The Global Deal
The Real Estate Behind the Games
A look at the 2016 Summer Olympic Games – Rio de Janeiro, Brazil, South America ADAM DOUDIET M.S. Candidate in Real Estate Finance Since winning the bid in 2009
Olympics, arguing that money
stadiums,
to host the 2016 Summer
should rather be spent on
athletes, and a large media
Olympic
education, infrastructure, and
center. While the city has
health care.
offered
Games,
Rio
de
Janeiro and the country of Brazil
have
faced
many
challenges. There is a recession
The
development
of
the
residences
these
for
residents
hundreds of thousands of dollars in compensation, there
that continues to worsen, high inflation, unemployment, and
“The removal of its residents,
are still some homeowners who refuse to leave. The
a government that is caught
however, does not alleviate the
government’s
up in a corruption scandal involving state-‐‑run oil firm Petrobras.
This
political
climate has led to several mass protests in Rio as well as other cities
throughout
Brazil,
prompting the demand to impeach
President
Dilma
Rousseff. Protesters have also fought against
hosting
the
2014
World Cup and this year’s
compensation for leaving is well below market level”
for leaving are justified by additional plans to convert the athletes’ housing into luxury
Olympic venues has created within
to
compensate these individuals
city’s poverty. Their
conflict
efforts
Rio’s
communities.
In
the
neighborhood
of
Vila
Autodromo, hundreds of families have had to relocate to allow for the construction of February 19, 2016 [Edition 1, Volume 1]
homes at the conclusion of the Olympics. As city officials are also determined to build roads leading into the Olympic Park, the remaining families may finally be forced to leave with this compensation.
THE GLOBAL DEAL
Vila Autodromo, one of Rio’s
Games
a
compensation for leaving is
many
complimentary addition to the
well below market and the
located in the upscale region
surrounding
new luxury housing will likely
of Barra da Tijuca. The
removal
commercial development in
however, does not alleviate
Income inequality will only
preparation for the Olympic
the
get
favelas
(slums),
is
will
of
city’s
be area.
its
The
residents,
poverty.
Their
attract
foreign
investors. worse.
Thailand’s Hospitality Sector: Hot or Hostile? Insight into Thailand´s problematic hospitality sector – Bangkok, Thailand, Southeast Asia AKSHAY GANDHI M.S. Candidate in Real Estate Finance As the second most visited city
tourism
by tourists in 2015, Bangkok
represents a 20 percent year-‐‑
lower pricing. However, until
presents a massive hospitality
on-‐‑year
fueled
the inefficiencies created by
development opportunity for
primarily by the influx of
the supply glut of unlicensed
domestic and international
nearly
hotels
developers
is,
tourists. Within that time
elasticity of Thailand’s tourist
therefore, unsurprising that
frame, the supply of licensed
market remains immeasurable.
the burgeoning hotel market
hotel inventory has increased,
consisting of thousands of
although not nearly to the
registered hotel rooms has also fueled the development of
“The size of this unregistered
ineffective. Since 2014, the government has only imposed
market presents a hindrance
reparations on 20 hotels,
these issues to the national
in the potential of Thailand’s
utilizing paltry fines ranging
level has prompted national
hospitality sector.”
alike.
unregistered
It
and
illegal
hospitality properties. Scaling
estimates of 10,000 illegal hotels that do not meet structural
or
operational
standards in comparison with 8,000 registered properties. The
sheer
size
of
this
unregistered market presents a hindrance in the potential of Thailand’s hospitality sector. Despite the recent roulette in governance,
Thailand
and
Bangkok were visited by an estimated 29 and 18 million tourists in 2015, respectively. According to the country’s
authority, increase 8
million
this
Chinese
economic scarcity principles and demand drivers should dictate increased nightly rates. However, Thailand’s nightly rates remain among the lowest of the 20 most visited destinations by US tourists in 2015 at $95 a night in comparison with an average of $158. It is certainly plausible low
construction
labor costs
and
coupled
with a propensity for budget February 19, 2016 [Edition 1, Volume 1]
have
are
encouraged
remedied,
the
Policing of the unlicensed market
between
has
remained
three
thousand
same effect. Consequently,
that
tourism
and
Thai
ten Baht
(approximately 80 to 270 US dollars). This has done little to disincentivize
further
unlicensed operations, with most hotels resuming business under alternate names. With the tourist tally expected to cross 30 million in 2016, the Thai government’s measures to encourage legal hospitality development,
curb
illegal
development and enable price mobility followed.
will
be
keenly
THE GLOBAL DEAL
Across the Atlantic Rises an African Hudson Yards A background and update on one of Africa’s largest development projects – Lagos, Nigeria, Africa AMENI KABBOUDI M.S. Candidate in Real Estate Development The Eko Atlantic project is a
Rendering of a portion of Eko Atlantic
public/private partnership; the financing is 100% generated from the private sector. The role of government is to provide
a
fast
tracked
processing of documentation and to provide legal and policy assistance. The project is operated privately by The Chagoury developer),
Source: www.ekoatlantic.com/media/image-‐‑gallery/
created a necessity to provide
about Lagos as it continues to
such a project given an over-‐‑
fight for a competitive position
demand for and non-‐‑existent
in the global property market.
supply of properties. Eko
However, across the Atlantic
Atlantic is a mixed-‐‑use project,
rises one of the largest mega
meeting sustainability criteria.
in
Africa,
“Eko
Atlantic”, which by New York standards is comparable to Hudson Yards. This project, launched in 2007,
“[T]he area is planned to be a free economic zone in the hope that Lagos will continue to
is still under construction. Located on Victoria Island,
develop as the financial hub of
south of Lagos, Nigeria, the
compete within international
area is planned to be a free economic zone in the hope
West Africa, and thus can markets.”
develop as the financial hub of
It spans over four miles long
West Africa, and thus can
and one mile wide, providing
compete within international
housing for more than 250
markets.
thousand people and office space for 400,000 employees.
faster than New York, which February 19, 2016 [Edition 1, Volume 1]
while
the
construction
companies are purely Chinese. In fact, not too far from the Eko Atlantic project, China Railway
Construction
Corporation signed
a
has deal
recently with
the
Nigerian government worth nearly $12 billion to build a railway
along
the
West
African nation'ʹs coast. It is important to note that the insemination of the idea behind Eko Atlantic arose from environmental necessity; the Nigerian coastline erodes at a rate of 32 feet per year.
that Lagos will continue to
Lagos is growing 10 times
(the the
wealthiest families in Nigeria,
You may not have heard much
projects
Group one of
Thus, the necessity to reclaim land and rebuild a stop wall, dubbed by locals as “the Great Wall of Lagos”, was the reason sparking this massive project.
THE GLOBAL DEAL
The reclaimed land comprises
According to the developer,
In Nigeria, where the elite
3.86 square miles. Eko Atlantic
there is no competitor for Eko
class increased by 300% from
is incorporating: residential,
Atlantic; no one is building
last year, a project as big as
commercial,
leisure
anything of this scale within
Eko Atlantic is setting a
facilities, hospitals, schools,
Africa. Given its location in
standard for the city. In fact,
places of worship, and over 12
the world’s most populous
this project is often referred to
hotels, all of which are
city where space is at a
as the African version of
scheduled for construction to date. According to David
premium, and the fact that Nigeria’s economy is one of
Dubai. This is an ambitious step that can unleash an echo
Frame, Managing Director of
the fastest growing globally, it
for an emerging city in the
Eko Atlantic, “This mixed-‐‑use
is fair to suggest that it will
next few years. New York,
project is not an old model,
not face much competition in
watch out, the real estate
this is a 21st century model
the near future. Further, this is
market is taking off across the
that will reach international
the first land reclamation
Atlantic!
standards.”
project in Sub-‐‑Saharan Africa.
retail,
Evidence of the land reclamation in order to accommodate Eko Atlantic
Source: Google Earth
February 19, 2016 [Edition 1, Volume 1]
THE GLOBAL DEAL
NOTE FROM THE EDITORS Welcome to this seminal issue of the Global Deal, the Schack Institute's very own student-run news bulletin. The first, condensed issue of this newsletter takes us across the globe, reaching Rio's hills, Thailand's shores, and Nigeria's capital. It is our intent moving forward that these articles engage the readers in a conversation with one another, facilitating the communication between Schack students on the various cutting-edge real estate issues being addressed at home and abroad. Indeed, it is incumbent on members of a New York City-based university such as ours to critically engage in real estate issues that face our colleagues around the globe. Of course, it is also crucial to learn and have fun. We hope you enjoy the first of many issues of The Global Deal. Please feel free to send any comments to our contact e-mail listed below. We would like to extend our sincere gratitude to Jessica Estrada-Watson and Chada Ngamwajasat, the REISA Executive Board, and especially to the students who have supported this endeavor and made it possible.
If you are interested in contributing to The Global Deal, please respond by filling in the linked form. Participants chosen will write an article of between 250-‐‑300 words, covering the most relevant real estate news of their chosen country or global issue. Application Link: http://bit.ly/THEGLOBALDEAL NYU SPS Schack Institute of Real Estate The Global Deal A Publication of REISA’s Global Real Estate Group 11 West 42nd Street, New York City, NY 10036 Contact: gre.reisa@gmail.com Senior Editors: Denham Apperley (denham.apperley@nyu.edu) Felipe Kohn (felipekohn@nyu.edu) Juan Carlos Ramos (jcramos@nyu.edu)
February 19, 2016 [Edition 1, Volume 1]