M.S. IN BUSINESS: REAL ESTATE & URBAN LAND ECONOMICS PROPOSED NEW NAMED OPTION: GLOBAL REAL ESTATE

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2 M.S. IN BUSINESS: REAL ESTATE & URBAN LAND ECONOMICS PROPOSED NEW NAMED OPTION: GLOBAL REAL ESTATE This proposal addresses adding a named option to the major Business: Real Estate and Urban Land Economics for the M.S. degree administered by the Wisconsin School of Business. The named option is Global Real Estate. The program will be referred to as the Global Real Estate Master (GREM). The new named option creates an educational program that complements the current offerings of the Wisconsin School of Business in real estate. THE GREM VISION The best business school students from around the world sharing the same classroom in Madison, learning real estate the Wisconsin way, helping us expand the reach of the Wisconsin values and Wisconsin brand around the world. BACKGROUND The Department of Real Estate and Urban Land Economics at the Wisconsin School of Business has a long tradition of excellence in real estate education. In 2003, the department chose to push the international dimension of its educational programs as a way to enhance its leadership position in real estate education. To date, the department has succeeded in: Expanding the international real estate offerings within the existing degree programs (courses and international field trips). Establishing a visible and respected presence in top academic circles, developing friendships with researchers from the best business schools around the world. Establishing a visible and respected presence in real estate industry and related policy circles around the world. The demand for real estate education continues to grow around the world. The current financial crisis has increased the premium on specialized real estate skills over general finance skills for the development, financing and management of real estate assets. The current trend toward sustainable development recognizes the built environment has a critical component of the sustainability of our societies. At the same time, business schools in the US and abroad have struggled to develop their own real estate programs due to lack of faculty capable of contributing research at the frontier of knowledge while developing relationships with industry and policy leaders. 1

3 The demand for education and the scarcity of faculty provides us with a unique opportunity to move forward in our quest for global leadership in real estate education. We propose to partner with highlyreputable academic institutions around the globe to share our real estate expertise and tradition in return for use of their international brand recognition and access to some of the most highly qualified students around the world. Our research reputation and academic relationships give us an advantage over our competition: our ability to pull together a partnership with the very best international business schools. This partnership translates into the proposal of a program in two steps: all students start the program at one of the designated partner schools; all students finish their education at Wisconsin. International partners recruit and prepare students in general finance and economics plus the basics of real estate finance. All students come to Wisconsin for an intensive semester of real estate training them to the same level of real estate expertise as our current M.B.A. students in real estate. We expect this new program generates a number of benefits. Grow the Wisconsin Real Estate Alumni Association from best in the U.S. to best in the world Improve access to highly qualified students outside the U.S., Leverage the training provided by partner schools, Expand the peer network and cross cultural business exposure of all our students. Expand our geographic reach and international recognition as a center of expertise in real estate. Provide new opportunities for a deeper partnership with high level real estate professionals and leading international real estate organizations. PROGRAM STRUCTURE: THE WISCONSIN SEMESTER Students spend the spring semester at the Wisconsin School of Business. They complete at least 17 credits of real estate training, including A 1 credit intensive course in the week prior to the start of the regular spring semester. This course focuses on introducing the students to the Wisconsin real estate tradition, and providing them with the necessary background to understand global real estate capital flows. Five three credit courses taught during the semester RE715: Real Estate Valuation and Feasibility Analysis, RE720: Real Estate and Urban Economics, RE740: Real Estate Capital Markets, RE750: Commercial Real Estate Development, RE765: Topics in Global Real Estate Markets. A one credit course structured around a field trip to a major US real estate market. 2

4 In addition, the GREM students will participate in applied learning activities outside of the classroom (e.g., conversation about the state of the global real estate markets with guest speakers, group mentoring meetings with industry leaders). We expect these activities to provide structured opportunities for the GREM students to interact with the real estate M.B.A. students. The GREM students will enjoy the benefits of the Real Estate Club, including a regular evening speaker program. The Real Estate Club will provide a natural forum for GREM students to build relationships with students in the other real estate degree programs. This opportunity should prove useful to all students. The courses offered to the GREM students are not new course for the department but they will be adjusted for the GREM program. In particular, the coverage of topics within each course and the choice of topics will be adjusted to acknowledge the global audience of the program. For example, currently RE715 is focused on valuation procedures within the US context. The course will expose students to alternative approaches to property valuation relevant in other countries. The GREM classes will be taught be a combination of faculty members from the department of real estate and urban land economics, senior lecturers and experienced part time lecturers. The allocation of specific members of the department to the teaching of each class will follow similar principles than the allocation of teaching responsibilities for other courses, namely expertise and comparative advantage. For example, we expect RE720, the most theoretical course of the program to be taught by a faculty member; we expect RE750, the most applied course of the program to be taught by a lecturer who has teaching and professional experience of the real estate development process. PROGRAM STRUCTURE: ADMISSION REQUIREMENT A novel feature of the GREM concerns the specific admission requirements. These requirements are critical to our ability to train students to an M.S. level of expertise in one intensive semester. They involve admission to one of our (currently three, possibly up to five) partner schools, and completion of specified preparatory training at one of them. GREM students must have completed a specific set of courses prior to coming to Wisconsin: Economics and Finance: the equivalent of the core M.B.A. first year economics and finance classes here. Real estate finance: the equivalent of the introductory real estate finance class offered in the first semester of the M.B.A. real estate here. We expect most students will obtain the above training by taking part of the M.B.A. program of our partners. We expect some students to join Wisconsin after training within a finance focused specialized master program at a partner school. 3

5 The quality of the students and their training is ensured by the selection of partner schools with the highest credentials. Thus, the quality of each student is assured by two prestigious business schools the partner school chosen by the student and Wisconsin. In particular, the first three partners were selected according to the following list of criteria: Ranked as a true leader in business education across the continent where the school is located (see below for rankings of our partners). International student recruitment of the highest quality with enrollment criteria at least as good ours. Institutional and program accreditations comparable to the Wisconsin School of Business fulltime M.B.A. program. As a first step, we propose to start the program in partnership with three business schools that are ranked number one on their continent. We have secured the cooperation of HEC Paris (Paris, France) has earned international acclaim for its superior programs, groundbreaking research, and outstanding student body. It has been ranked #1 as the best European business school over the last four years by the Financial Times. HKUST Business School (Hong Kong, China) is a dynamic, international research university in relentless pursuit of excellence, leading the advance of science and technology and educating the new generation of front runners for Asia and the world. It ranked #1 in Asia and Australia over the past three years according to The Economist Intelligence Unit. INCAE Business School (San Jose, Cost Rica) is devoted to training and instructing, from a worldwide perspective, individuals capable of successfully holding top management positions in Latin America. It is the #1 ranked business school in Latin America according to Revista América Economía. We may eventually add up to two partners to expand our coverage of the world. WHY THE M.S.? We understand the preference of the graduate school to reserve the M.S. degree for research oriented education rather than professional education. In light of this preference, we initially considered attaching the named option Global Real Estate to the existing M.B.A. in Business: Real Estate and Urban Land Economics. Our colleagues within the school of business and our partners in the GREM pointed out that the M.B.A. is defined at the UW, and recognized around the world, as a degree granted upon completion of an interdisciplinary program that exposes the student to each of the functional areas of business. The GREM program does not fit the definition of an M.B.A. Rather, the GREM is a specialized program focused solely on real estate. As such, it is closer in terms of content and intent to the two M.S. degrees 4

6 we currently offer in the school of business: the M.S. in Actuarial Science and the M.S. in Quantitative Finance. These two business M.S. degrees have been in place for years. More recently, specialized M.S. degrees similar to the GREM in their professional nature have been created within the UW Madison. For example, the M.S. in Biotechnology is directly targeted at working professionals advancing their careers in the field of biotechnology; the website states: Graduates are prepared to lead product development, create new companies or foster policies that will responsibly advance the field. The M.S. in Agro Ecology program aims to train not only researchers but also analysts and educators. The degree admits a professional oriented Public Practice named option. We are therefore proposing to add the named option Global Real Estate to an existing degree, the M.S. in Business: Real Estate and Urban Land Economics. We have not offered this degree for a few years because it was competing with the real estate M.B.A. due to lack of differentiation. Differentiation will not be an issue with the named option Global Real Estate given the curriculum we propose and the specific admission requirements. Actually, from a communications point of view, attaching an M.S. degree title to the GREM actually simplifies matters by avoiding confusion for our existing alumni and other friends of the program. The GREM as an M.S. simply adds a clearly different offering to the existing portfolio of degrees we grant, our B.B.A., M.B.A. and Ph.D. It is very unique in the connection with (currently three and eventually up to five) incredibly well respected partners to offer a truly global educational experience in real estate. Finally, our approach to choosing a degree title ought to be mindful of the complexity of working within the international collaborative process that underpins the GREM. The main argument in favor of the M.S. and against the M.B.A. that all partners raised was the one mentioned first in this section: the M.B.A. acknowledges successful completion of a general business education and not the real estate focused training we plan to deliver with the GREM. ADMINISTRATIVE STRUCTURE The Global Real Estate Master is an integral part of the educational offerings of the Department of Real Estate and Urban Land Economics, a complement to the current undergraduate and graduate offerings. A faculty member of the real estate department is Academic Director of the GREM. The director s mandate is to provide academic leadership for the program. Two primary methods of meeting that mandate are to focus on maintaining and expanding relationships with partner institutions and with the global real estate industry. The Academic Director benefits from the support of the department of real estate and urban land economics, the Graaskamp Center for real estate, and the Wisconsin School of Business in order to deliver the optimal educational experience to the GREM students and ensure the efficient allocation of 5

7 resources. Together, these resources will assure effective and efficient handling of visas, housing, and student orientation needs, among others. The GREM program benefits from the services of a Board of Advisors. The board is constituted of leaders of the global real estate industry. Their mandate is to provide guidance with regards to program content, marketing and overall strategy, with regards to the program s relationship with industry organizations and on fund raising matters. In addition, members of the board provide occasional presentations to the students on industry topics in Madison or at partner institutions. Target enrollment: Eventually we aim to grow the class size to 45 students a year. We aim to start with a class of 15 or more in the first year. 6

8 APPENDIX: COURSE DESCRIPTIONS We list below short synopsis for the courses we propose to offer to the GREM students during the spring semester at Wisconsin. RE715 REAL ESTATE VALUATION AND FEASIBILITY ANALYSIS. The primary purpose of this course is to provide students a command of the analytical tools necessary to evaluate real estate properties. We treat as an integrated whole the concepts of market analysis, highest and best use analysis, feasibility analysis, and appraisal. The course uses commercial property appraisal techniques to determine the feasibility of alternative programs of real property use. Real property value, as determined by an appraisal of real estate, depends on its highest and best use. The highest and best use of a real estate asset is determined by evaluating the physical and locational components of the site and improvements, the legal and political constraints influencing property use, the supply and characteristics of competitive projects, the demand for the particular type of property and the cost of constructing the asset. Students work in teams to analyze a local commercial property using actual data. RE720 REAL ESTATE AND URBAN ECONOMICS This course teaches the principles that underlie real estate markets as well as a range of skills required to tackle real estate relevant issues in business and public policy. Students develop an understanding of how cities work, in the whole and their main markets. We analyze spatial relationships in the urban economy, including urban land, labor and housing markets; urban transport; city governance and finance; and regional models. Particular emphasis is placed on the economics of real estate, residential and commercial. Through a range of exercises including a student paper with original empirical work, we improve skills in data analysis, presentation and interpretation in urban and regional contexts. RE740 REAL ESTATE CAPITAL MARKETS This course addresses contemporary issues in real estate capital markets, with a primary focus on the commercial side of the market. Equity investment is considered through the REIT investment vehicle and related structures available around the world. Students will learn about tax rules and regulation governing the structure, investment characteristics and stock return behavior, dividend and capital structure policy, and relations with the broader capital markets as well as the private real estate investment markets. Debt investment is considered through mortgage syndication and securitization, with both owner/borrower and security investor perspectives being considered. Students will learn about the economics of debt syndication and securitization, how waterfall structures work, and how to analyze deal prospectus and make investment decisions. Case studies, problem sets and outside speakers will be used to enhance learning. RE750 COMMERCIAL REAL ESTATE DEVELOPMENT This capstone course provides an overview of the real estate development process from project conception to asset disposition, with particular focus on the role of the developer as the strategic coordinator of many disciplines. Students will be exposed to best known methods and practices that 7

9 developers utilize to conduct market research, site selection, financial feasibility, regulatory review, neighborhood negotiations, design, construction contracts, construction management, debt financing, private placements, equity waterfalls, leasing, asset management and disposition. The course utilizes several learning methods, including lectures with significant student participation, presentation by industry experts, short case studies, field trip to a development site and analysis of a local development opportunity with a presentation to a panel of industry professionals. At the conclusion of the course students will have developed an interdisciplinary understanding of the many facets of the development process and have an insightful understanding of the risks and rewards along each step of the process. RE765 TOPICS IN GLOBAL REAL ESTATE MARKETS This course has two main objectives. First, it covers current events in the global economy and global real estate markets, and students learn techniques and sources to enable them to follow and analyze these events more deeply in their future careers. Second, students develop specific skills essential for today s real estate executives, for example, negotiation and business development skills. The course is flexible and its content will be adjusted to changing market conditions. For example, in such a course would have a sizable component focused on bankruptcy and workouts. The course will be team taught by faculty with current topical input from industry specialists. 8