Tag: upenn

• Sam Zell dies at 81

  Sam Zell, the billionaire real estate investor, died this week at the age of 81. That seems young to me. Or maybe I’m just being overly optimistic about life expectancy. This is around the US average.

  Whatever the case, if you work in real estate, you likely know/knew of Sam. In my case, he spent a lot of time at Penn after he permanently endowed the real estate center (under both his name and his late business partner’s name).

  I used to go and listen to him speak at least twice a year, and I would hang off his every word as a young student of real estate. “So wait, how does this all work?”

  It was also at this time that he sold Equity Office to Blackstone for $39 billion (back in 2007, it was the largest private equity deal in history). Sam’s explanation for doing this deal was that Blackstone offered him more than what he thought the portfolio was worth, so he sold it. He took no credit for good market timing.

  If you’ve ever heard Sam speak, you know that he’s incredibly direct. Generally, he also didn’t seem to give a fuck, and was happy being the only person in a Hawaiian shirt among a sea of blue and black suits.

  In fact, he’s largely the reason that, as students, we used to all joke that the richer the speaker, the more funny and honest they would be. “Come on, let’s go to this one. She’s rich.” I guess this is just what happens when you no longer have anything to prove.

  But none of this is to say that he didn’t care. He cared a great deal about the school and about helping young students. And for that, I say: thank you Sam. Thank you for being generous with your time.

  2023.05.19

• Harvard announces new Master in Real Estate degree

  The Harvard Graduate School of Design (GSD) just announced a new 12-month degree called the Master in Real Estate (MRE). Here’s a short excerpt about the program:

  The MRE program is designed to train future practitioners to address new and urgent realities facing the built environment and cities today. Whether undertaken by for-profit businesses, not-for-profit organizations, or public entities, real estate occupies a pivotal role in determining how the places where we live, work, and play are equitable, environmentally sustainable, and appealing, in addition to being productive for the economy.

  The key takeaways are that this is a graduate program being designed for aspiring real estate entrepreneurs and that it will live within Harvard’s Graduate School of Design. So there is an implicit recognition that the world of real estate doesn’t need to run counter to the pedagogical goals of a design school.

  Anyone who went to architecture school will tell you that real estate is often viewed as the “dark side.” Either you commit yourself to the pure world of architecture and design, or you sell out and seek profits in the world of real estate. But I have always considered this to be a false dichotomy.

  Real estate is a fundamental component of how we shape our built environment. And so if one’s ambitions are to improve the built environment — which is something that architecture schools do teach you — why should the delivery vehicle matter? Shouldn’t we be encouraging people to optimize for maximum benefit?

  I completed my undergraduate degree in architecture. But very early on I had the feeling that I was only getting one piece of a larger picture. And so I went to the University of Pennsylvania for graduate school and completed a degree that combined both architecture and real estate. My goal was to figure out a way to combine both passions. Maybe I’d become the next Jonathan Segal.

  Penn was very open to cross-disciplinary studies at the time (this was the mid-2000s), but there was still a gaping divide between the school of design and the business school. Walking across campus meant taking off one hat and putting on another. There wasn’t a lot of overlap.

  After school, I returned to Toronto and started working in development. I then decided to pursue my MBA part-time, which really wasn’t necessary for my career, but was probably driven by some sort of insecurity I felt at Penn. I was the outsider design student (with funny glasses I might add) trying to keep up with Wharton MBAs.

  I went back to the University of Toronto for my MBA and thoroughly enjoyed it. But I still couldn’t understand why there was such little overlap between the design school and the business school when it came to matters of the built environment. The real estate courses at Rotman were also extremely limited at the time.

  So I started talking to faculty members: What would it took to create a joint real estate program that lived somewhere between the design school and the business school? I offered to help and I tried to press upon everyone that this was a gaping void and a huge opportunity. Canada was falling behind in terms of real estate education. It was time to step up.

  The answer I got was generally always twofold: (1) Rotman’s real estate courses were already good enough and (2) it’s pretty hard to start a new program at the University. You have to do a bunch of things, one of which includes finding money. So, sorry.

  Harvard’s new Master in Real Estate degree is the kind of program I had in mind. So I’m happy to see others taking action. And I ultimately think it will be a good thing for our cities.

  If you’d like to apply, you can do that starting this fall.

  2022.05.23

• Surface Summer School at Penn

  

  The University of Pennsylvania Stuart Weitzman School of Design — my alma mater — has just launched a new initiative with Surface Magazine called the Surface Summer School at Penn. A fairly unique partnership between a media company and an accredited university, the goal of the “summer school” is twofold.

  One, it gives Penn students, who might otherwise struggle to find an internship in this climate, something productive and positive to do over the summer. And two, it applies design thinking to the problems of this pandemic.

  Penn students will have the month of June to design a prefabricated COVID-19 testing structure — one that could be rolled out in dense and compact urban centers around the world. A jury will then review the submissions and a winner will be announced by mid-July.

  The jury includes a host of noteworthy architects and designers: Winka Dubbeldam, Dror Benshetrit, Thom Mayne, Yves Béhar, Susan Sellers, Marion Weiss, Ferda Kolatan, Joe Doucet, and others. Starting on June 3rd at 6:30 PM eastern, members of the jury will also start delivering design lectures on Surface’s Instagram.

  I am looking forward to seeing the submissions. Hopefully all of them will be made public.

  Photo by Dyana Wing So on Unsplash

  2020.05.28

• Cities and contagion

  

  The Penn Institute for Urban Research has just launched a new initiative called, Cities and Contagion: Lessons from COVID-19. The inaugural piece is a special edition of its Urban Link publication. But going forward, the initiative is planned to include not only publications, but a resource library, convenings (online and offline, when appropriate), and research projects. The objective is to bring together experts from different disciplines to discuss the impacts of this pandemic on cities, as well as the possible responses going forward. You can find the first set of articles, here. Some of the contributions include, “Agglomeration economies are not going away” (Jessie Handbury) and, “There’s no substitute for cities” (Richard Voith and Susan Wachter). The titles alone should give you a taste of what you can expect from this first publication.

  Photo by Patrick Mueller on Unsplash

  2020.04.27

• An all-women development team

  My good friend Taya Cook (of Urban Capital) and her development partner Sherry Larjani were featured in the New York Times today as a result of their Reina project and their remarkable efforts to gender balance the male-dominated commercial real estate industry. I am thrilled that their work is getting the attention that it deserves.

  Here’s an excerpt:

  That’s because, despite progress in many other professional realms, women remain severely underrepresented in real estate development and investment, particularly in senior roles.

  Women held just 4 percent of senior investment roles at major real estate firms, according to a widely circulated 2011 study, and their numbers have improved only “marginally” since, said the study’s author, Nori Gerardo Lietz, who is a senior lecturer at Harvard Business School and a longtime real estate investor.

  Ms. Lietz reviewed the senior ranks of 82 major real estate investment firms for the study, as well as many more private equity and venture capital firms, and found that women were noticeably absent from the most highly paid, “touch the money” jobs.

  For the full article, click here. And for more on Reina Condos, click here.

  2019.11.12

• Implications of new housing supply

  

  There’s a lot of debate within urbanist circles about whether or not supply alone can solve or at least mitigate housing affordability concerns. Richard Florida and others will say that, while beneficial, increasing supply isn’t the be all end all. We need to be building affordable housing.

  Edward Glaeser, Joseph Gyourko, and others have, on the other hand, argued that middle-income housing is a supply problem and that low-income housing is quite simply a demand-side problem, which could be solved through things like a housing voucher program.

  In other words, the cost of housing isn’t necessarily the problem, it’s the low income levels. One of the benefits of supplementing people’s incomes is that it empowers mobility. People can then move to where there are jobs, as opposed to being tied to a specific neighborhood or city.

  But this debate is arguably just about the extent of the supply benefits. Intuitively, it makes sense to try and match new housing supply with demand and economic growth. But how far can that take us, particularly in high demand and high productivity cities?

  Glaeser (Harvard) and Gyourko (Penn) have a relatively recent paper out called, The Economic Implications of Housing Supply, which looks at, among other things, the “implicit tax” imposed on development as a result of land use restrictions and other supply constraints.

  Here are two excerpts:

  We will argue that the rise in housing wealth is concentrated in the major coastal markets that have high prices relative to minimum production costs, and it is concentrated among the richest members of the older cohorts—that is, on those who already owned homes several decades ago, before binding constraints on new housing construction were imposed.

  But in a democratic system where the rules for building and land use are largely determined by existing homeowners, development projects face a considerable disadvantage, especially since many of the potential beneficiaries of a new project do not have a place to live in the jurisdiction when possibilities for reducing regulation and expanding the supply of housing are debated.

  If you’re interested in this topic (and sufficiently nerdy), you can download a PDF copy of the paper here.

  Photo by chuttersnap on Unsplash

  2019.02.27

• Amazon’s economies of density

  According to Amazon’s recent annual 10-K filing, the company leased and owned (most of their space is leased) about 288,419,000 square feet of space around the world at the end of 2018. Of this number, about 80% is used for “fulfillment, data centers, and other.” Amazon doesn’t break out this line item any further, but GeekWire reckons that a good 3/4 of their real estate is dedicated to their fulfillment warehouses.

  Here’s the full summary of their facilities (from the 10-K filing):

  

  Given that fulfillment is such a large share of their properties, I am most interested in understanding the geography of their warehouses and how that impacts their core value proposition, which is largely all about convenience.

  In April 2017, Jean-François Houde (of Cornell), Peter Newberry (of Penn State), and Katja Seim (of UPenn) published a paper on this very topic called, “Economies of Density in E-Commerce: A Study of Amazon’s Fulfillment Center Network.” There’s also this Knowledge@Wharton podcast on the paper if you’re looking for a quicker listen or read.

  In the early days of online retail, the decision of where to warehouse had meaningful tax implications. Because (in most cases in the US?) you only had to collect sales tax if you had a physical presence in the same location as your purchasers.

  As that changed, it then made more sense to create a broader distribution network and minimize the distance between fulfillment center and purchaser. By 2016, Bloomberg estimated that nearly 78 million Americans lived in a zip code where Amazon offered free same-dame delivery. That number has obviously increased since.

  And in the paper “Economies of Density”, they discovered the following cost savings as a result of Amazon’s growing fulfillment network:

  We find that Amazon saves between $0.17 and $0.47 for every 100-mile reduction in the distance of shipping goods worth $30. In the context of its distribution network expansion, this estimate implies that Amazon has reduced its total shipping cost by over 50% and increased its profit margin by between 5 and 14% since 2006. Separately, we demonstrate that prices on Amazon have fallen by approximately 40% over the same period, suggesting that a significant share of the cost savings have been passed on to consumers.

  The interesting question for real estate people and city builders — which is brought up in the Knowledge@Wharton podcast but is difficult to answer — is whether there are diminishing returns to this “economies of density” phenomenon. In other words, how dense does Amazon’s fulfillment network want to be?

  2019.02.12

• Planning staff reports

  A bunch of people have asked me lately about what they should do if they want to get smarter on land use planning and on the entitlement process for development projects. It was specific to Toronto, but I don’t think my answer is specific to only this city.

  I took a few planning classes in graduate school when I was in the US. But I was more focused on architecture and real estate, and so I did not leave school an expert by any means.

  I learned about the failures of euclidian zoning and about things like the Low-Income Housing Tax Credit, which always seemed like a sensible supply-side tool to get the private sector to invest in affordable housing.

  But what I have found most useful is to just read planning staff reports. These are the responses to actual development proposals and they show you how staff interpret the policies that are in place and how staff apply them to real buildings.

  I may be in the minority in that I actually find these reports interesting. But regardless, they are a great crash course in planning and development approvals and they can help you manage your entitlement risk.

  2018.08.19

• The blue (real estate) bible

  Back when I was in grad school studying real estate, we used to refer to the below book as the “blue bible.” It is a comprehensive look at real estate finance and investments, and also development. But perhaps more importantly, it is written in a way that is clear, direct, and immensely practical to the actual world of real estate.

  

  The reason I mention this today is because the fifth edition is out and my friend Bruce Kirsch is now an author, along with Peter Linneman. Thankfully the cover is still blue, otherwise I might be a little sad and this post wouldn’t make a lot of sense.

  Bruce has an MBA in Real Estate from Wharton (at Penn) and is the founder and CEO of Real Estate Financial Modeling, LLC, which I recommend to absolutely everyone who wants to get better at financial modeling and deal underwriting.

  I have a lot of people who reach out to me on a regular basis and want to ask me about getting into real estate, and in particular, development. I try my best to make time because I was once in their shoes. Usually that means an early morning coffee in Toronto’s PATH.

  My advice is fairly consistent. You have two options. Try and get your foot in the door at a shop or, if you’ve got the gall, go out and try and do it on your own. I have friends who have successfully done the latter with very little in the way of formal real estate training.

  Whatever your decision, knowledge of the industry will obviously serve you well. Oftentimes I’m meeting with design and/or planning professionals who bring a lot to the table, but usually lack the finance and investments knowledge. That’s when I remind them of my story: Don’t screw up the numbers.

  This is also when I suggest taking one of Bruce’s classes. I’ve taken a number of them. Because to learn how to model something in Excel you have to understand how it actually works and Bruce helps you do exactly that. Garbage in, garbage out. That’s how models work.

  But the other thing one should consider doing is picking up a copy of the blue bible. I have a copy sitting on my desk right now and will tell you that it’s a “must read”, whether you’re a designer and just want to learn more about the other side of the business, or you’re an experienced real estate professional.

  For more on the book, click here and then on Textbook at the top. Oh, and Bruce, congratulations on the new book!

  2018.07.22

• ULI Hines Student Competition comes to Toronto

  I was speaking with a Penn (my alma mater) student this evening about career options in development and he mentioned to me that he recently participated in the 2018 ULI Hines Student Competition. He also mentioned that this year’s “study site” is in Toronto. (It’s the BMW Toronto dealership between the West Don Lands and East Harbor.)

  For those of you unfamiliar with the ULI Hines Competition, it’s an annual student competition (now in its 16th year) that encourages collaboration among “future real estate developers and the many allied professions, such as architecture, landscape architecture, historic preservation, engineering, finance, and others.” 

  Each year there is a real life study site and multi-disciplinary teams compete for $50,000. I participated in my 2nd year of graduate architecture school and we received honorable mention. So no $50,000, sadly. But it was a valuable experience and I would recommend it to any student who plans to be involved in the built environment after graduation.

  I am looking forward to seeing what the finalists come up with for this site. I think that the study site being in Toronto – and in particular this location – speaks to the momentum that has developed in this part of the city as a result of the West Don Lands, East Harbor, Sidewalk Toronto, and the various planned infrastructure investments. 

  Here is a copy of this year’s briefing materials.
  Good luck to all of the teams that participated.

  2018.02.16