Real Estate Economics and Finance [MGT 548]

Real Estate Economics and Finance [MGT 548]


Instructor: William Goetzmann
International Center for Finance
telephone 432-5950
Assistant: Mary Ann Nelson


The course applies economic and financial theory to the problem of real estate investing. It will focus on a top-down approach to real estate portfolios. Topics include valuation, development, manager evaluation, REITs, real estate capital markets, real estate in the investment portfolio, geographical diversification and agency problems, housing economics and securitization. The course requires six case write-ups (two-page max plus tables or figures). Three of these must be done individually, the others can be done with a group of four or less. There is no exam.

The text is optional. Here is the Amazon link: Brueggeman and Fisher Real Estate Finance and Investments, 2005 edition. [BF]


Course Outline


January 18, Class 1: Introduction to Real Estate


Lecture A: Property investment in historical perspective.

Lecture B: Introduction and discussion of real estate as investment.


Reading: BF Chapter1.


Here is some interesting optional reading on property rights:


-Excerpt from The Mystery of Capital by Hernando De Soto

-Henry George’s Remedy

-Morris Silver “Land Markets in the Ancient Near East

-Michael Hudson Interview on Russia


January 25, Class 2: Case: Angus Cartwright. Link to Angus Cartwright HBS case site. Bring your write-up to class for discussion.

Lecture: Real estate markets, supply and demand factors, strategy.


Reading: BF Chapters 9 and 10.


Here is some interesting optional reading on supply and demand factors in commercial property markets:


Sivitanides, Torto and Wheaton, 2003, “Real Estate Market Fundamentals and Asset Pricing”, Journal of Portfolio Management Special Issue 45-53 2003 (if this link does not work use Yale SFX links)

February 1, Class 3: Doug Shorenstein. Case: Lexington Avenue. Materials to be distributed in previous class. Bring your write-up to class for discussion.

Lecture: Debt, mortgages, CMBS.


February 8, Class 4: Case: New England Place. Materials are to be distributed in previous class. Bring your write-up to class for discussion.

Lecture: Real Options in Real Estate and Agency Theory and Real Estate


February 15, Class 5: Case: Costa Mesa. Materials to be distributed in previous class.

Lecture: Gravity models and location analysis.


Optional Reading:


- Gravity model Matt Rosenberg [Real Simple]

- Calibrating & Testing a GRAVITY MODEL for Any Size Urban Area,U.S. DEPARTMENT OF TRANSPORTATION, August 1983 [Some useful details and background]

- A New Perspective on Forecasting Store Sales: Applying Statistical Models and Techniques in the Analog Approach

David S. Rogers Howard L. Green Geographical Review, Vol. 69, No. 4. (Oct., 1979), pp. 449-458. JSTOR link” [retail application]


February 22, Class 6: Case: Dubailand. Materials to be exhibited in class.


Lecture: Regional and international factors in real estate. International diversification.


Optional Reading:


- Case, Goetzmann & Rouwenhorst “Global Real Estate Markets: Cycles and Fundamentals


March 1, Class 7: Case: Evaluation Corporation.

Lecture: Real estate indices, historical data, risk and return, time series modeling.


Reading: BF Chapter 22


March 22, Class 8: Ellen Shuman, CIO, Carnegie Foundation.

Lecture: Background for Lucky U case: portfolio optimization.


March 29, Class 9: Case: Lucky U.

Lecture: Institutional Investors and Real Estate: A Behavioral Approach.


April 5, Class 10: Lecture: Introduction to REITs and Corporate Governance and Real Estate.

Case: Taubman Hostile Takeover Battle.


April 12, Class 11: Tom Zacharias, W.P. Carey on Real Estate Investment Trusts.


Reading: BF Chapter 21


Lecture: Introduction to housing. Performance of housing as an investment. Low-income housing policy.


April 19, Class 12: Lecture: Measurement of housing returns. The mortgage market. Valuation of mortgage backed securities.


Reading: Chapters 4 through 8.


April 26, Class 13: Home Equity Insurance: A Pilot Project

Lecture: Class wrap-up and discussion.