structural modeling techniques to Singapore's office market for the period from 1975 to 2011. Using data collected from Singapore's Urban Redevelopment Authority, the regression models established by rent, demand and supply equations, dissect the market behavior and project an understanding of the underlying correlation and market mechanism. With which, the thesis forecasts for the next 10 years, in quarterly interval, the movement trajectory of Singapore's office market.
Living and working as activities in this current milieu where role play in the system of power are essential to success was problematized; In the era when social and financial “cloud participation” has given rise to ebay, Facebook, Twitter and Wikipedia, what does work, live and play mean in this current environment where indulgence and consumption for its very own sake is very much part of the cultural lifestyle.
Where is Architect in this financial time? In as much as it is about providing plausible answers, this thesis challenges the existing power system in the Real Estate industry, instead of taking dweller’s spatial appropriation as guerrilla activities, the thesis proposes ways that channels private equity "financial cloud participation" into system of value production. Architectural proposition therefore works in way which turns these underlying power struggle scenarios into formal expression.
Feasibility, Benefits And Challenges Of Modular Construction In High Rise Development In The United States: A Developer’s Perspective
Sri Velamati
Advisor: Christopher Gordon, Lecturer, Center for Real Estate
Modular construction has long been utilized in the construction of residential and many other commercial product types as a means for potentially quicker construction delivery times. Over the past 5 years this construction technique has slowly been introduced into the high rise residential market throughout the world. The additional structural challenges of high rise construction make modular construction in this setting more challenging, but the high construction costs of high rise construction also make any savings in time and hard cost worth consideration. Based on case studies, interviews and financial simulations this thesis will address the design, engineering, sustainability, scheduling, legal and financial considerations a developer would likely consider in adopting modular construction in a high rise project in the United States.
Recognition of Business Oportuniteis for Chinese Private Investors in U.S. Real Estate Market
Ya Wang
Advisor: John Kennedy, Lecturer, Center for Real Estate
Real estate investment is becoming increasingly international. As China’s economy rises as a major force in the world, its continuous growth in fiscal surpluses and accumulation of wealth are making up an expanding segment of the capital market. Traditionally, stateowned enterprises (SOE) and banks were important sources of international real estate investment from China; more recently, increasing high‐net‐worth individuals and private real estate equity funds have merged and are seeking opportunities around the world. This paper identifies the important policy indicators that are pertinent to Chinese private investors’ activities in the U.S. real estate market, examines the investment landscape in both countries, gives particular attention to associated challenges, barriers and risks, and finally explores the potential business opportunities that can be recognized and turned into meaningful strategies.
The Market of Medical Office Buildings
Yu-Hua Wei
Advisor: William C. Wheaton, Professor of Economics
This paper is to define the demand and supply factors and to develop a system to forecast the future development of medical office buildings. At this juncture of time when the health care industry is facing historical changes due to demographic shift, economic challenges and legislative moves, understanding the market mechanism of medical office buildings that provide easy accesses for medical service to aging population, carry lower costs for health care system, and promote the preventive care in medical practices has never been more critical.
Medical office buildings as a real estate product type have unique market and development mechanism. They house medical services and have commercial and retail real estate characteristics. To understand the demand and supply of medical office buildings, health care industry that provide medical services, population consuming medical services and real estate industry develop and manage the physical space need to be observed. By using panel regression to analyze historical economic, population and health care employment data across metropolitan areas, we can establish a system that explains the medical office building market. We further quantify the future medical office building demand based on the forecasted economic data and the model established in this paper.
The future development of medical office buildings is intricately tied to many factors including the trends predicating the scale and speed of the development. Using the historical events as guidelines and the system established, this paper presents positive outcomes for the demand of medical office buildings under different scenarios.
NYC Property Tax Exemption Program: Existing Policies and Future Planning
Jenny Chiani Wu
Advisor: W. Tod McGrath, Lecturer, Center for Real Estate
New York City’s tax expenditures relate to real property tax totaled $4.5 billion in fiscal year 2012. The largest expenditure relates to the “421-‐a” tax exemption program for new multi-‐family residential real estate development, which costs the New Yorkers nearly $1 billion in foregone tax revenue (Office of Tax Policy, FY 2012). The 421-‐a program was originally established in the 1970s to spur new multi-‐family developments. Initially, developers received full tax exemption on the assessed value of the new construction, which then decreased by a phase-‐out schedule where their property taxes were payable in full at the end of benefit period. As the private development market recovered, the city calibrated the program to (i) exclude certain neighborhoods from receiving benefits for strictly market-‐rate development and (ii) to spur affordable housing development by offering benefits of the program if a certain percentage of the total units constructed were affordable.
Despite the success of the strategy in delivering 142,044 residential units in 2012 (Office of Tax Policy, FY 2012), the program has been subjected to increasing scrutiny as New York City’s need for real estate tax revenue has increased. It is unclear how many of these units would have been built without the exemption. Many opponents have argued for the termination of the program because it has not produced benefits commensurate with the huge tax expenditures New York City has made, and that the beneficiaries had been landowners who captured the value of the abatements through higher land prices. As the program approaches its potential renewal in June 15, 2015, it is worthwhile to conduct a detailed analysis of the efficacy and cost of the current program.
The thesis offers a thorough yet intelligible case study of a co-‐op building in Chelsea of how the property taxes would be calculated and the program’s impact on the financial feasibility of the development. Different scenarios are created that follows each of the program reforms to understand the actual value of the property tax exemptions to developers and the ways in which such value is distributed. In the current environment where many New Yorkers find themselves facing a daunting housing market with decreased production and increased demand for affordable units, the program should strengthen its benefits to steer more developers towards creating affordable housing. Alternative financial models based on the case study suggest that the return of an improved negotiable certificate program can make the 421-‐a program a more effective affordable housing incentive without additional cost to the city.
