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CRER Vol. 03 (2004)

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    Miscellaneous Frontmatter
    (2004-06-01)
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    Mold In Buildings: Issues and Outcomes
    Bonebrake, Keegan J. (2004-07-01)
    Executive Summary This article will provide an introduction to mold species most commonly found in buildings, and will present potential health and safety effects of such species. Prevention and reasons behind growth of mold in facilities will be discussed, giving examples of both construction and operation prevention techniques. Finally, remediation guidelines and highlights will be presented. These topics will provide a basic understanding of current mold issues, allowing one to fully engage in discussion of the subsequent sections, where current legal issues involved with mold will be presented along with cases dealing with physical, legal, and financial implications of mold in buildings.
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    118 Fort Road
    Bonebrake, Keegan J.; Zhang, Fuguang; Olsen, C. Bradley (2004-06-01)
    [Excerpt] Background: On July 1, 1998, Jeff O’Ryan, the partner in charge of marketing and leasing for Consolidated Hunter Auctioneers was holding an auction for 118 Fort Road, a 0.6S acre Enterprises, Inc. (“Consolidated”), was reviewing the documents to be submitted for the next day’s bid. Hunter Auctioneers was holding an auction for 118 Fort Road, a 0.6S acre land parcel in the heart of College Center, a small, mixed residential-retail area adjacent to Curtin University (“Curtin”) in Hunter, New York.
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    Is Overbuilding Risk Declining? Evidence From Hotel Markets
    Corgel, John B. (2004-07-01)
    “In the old days, construction statistics and other important data were closely guarded secrets. Developers can now look at competitors’ numbers and tell at a glance if an area is becoming overbuilt.” From a Wall StreetJournal article about U.S. office markets, January 23, 2004.
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    Shopping for B-Malls: Investing for Stable Cash Flows and Value Creation
    Giller, Jeff; Plenge, Steven (2004-07-01)
    Executive Summary• The most compelling B-mall investment strategy is to acquire B-2 malls that have the potential to move up to the B-I level. • High barriers to entry and population demographics in their suburban locations make B-malls attractive. • Secondary malls typically price at below replacement cost. B-grade shopping malls have evolved into an extremely attractive real estate investment product. A B-mall is a regional shopping center that, relative to an A-mall, suffers from advanced age, a secondary or tertiary location, and/or mismanagement. The positive attributes of most B-malls, however, include strong and consistent cash flow production, high leasing demand, exceptional locations, functional and fungible physical plants, and trading values that are below replacement cost. Understanding the attributes that make B-malls successful and then realizing their intrinsic value by designing and executing proper rehabilitation, retenanting or expansion plans will increase cash flow and value for the savvy owner/manager.
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    Land Use Rights in China
    Yuan, Zhenhuan (2004-07-01)
    China is a socialist country and all land in China belongs to Chinese citizens as a whole. Article 10 of the 1982 Constitution upholds the Chinese land policy that reflects the traditional view of socialism - land of the country must be owned by the country (State) or its agricultural Collectives. State-owned enterprises or other organizations, which cannot own land themselves, may use land with permission from the State. With the development of the Chinese economy and increasing economic reforms, the need for both residential and commercial space has grown rapidly. This emerging real estate demand led to an amendment to the Constitution o f the People’s Republic o f China in 1988. Under this amendment, private investors may obtain land use rights from the government and the holder can retransfer these land use rights to a third party subject to certain conditions. This article extensively discusses this important amendment, the current system of land use rights in China and its application to the booming Chinese private real estate market.
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    Letter from the Editors
    Penmetsa, Padma; Lake, Darren Scott (2004-07-01)
    [Excerpt] Dear Readers, Welcome to the latest issue of the Cornell Real Estate Journal. As real estate is a multidisciplinary profession, our goal for the Journal is to expose readers to articles examining a wide range of topics including real estate law, investment strategy, finance, marketing and international real estate.
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    Investing in an Emerging Mortgage Backed Securities Market: The Case of Korea Housing Finance Corporation
    You, Seung-Dong (2004-07-01)
    Korea Housing Finance Corporation (KHFC) is poised to change the structure of the Korean housing finance industry. KHFC is proposing innovative fixed rate long-term loans, which will fulfill an unmet demand among Korean homebuyers, and plans to offer long term Mortgage Backed Securities (MBS) in the bond market. This article provides information on the emerging Korean mortgage market, a framework for establishment of this new Government Sponsored Enterprise (GSE) and characteristics of the KHFC MBS product. First, it presents current conditions of the secondary mortgage market in Korea. Second, it discusses the process and rationale for the establishment of KHFC. And finally, it introduces the KHFC home mortgage loan and the KHFC MBS.
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    Foreword
    Olson, C. Bradley (2004-07-01)
    [Excerpt] Dear friends, alumni and supporters of Cornell’s Program in Real Estate,We are pleased to present Volume 3 of the Cornell Real Estate Journal. Assembled and presented by Executive Editors Padma Penmetsa and Darren Lake (both MPS/RE ’OS candidates), this year’s edition includes articles prepared by students, faculty, alumni and friends of our Program on topics including formation and impacts of the new Korea Housing Finance Corporation; CMBS Fusion transactions; the potential for hotel overbuilding; retail mall investment strategies; land use rights in China and an original case study on investment in private student housing — an exciting range to be sure!
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    CMBS Fusion Transactions: A Tradeoff between Credit Quality and Diversity
    Woo, Baffelly; Mudrick, Jeff; Barve, Neil; Lee, Michael W. (2004-07-01)
    In recent years, fusion transactions have become the dominant structure in CMBS. Simultaneously, credit support has also come down materially. We find that part of the decrease can be attributed to the benefits of experience and the improving property type mix. However, the biggest factor contributing to the declining credit support is the inclusion of large investment-grade quality loans. These large loans reduce the total expected loss to the trust, but could also weaken the degree of diversification. To quantify the tradeoff between diversity and credit quality, we use Monte Carlo simulations to analyze the impact across the capital structure. Our key findings are: • Improvement in credit quality benefits all classes. • Diversification affects different parts of the capital structure differently; it helps the senior-most classes but could hurt equity holders. • Though fusion transactions are less diverse, due to the presence of high quality large-loans, diversification benefits can be achieved through a relatively small number of large loans - typically less than 10. • The resulting tradeoff for fusion transactions is that the improvement in credit quality often outweighs the reduction in diversity. • A fusion transaction with S to 10 investment-grade large loans can effectively lower the required credit support relative to a pure conduit deal despite the reduced diversity.