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CRER Vol. 05 (2007)

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https://hdl.handle.net/1813/70541

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    Cover
    (2007-05-01)
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    A Critical Assessment of the Traditional Residential Real Estate Broker Commission Rate Structure (Unabridged)
    Nadel, Mark S. (2007-05-01)
    While real estate brokers have long set their fee as a straight percentage of a home’s sale price, this formula is an anomaly and a primary reason why such fees may be inflated by more than $30 billion annually. Although competitive pressures ordinarily force an industry’s fee structure to reflect its costs, real estate broker commissions are strangely unrelated to either the quantity or quality of the service rendered or even to the value provided. Rather, this fee has been based solely on the price of the home. (It is as if tax preparers set their fee as a flat percentage of a client’s gross income, irrespective of how difficult the return was to prepare or how much their efforts saved the taxpayer). Oddly, not only is there no evidence that it is any more costly to sell higher-priced homes than median-priced properties, but it is possible that the opposite may be true! Furthermore, the straight percentage fee formula creates little incentive for real estate agents to provide home buyers or sellers with additional value.
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    Existing Buildings: It’s Easier Than You Think to Green the Triple Bottom Line
    Pitts, Jessica; Lord, Mychele R. (2007-07-01)
    This paper addresses the application of green practices in existing buildings from a triple bottom line perspective. It describes the most widely used benchmark for assessing green practices, the U.S. Green Building Council’s LEED Rating System, and provides a “road map” for pursuing LEED certification. It concludes with a consideration of the triple bottom line, highlighting the economic, environmental, and social benefits of implementing green practices in existing buildings. The broad umbrella of green practices includes a wide range of applications. It encompasses developing high-performance buildings utilizing cutting edge technology to implementing management strategies in existing buildings that result in improvements to the economic, environmental, and social bottom lines—the triple bottom line. As the built environment of cities is largely old construction and not “green” by design, the benefits of green buildings remain largely untapped. It would not be practical to tear down all existing buildings and erect in their places high-performance structures. However, that does not mean the advantages of green practices remain outside the grasp of any real estate owner. By taking a broader, triple bottom line approach to managing existing buildings, building owners acknowledge the interconnections between building performance, environmental impacts, and tenant health and well-being. While many benefits of utilizing green practices in existing buildings are easily identifiable in terms of economic gains, ignoring less tangible benefits such as indoor air quality and thermal comfort creates a barrier in realizing a building’s maximum potential. The U.S. Green Building Council’s LEED (Leadership in Energy and Environmental Design) Rating System for Existing Buildings provides a comprehensive approach to building evaluation which incorporates the economic, environmental, and social bottom lines. This paper details how green practices affect the triple bottom line through case studies and an analysis of current literature.
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    The Future of Limited Equity Cooperatives
    Perkins, Kristin (2007-01-01)
    Limited Equity Cooperatives (LECs) are a form of cooperative housing that is price restricted, often created initially through government construction or mortgage interest subsidies. Affordability is maintained in perpetuity by capping the transfer value of cooperative shares to limit the equity that owners can extract from their units. As a type of collective ownership, LECs enable homeownership without the risk of debt financing or the responsibility of maintenance. Cooperative members receive the same tax advantages as traditional homeowners, assessed on shares of the cooperative rather than a single unit. The restriction on share resale values keeps LECs affordable to multiple generations of purchasers and enables renters to become homeowners without having to qualify for traditional financing. LECs provide these benefits while spreading the risk and cost of homeownership across many shareholders (Saegert and Benitez 2003). Nearly 16 million U.S. households are severely cost burdened (spending more than 50 percent of their income on housing), a number that increased by two million between 2001 and 2004 (Joint Center for Housing Studies 2006). Neither the federal government nor the private sector has implemented an effective solution to the affordability crisis. By incorporating LECs into federal housing policy, an opportunity exists to ease the cost-burden of homeownership for low- and moderate-income households, promote mixed-income housing, and increase community engagement and civic capacity. LECs offer an alternative to market rate and subsidized housing, but are not appropriate for every population or every location.
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    Private Equity Goes Retail
    Kennedy, Richard; Baker, Richard (2007-07-01)
    [Excerpt] The past few years have brought record-setting merger and acquisition activity in just about every industry across the board. Private equity firms, known for their pioneering efforts in creating exceptional returns, have been the most active investors in this frenzy. Due to increased competition with hedge funds and institutional investors, private equity shops have been pushed to search high and low in order to meet investor expectations. So while creativity with respect to deal structuring and sourcing has become essential for survival in the private equity business, there has also been a natural progression towards more complicated and risky transactions. The retail sector, an industry segment originally seen as risky territory, has increasingly come under the spotlight during this phenomenon. Ripe with a number of struggling public companies—most of which have significant real estate holdings—it is no surprise that private equity has shown a greater interest in this sector.
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    Workforce Housing in New York City: A Case Study of Urban American, LLC
    Wilson, Rachel (2007-07-01)
    The challenging task of providing high-quality workforce housing is further complicated in a rent-stabilized housing market such as New York City. Socially conscious, fiscally responsible landlords must conduct major capital improvements and apartment maintenance with an eye toward creating a safe and attractive living environment while also meeting investors’ return expectations. How does a for-profit company add value to its portfolio while managing to keep rents affordable? This case study of Urban American, LLC, examines how one company’s operational model works within rent stabilization laws to create healthy returns and reinvigorate the workforce housing stock in and around New York City. The author would like to thank Urban American, LLC, and especially James Eisenberg, Joshua Eisenberg, Philip Eisenberg, Ann Heath, and Frost Travis for their guidance and goodwill during the course of preparing this case study. Any errors of fact or interpretation are the author’s alone.
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    More Miscellaneous Frontmatter
    (2007-05-01)
    Advisory Board; Student Collaboration Initiative; The ING CLARION Most Outstanding Article Award Cornell Real Estate Review; AREC; Cornell Real Estate Council
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    2007 ULI Hines Student Urban Design Competition.
    Chua, Ronald; Day, Stacy; MacLeod, Matthew; Nelson, Andrea; Stecyk, Laryssa (2007-05-01)
    Cornell fielded five entries in 2007 Urban Land Institute Gerald D. Hines Student Urban Design Competition, which takes place each year over 10 days in January, just as students are returning from winter break. Now in its fifth year, the competition aims to strengthen the interdisciplinary ties between business, architecture, planning, and landscape architecture. Each team consists of five graduate students from at least three distinct disciplines, and draws upon their combined talents to produce schematic designs, redevelopment strategies, and financial analyses to solve a real-life urban design problem.
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    Miscellaneous Frontmatter
    Editorial Board, Cornell Real Estate Review (2007-07-01)
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    Executive Profile: Bill Sanders
    Editorial Board, Cornell Real Estate Review; Sanders, Bill (2007-07-01)
    [Excerpt] William “Bill” Sanders is renowned as one of the greatest innovators in the world of real estate finance. Over the last 40 years, Mr. Sanders has been instrumental in the creation and operation of some of the largest and most successful real estate ventures ever undertaken. He has been described as the ‘Warren Buffett of real estate’ and is considered to be one of the most influential real estate strategists in the country. Mr. Sanders is both a member of the Cornell University Board of Trustees and the Cornell Real Estate Advisory Board.