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CRER Vol. 02 (2003)

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    Timeshare in Mixed Use Projects: Success and Risk Factors
    Dupuis, Jason J.; Patterson, Giles P.; Su, Frank Y. (2003-07-01)
    [Excerpt] Mixed use projects with both a timeshare and hotel component are increasingly popular as the resort development project of choice. Given the many advantages of mixed use, the purpose of this paper is to present five keys to success as well as five risks associated with mixed use. An evaluation of these success and risk factors leads to the conclusion that the synergies and advantages of mixed use far outweigh the risks, which although must be addressed, can be properly accounted for and mitigated. Research pertaining to these keys to success and risk factors are a combination of analysis, insights, and findings obtained from timeshare and hotel industry executives.
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    A Catalog of Responses to September 11
    Heath, Ann Elizabeth (2003-07-01)
    [Excerpt] On September 11, 2001, life as we knew it changed when a terrorist attack took the lives of thousands with the hijacking of four airplanes. Two of those planes were used to destroy the World Trade Center’s Twin Towers. Many changes have taken place since September 11. The events of September 11 have had an impact on the US office market. This paper will focus on changes to corporate real estate strategic planning and changes to urban high-rise office buildings that have emerged as a response to September 11. Corporate strategy changes that will be discussed will focus on decisions made with respect to the geographic location of human capital, new security measures taken, and business continuity strategies which focus on changes to data storage practices. Changes to physical characteristics of high-rise office buildings will be discussed, emphasizing the changes taking place in the future design and construction of buildings due to architectural, structural, and technological changes and changes in the management and operation of buildings. First we will take a look at the overall office market post September 11 and then will focus on the specific changes that have taken place since that time.
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    The Repeal of Rent Control in Malaysia
    Atsumi, Saeko (2003-07-01)
    [Excerpt] Policy Background A newspaper reported that the Federal Government of Malaysia had indicated its intention of repealing the Control of Rent Act 1966 since the beginning of the 1980s (Kathirasen, 1997), when the current prime minister, Mahathir, took over that position after seeing the economic expansion of the 1970s. Throughout the decades of Mahathir era, the Malaysia Incorporated Policy1 has been intensified to achieve competitive and robust economy moving towards globalization, one that emphasizes the productive relationship between private and public sector. The key concept of this policy is to focus on the liberalization of the Malaysian economy, pursuing export-led growth in spite of the rise of protectionism, and to increase the competitiveness of Malaysian products in the global market (Rahman, 1993). Rent control had become inconsistent with this trend including pursuing deregulation, a market economy, and the full exercise of property rights. The fact that control hampered urban redevelopment and underutilized scarce land capital for a long time was considered to be problematic. Thus, repeal of rent control was expected to reactivate flows of land capital by encouraging investment in pursuit of further economic development. In terms of the ethnic problem in Malaysia, putting urban properties mostly owned by ethnic Chinese on the market after the repeal of rent control is supposed to mitigate the ethnic imbalance with Malays. Along with the nation’s policy which ensures Malay participation in the modern sectors of economy, the Federal Government of Malaysia recognized that it was important to mobilize a large amount of assets to realize certain share of Malay ownership of capital (Malaysia Prime Minister’s Department, 1991b).
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    Foreword
    Olson, C. Bradley (2003-07-01)
    [Excerpt] Dear friends, alumni and supporters of Cornell’s Program in Real Estate, We are pleased to present Volume 2 of the Cornell Real Estate Journal. Assembled and presented by Executive Editors Chandan Banerjee and Brook Katzen (both MPS/RE ’04 candidates) you will find articles prepared by students, faculty, and friends of our Program on a wide range of topics and locations. Mixed in with articles dealing with investment opportunities in China, Responses to September 11 and Timeshare in Mixed Use Projects are papers on valuation theory and practice as well as an original case study and student response.
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    Letter from the Editors
    Banerjee, Chandan; Katzen, Brook (2003-07-01)
    [Excerpt] Dear Readers, Welcome to the latest issue of the Cornell Real Estate Journal! Our goal for the Journal is to produce a publication that is a mix of the “state-of-the-art” and the “state-of-the-practice.” We hope that we have been successful in our endeavor.
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    Investment Opportunities in China’s Real Estate Market
    Gong, Jackie Yan; So, Philip Hei Tung (2003-07-01)
    This paper is a comprehensive introduction to China’s real estate market. After briefly reviewing the reforms and macro political and economic environment in China, the paper gives a general overview of the market, and then goes on to discuss the benefits, opportunities, potential problems and risks. After joining the WTO, China will continue the transition to a free and competitive market. Investors, especially international investors, may soon discover exciting investment opportunities in China’s real estate market. For example, the emerging secondary market in real estate financial products and real estate non-performing loans may provide investors lucrative business opportunities. There will be increasing opportunities for investors to benefit from China’s vigorous reforms and rapid expansion of the real estate market. Investors may not choose to invest in China now, but should keep an eye on China’s growing real estate market because China is where the growth will be!
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    Case Study: Blue Heaven Science and Technology Campus
    Olsen, C. Bradley; Kim, Byung Gweon; Kwon, Chul Hwan; Lin, Chun-ju (Vivian); So, Philip Hei Tung (2003-06-01)
    [Excerpt] A regional light rail authority (“Authority”) in a large metropolitan area is involved in major extension of its services and is facing a funding shortage. The Authority has elected to raise additional funds from the sale or joint development of properties immediately adjacent to proposed light rail stations. One site under consideration is a 9.2-acre site adjacent to the Blue Heaven Station on its B-Line. The Authority issued a Request for Proposals (RFP) for development of the site by private developers, to include multi-modal transit facilities, 1,000 parking spaces for transit riders and appropriate related uses. In the RFP, the Authority suggested a price for the site of $8 million and indicated a willingness to consider other proposals such as joint development.
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    Blue Heaven Case Response
    Mings, Brian Maxwell (2003-06-01)
    [Excerpt] The issue at hand regarding The Science and Technology Campus being developed by Blue Heaven Technology Partners, LLC (BHTP) is how to deal with several problems that have arisen since the developer was awarded the exclusive right to negotiate the acquisition and development of the site. These problems significantly change the cost, profitability, and risk profile of the project and need to be analyzed carefully to determine the appropriate course of action. In addition, key questions need to be answered about the initial financing arrangement for the project and whether or not the arrangement was fair and equitable to all parties when it was first negotiated.
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    Real Estate Capitalization Rate Interpretations through the Cycle
    Corgel, John B. (2003-07-01)
    Both the numerator and denominator of real estate capitalization rates may experience different degrees of movement as markets evolve from one phase of the cycle to another. Capitalization rate interpretations become especially difficult surrounding these turning points. The issue takes two forms. First, periods of market transformation create confusion about what cap rate to apply. Opportunities may occur at turning points to introduce substantially different numerator estimates, which results in multiple capitalization rates for the same property and thus compromises the decision rules of modern investment theory. Second, simultaneous changes in its components (i.e., riskfree rate, risk premium and expected growth rate of income) cause capitalization rates to change, sometimes in unpredictable ways. Tracking the directional pattern of capitalization rates requires an understanding of how and why the components change. This article addresses both forms of the issue.
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    Investment Value Depends on Investment Value
    deRoos, Jan A.; Corgel, John B. (2003-07-01)
    Users of discounted-cash flow models for estimating real estate investment values encounter the following problem: the unknown value being estimated depends on inputs to the model that rely on the unknown value. The models, therefore, produce biased estimates of investment value unless iterative or simultaneous solutions are found. The market value literature addresses this problem by invoking simultaneous solutions. Parallel approaches for estimating investment value are hampered by complications resulting from the need to incorporate income tax effects. As shown in this paper, serious estimation bias results from first-run solution models in modern real estate text books and commercially available computer programs. Closed-form solutions for a variety of investment value models are obtainable to remove the estimation bias.