Real estate, alternative real assets and other diversions

Diary of a Traveling Academic – When property sold for ten cents on the dollar

The Professor

These last six months have been full of terrific opportunities for this travelling academic to feed her real estate addiction. 

First up was a trip home to Madison for the Wisconsin Real Estate Alumni Association. Since I hold three degrees from UW Madison, this reunion (held every two years) is always a special one for me. This year we had record attendance. I studied at Madison when James Graaskamp was the chair and we were able to convince many of the old timers to return this year, which marked the 30th anniversary of his death. It was three days full of catching up with old friends and colleagues, and meeting the new generation of real estate professionals. 

It was striking to see how small a world commercial real estate truly is and how important your network from graduate school can be. Many of the teams that got started early, possibly while in college, were still working together – and appeared to be doing very well.

Then there was a trip to Kiawah Island for the ULI SC Capital Markets event. This meeting, organised by the Local Urban Land Institute’s District Council, was optimistic and full of interesting takeaways. The most eye-opening was a vehicle created by the new US tax code called ‘opportunity zones’. These are special areas across the US, designated by the federal government, where you can invest capital gains from anyinvestment into a fund, and if that fund invests in the ‘zone’ the investor avoids paying capital gains tax (CGT). 

The rules and regulations for the investments were not very clear at the meeting and are still not very clear now. What wasclear is that a significant number of investors are seriously contemplating the use of this new vehicle as a way to avoid CGT. It makes me nervous – real estate professionals have to be vigilant to avoid the sins of our past. We need to make sure that funds invested in these zones are used for real estate investments that make economic sense, as well as being tax-efficient. 

Otherwise, I fear we are heading for a repeat of the 1986 Tax Reform Act. The tax benefits were swept away overnight and many investors were left holding property that had a much lower value than the day before. In some places, property affected sold for ten cents on the dollar. 

We hosted the Counselors of Real Estate national meetings here in Charleston in October. This was full of detail on the growing importance of logistics to the real estate market. Charleston, being a port city, has a vibrant industrial and distribution market that continues to grow as the port is deepened. It is one of the first US ports that will be able to take Panamax ships. 

We were also treated to an incredible interview with Mayor Joe Riley, whom many in the US refer to as ‘America’s mayor’. Mayor Riley led Charleston for 40 years, through a hurricane, an ice storm, and a massacre of nine innocent churchgoers. He talked about how he pulled the community together to avoid riots by building relationships with constituents over time and talking to them first – beforethe media and activist groups. I was there during the church shooting. My children were within blocks of it, in the dorms of the College of Charleston. I could not have been prouder of how our community responded, banding together against the hatred of one man. We were certainly ‘Charleston strong’. 

I had the opportunity to visit Atlanta for an RICS-Americas event. The RICS is alive and well in the Americas. We are still a relatively small group but we continue to try to grow the membership. With all the other organisations involved in property in the US, this is no easy task. However, slowly but surely, we are expanding. I know there are many readers of the Property Chroniclewho are RICS members – we could use your help in encouraging your firms to promote the designation for your counterparts in the Americas, particularly in the US. US-based professionals can also take advantage of reciprocal arrangements with organisations like the Counselors of Real Estate and the Appraisal Institute. There is, of course, a cost – but, as we all know, networks in property markets are crucial, and being part of the RICS significantly increases your global reach. 

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About Elaine Worzala

Elaine Worzala

Dr. Elaine Worzala, CRE, FRICS is the Director of the Carter Real Estate Center at the College of Charleston. She got all three of her degrees (doctorate, masters and undergraduate) from the University of Wisconsin-Madison. She is an active member of several academic associations as well as professional organizations including research projects she has completed for RICS, ICSC, PREA and NAR. She believes strongly in bringing relevancy to her classroom from her research projects. She has published articles in many of the mainstream real estate academic journals as well as industry-based publications and other media. Her research interests are applied and lie primarily in institutional real estate investment, valuation and real estate education. Additionally, many of her studies take on an international perspective as she works to open up the borders as they relate to real estate markets. Primary teaching interests include real estate valuation, investments, and feasibility analysis as well as the introductory real estate process course and international real estate investment. She has held academic appointments at Colorado State University, University of Connecticut, University of San Diego, Johns Hopkins University, Clemson University, San Diego State University and the College of Charleston. She has also co-taught a summer Research designs course at the University of Aberdeen. Dr. Worzala has received numerous awards including the American Real Estate Society (ARES) Grasskamp Award, the ARES Education Award, and the ARES Distinguished Service Award. From the International Real Estate Society she was awarded the Achievement Award and the Bert Kruijt Service Award for outstanding service to IRES. She is a Fellow in the Weimer School, a member of Lambda Alpha International, a Fellow of the Royal Institute of Chartered Surveyors, and designated as a Counselor of Real Estate. She is the director of the doctoral program for the James Webb American Real Estate Society Foundation. She is also currently serving on the national board of the Counselors of Real Estate, the Advisory Board of the Real Estate Research Institute (she was on the national Board), and the Southeastern board of the Royal Institution of Chartered Surveyors.

Articles by Elaine Worzala

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