Real Estate Course Offers a New Lease on Land

Louis Li, Sarah Walker, and Dmitar Goulev appled MBA knowledge to a real-world real estate development challenge on Telegraph Ave.

Louis Li, Sarah Walker, and Dimitar Goulev applied MBA knowledge to a real estate development challenge on Telegraph Ave.

Not everything about real estate development can be contained on a spreadsheet, as students in the Real Estate Investment and Market Analysis course learned this spring.

“Buildings, like any other enterprise, need to make money and they sink or swim on the developer’s mastery of core business disciplines,” says Professor Nancy Wallace, who co-teaches the BILD experiential learning course with Professor Dwight Jaffee. However, Wallace points out, “The ability to think creatively across those disciplines is also a must.”

One team of students applied creativity to a City of Berkeley plan to rejuvenate a Telegraph Ave. site adjacent to People’s Park. Their plan: preserve a historic mural and bring affordable housing and a small grocery store to the neighborhood.

Another team, tapped to address Cal Performances’ desire for a new facility, ran the numbers and found that immediate shorter term options appeared to have greater paybacks. “It’s a very real-world outcome,” says Wallace, “to find that very large scale projects must be developed in stages.”

Sarah Buchwalter, Brad Wolfe,

Sarah Buchwalter, Brad Wolfe, Betul Balci, and Gabriel Gomez Rojo reframed their real estate challenge to help Cal Performances build culture.

“We then thought we could best help by drawing Cal Performances’ attention to their existing assets,” says Brad Wolfe, MBA 13. Noting the success Berkeley-Haas has had differentiating itself through culture, the team reframed their challenge and made recommendations to help Cal Performances expand revenue by more directly connecting to and leveraging Cal culture.

“Our approach was inspired by the Haas Defining Principle of Question the Status Quo,” says Wolfe. “We believe in the Haas Defining Principles and we also see their power as market differentiators.”

On the other side of the Bay, Cleya Ormiston, MBA 14, was on a team helping the San Francisco Public Utilities Commission determine highest and best use for a site in Millbrae. Ormiston chose Haas specifically for its Real Estate Program and this summer will be working at Met Life in the Real Estate Investment Group.

She says the team spoke with more than 80 people during the project, including Connie Moore, MBA 80, CEO of REIT giant BRE Properties, and Steve O’Connell, MBA 12, development manager with Grosvenor.  “People really wanted to help us learn,” observes Ormiston.

That learning was critical because, as Wallace says, “Real estate may be about piles of dirt, but these piles of dirt require an understanding of supply and demand, of the tenant base, of sustainable rents, operating costs, and capital structure, as well as the marketing knowledge to attract the target constituency to a development. It’s a very serious-minded pursuit.”

Winning Idea: Housing Foster Care’s Young Adults

A winning proposal for mixed use: a medical clinic and affordable housing, including apartments for foster care’s young adults

The Competition: Bank of America Low Income Housing Challenge, May 2012

The Outcome: First place, tied with Cal Poly

The Team: Ed Parillon, MBA 13, Full-time MBA Program; Greg Lukina and Pontus Lindberg, both MBA 13, Evening & Weekend MBA Program; Jacob Bintliff, MCP 12; and Gwen Fuertes, Liz Kee, and D’Genaro Pulido, all M. Arch 14.

The Challenge: Develop a proposal for affordable housing, choosing a site, finding a development partner, and detailing design approach and plan for financing construction and ongoing operations.

The Winning Approach: The Golden Bear Partners chose two parcels near Balboa Park BART in San Francisco, currently used as employee parking for Muni and as a drop-off area for BART. “We proposed combining the parcels and constructing a mixed use project with 124 affordable apartments and a neighborhood clinic on the ground floor,” says Parillon.

Won Because: “Of the affordable units, 16 would be set aside for young adults formerly in the foster care system, and at serious risk of homelessness. Close to City College of San Francisco (CCSF), the site gives these youth access to a strong post-secondary education opportunity.” Parillon says the team also impressed by choosing active community partners, like the Bernal Heights Neighborhood Center (an affordable housing developer). “The judges noted that that gave our proposal a lot of additional credibility.”

The H factor:  “We were able to leverage deep real estate expertise at both Haas and the College of Environmental Design, with Nancy Wallace and Michael Smith-Heimer as advisers, as well as alumni in the industry,” says Parillon. “The cross-pollination made possible at Berkeley meant having students from the City Planning and Architecture schools be part of our team, which added immensely to the quality and realism of our proposal.”

Defining Principles at Work: Putting a priority on larger interests, the team deliberately designed a project that brought an underserved population into the neighborhood. Going beyond themselves added complexity to their proposal, but “we thought that it was crucial given the location near CCSF and the advantages that provided.”

Cal 14-Stanford 9. Why Yes, We Did Win the Golden Shovel Again

Fit to be tied…actually, this team won the Golden Shovel: Steve O’Connell, MBA 12; Dan D’Orazi and Chris Brown, both MBA 13; Micah Burger, CED 12; and Fred Bayles, MBA 13

The Competition: Not that we’re keeping score or anything (all right, clearly we are), but we must point out that for the 5th consecutive year, Berkeley-Haas has won the Golden Shovel Competition, sponsored by National Association of Industrial and Office Properties (NAIOP). The two-team match-up pits Berkeley against Stanford.

The Outcome: This year’s win brings the lifetime total to Cal 14-Stanford 9.

 The team: Frederick Bayles, Chris Brown, and Dan D’Orazi, all MBA 13; Steve O’Connell, MBA 12; and Micah Burger, Architecture, CED 12.

The Challenge: To act as a consultant to the San Francisco Public Utilities Commission (SFPUC) to create a development and disposition strategy for a 17.5 acre site called the Balboa Reservoir. The site is located adjacent to the City College of San Francisco and is currently used as a surface parking lot for CCSF students. “As one of the last remaining large-scale, transit oriented development opportunities in San Francisco, the Site represents an extremely attractive investment opportunity,” says D’Orazi.

The Winning Approach: The “Reservoir Bears” came up with a vision for a mixed residential community with open space called “Westwood Terrace.”  The proposal also took advantage of the site’s unique topography to provide below-grade replacement parking at close to above-grade costs. “As the largest student parking area on campus, replacement parking was a focal point of both the CCSF and the local community,” says D’Orazi.

Due Diligence: The team spent time identifying the SFPUC’s key motivators, distilling those down to: Maximize the value of the site to create an economic benefit for ratepayers and align with the SFPUC’s long-term commitment to environmental sustainability. Also, “We spoke with over 100 industry leaders and spent countless hours analyzing different concepts and strategies.”

Judges Said: The team was told that the depth and quality of their research on all aspects of the development was extremely impressive. “Our analysis was supported by a 272 page document that detailed every aspect of the process from start to finish. We also utilized a creative deal structure that was supported by accurate underwriting in-line with current return requirements,” D’Orazi says.

The H Factor: The team received guidance from Professors Nancy Wallace and Bob Helsley and were concurrently taking their Real Estate Investment and Analysis class.  “Our team advisor, Craig Davey, was also extremely helpful in developing our core concepts. In addition, the Haas real estate network was an invaluable resource for our team and we were continually impressed by the willingness of the community to open their doors.”

Influence without Authority: “This was one of the most equitable and hardworking teams we have ever been associated with and we all truly enjoyed the experience,” says D’Orazi. “The collaborative nature of Haas was extremely evident.”

Winning Approaches: UT Austin Real Estate Challenge

L. to r., and top to bottom: Mogabgab, Kepler, Eder, Simmons, McEachron, and Romero take on a market in turmoil

The Competition: Real Estate Challenge, UT Austin, Nov. 2011.

The Team: Full-time students Christian Eder, Josh Mogabgab, Derek Simmons, Nicholas Romero, and Tyler Kepler, all MBA 12; evening student Charlie McEachron, MBA 12.

The Outcome: Second place (second year in a row).

The Field: Haas came in ahead of Stanford, MIT Sloan, Wharton, and Yale.

The Challenge: How to buy a partner out of a joint venture involving three office buildings.

The Winning Approach: The Berkeley team used rights embedded in the joint venture agreement to buy its partner out of the deal.

Defining Principles at Work: “We learned to think about deals from the perspective of each party at the table—developer, investor, counter-party, lender—and evaluate each of their incentives to push a potential transaction forward,” says Romero of a Students Always approach.

The Motivation:  “We’re interested in how the built environment shapes urban areas,” says Kepler. “There is still tremendous opportunity to think creatively about real estate finance-related issues leftover from the recent financial crisis.”

Fuel of Choice: Take-out Thai food, Cut Copy mixtapes, Peet’s coffee, and Tony Romo jokes.

Demonstrated Prowess 2011-12: Education, management of organizations, marketing, entrepreneurship, and real estate.

Digging In

Berkeley MBAs Bury the GSB in Golden Shovel Competition

It seems the Golden Shovel has grown mighty comfortable at Berkeley-Haas. The prized trophy from the NAIOP Real Estate Challenge will reside at Haas for the fourth consecutive year, after a Berkeley MBA team defeated Stanford GSB in the annual regional challenge on May 4. Evening and weekend student Charlie McEachron, MBA 12, full-time MBA 12s Dan Byrnes, Tyler Kepler, and Derek Simmons, and Environmental Design student Michael Song teamed up to win both first place and the audience choice award.

Team advisor Craig Davey, MBA 12s Charlie McEachron and Tyler Kepler, Environmental Design student Michael Song, MBA 12s Dan Byrnes and Derek Simmons, Livermore Mayor Marshall Kamena, and Competition Chair Dennis Williams

This year’s challenge was to present a multi-use development plan for three sites in Livermore, Calif. and victory was no easy feat: To determine feasibility of city-proposed uses or to propose alternate uses, the team consulted with more than 100 experts. “The Cal network served us well,” says Byrnes, “opening doors to very powerful people who certainly had other things to do besides help us with our student project.” Work lasted for two months and culminated with a 200+ page proposal, a rigorous Q & A with the jury, and presentation to an audience of 300.

“Livermore On Broadway”—victory, fully rendered

The team’s “Livermore On Broadway” combined high-density residential and mixed-use retail. “The judges were particularly impressed with our ability to understand the city’s financial motivations and constraints, and those of the three sites, and to propose a plan that addressed these in a difficult capital markets environment. Having an incredibly gifted architect on our team certainly didn’t hurt,” says Byrnes. “Everybody brought unique strengths to the table and it really showed in the end.”

This year’s win brings the lifetime Golden Shovel score to Cal 13, Stanford 9.

Who makes you proud to be Berkeley-Haas? Tell us in the comments below or share your stories with vgilbert@haas.berkeley.edu.

The Real (Estate) Stuff

Berkeley MBA team Wins UNC Real Estate Competition

Case competitors need to be prepared for anything. Really. Now, they can add “conduct research in a non-native language” to that prep list. A team of Berkeley MBA students did just this on their way to taking first place in the UNC Real Estate Development Challenge at Kenan-Flagler on February 11.

Full-time student Gretchen Heckman, MBA 12, and evening and weekend MBA students Meaghan Kroener, MBA 12, Joseph Rehrmann, MBA 12, and David Sterlace, MBA 11, beat out 16 teams from top MBA real estate programs, including Columbia, Wharton, and the home team at UNC, to win $10,000 and top honors.

To prepare, the team reviewed the competition’s previous cases and worked through an Urban Land Institute case that required creation of a downtown redevelopment zone using LEGO bricks. “A really ingenious way to help non-design professionals connect with what they’re creating,” Kroener, an architect, says of using LEGOs. What they did not do was brush up on their Spanish language skills.

The road to victory: paved with sweat, smarts, and…LEGO

The competition challenged teams to create a redevelopment proposal for a site adjacent to and including a historic train station in Montevideo, Uruguay. Each Haas team member took charge of a key element, such as design, market research, entitlement, and finance. Rehrmann says the team “performed the most thorough research by far,” noting that this was particularly challenging because it included analyzing Uruguayan market data, city plans, and official documents—in Spanish.

The effort was worth it, Kroener confirms. “We dug deeper than housing trends and the macro-economic climate of Uruguay,” she says. “We identified local customs, such as neighborhood festivals, and analyzed zoning maps and special use districts. This additional entitlement research helped us defend the uses we had planned for our site and the micro data helped prove a true need that would support a successful project.”

Who makes you proud to be Berkeley-Haas? Tell us in the comments below or share your stories with vgilbert@haas.berkeley.edu.