We are proud to announce the launch of the Kelley Real Estate Outlook, a new research publication from the Indiana Business Research Center and the IU Center for Real Estate Studies. The first issue of the Outlook, a biannual publication that showcases scholarly research in real estate and informs readers of market trends, is now live and can be viewed here.

A Kelley School of Business press release gives an overview of some of the research and articles currently available in this issue, including a warning of a coming generational housing bubble. Other articles in the new publication include a report on the increasing shortage of affordable apartments in the U.S., an outlook for commercial real estate, and links to recent research on housing and commercial real estate issues.

Sample Gates Management (SGM), the investment entity for the IU Real Estate Private Equity (REPE) Program, a student-run private equity fund, has executed its first investment. The deal closed earlier this month, investing $400K into Echo Park, a 154-unit, Class-A market rate apartment community in Bloomington, IN.

Echo Park is currently 100% leased and located just 2.7 miles south of the Indiana University campus, catering to graduate students and non-student residents seeking a quiet, high-end apartment living experience. Deal sponsor Gray Capital acquired the property in February, and they plan to hold and operate it with their own in-house management team.

The IU Real Estate Private Equity (REPE) Program is a two-semester capstone course primarily for seniors majoring in real estate that allows students to raise and invest capital in real estate via a student-managed entity called Sample Gates Management, Inc. (SGM). In late 2022, SGM raised $4.2 million from more than 40 accredited investors, making the IU REPE Program the largest undergrad-led program of its type in the United States

The IU Center for Real Estate Studies’ winter luncheon brought together an expert panel focused on the timely and relevant topic of housing and affordability in Indiana. The discussion touched on the affordability of the local housing market, demographics and the trends affecting supply, possible solutions, and what we can expect going forward.

The panel was moderated by Sara Coers, Associate Director of the IU Center for Real Estate Studies and Lecturer in Real Estate at the Kelley School of Business in Indianapolis. Panelists included:

• Matt Kinghorn, Senior Demographer, Indiana Business Research Center
• Philip T. Powell, Ph.D., Academic Director, Indiana Business Research Center, Daniel C. Smith Faculty Fellow, Indiana University Kelley School of Business
• Chris Pryor, Chief Advocacy Officer, MIBOR Realtor Association
• Stephanie Quick, President, Intend Indiana, a community development non-profit using innovative financing and development solutions to preserve affordability
• Ernest Xi, President, Valu-Built Construction
• Jun Zhu, Ph.D., Clinical Assistant Professor of Finance, Indiana University Kelley School of Business, Non-Resident Fellow, Housing Finance Center, Urban Institute

To open the discussion, Coers gave an overview of the current state of the housing market and its importance, stating that home ownership and stable housing have enormous social and community benefits for people, including educational success, civic participation, and better health. Home ownership is also the largest source of wealth among families, as it promotes accumulation of personal and generational wealth through equity building and home appreciation. Consequently, our housing market is a substantial part of our national economy, comprising almost 17% of GDP in 2021. However, rapidly rising home prices are threatening this path to economic security for many, with Central Indiana’s median sale price increasing by double digits each of the last three years, with a 43.6% total increase in the median sale price since December 2019.

The panelists discussed what affordability means when we talk about single family housing and the barriers we’re currently facing with regard to home ownership locally. The issue of low supply alongside growing demand was addressed in relation to historically high construction costs. Panelists discussed the demographic trends that have increased demand during a time when the high cost of labor and building materials skyrocketed and what policy solutions could improve supply-side issues.

Panelists also shared their insights on the role of institutional investors in the housing market and their impact on housing inventory and prices, with a particular focus on their impact on low- to moderate-income and first-time home buyers. There was discussion about policy moves and their potential implications, including laws prohibiting or limiting single-family rental activity, as well as what might cause investors to lose interest in the housing market.

To wrap up the discussion, the panelists discussed the future of housing and affordability, including what we can expect going forward demographically as one segment of the population ages out of their homes while another growing segment of non-traditional new households is formed. Panelists also weighed in on what sort of innovative approaches to financing and home buyer assistance may become more widely available to help address the problem of affordability. Example of home buyer assistance included the growing trend of employers constructing homes to sell to their employees at affordable rates (such as Cook Medical in Spencer) and philanthropists and employers providing down payments that are either paid back at zero interest or are given with no expectation of payback. In addition, innovation in construction design and materials, including volumetric modular construction, was discussed as one of several possible avenues to help bring down housing costs.

Thank you to our panelists and moderator for providing their expertise on this important and relevant topic.

Students at the Indiana University Kelley School of Business have raised $4.2 million to establish a real estate private equity fund that they and their future peers will manage and use to make investments in existing and future developments.

Called Sample Gates Management Inc., it is the largest undergraduate student-managed real estate private equity fund launch, measured by dollars raised, in the country. More than three dozen real estate and financial firms and individual investors, including Kelley alumni, were among the initial investors in the fund, which was created entirely through an offering that closed in late December.

“We want to make it clear that this is investment money, not donations,” said Doug McCoy, the Al and Shary Oak Director of Real Estate, a teaching professor of finance who directs Kelley’s Center for Real Estate Studies. “Our students will turn around and invest in real estate transactions under the guidance of an investment committee and faculty. These transactions are heavily vetted by practicing, esteemed professionals who are alumni and investors in the fund.

“This is something that hopefully succeeds for decades, and we believe it will be a big part of our students’ development. This is something at the heart of our real estate program. We’ve removed the wall between academia and practice, and that integration of those two allows our students to graduate as experienced professionals.”

From left: J. Timothy Morris, founder and partner of Proprium Capital Partners; Patrick Engels, a 2021 Kelley alumnus who came up with the idea for the fund; Doug McCoy, the Al and Shary Oak Director of Real Estate and a teaching professor of finance; and Tom Peck, faculty advisor and chief investment officer at Hageman Group. Photo by the Kelley School of Business

The fund emerged from a student initiative after a three-year process. Patrick Engels, a 2021 Kelley alumnus now working as an analyst at a New York investment management firm, approached professors in the school’s real estate program during his freshman year. The idea was further developed through leadership from alumni such as early supporter J. Timothy Morris, founder and partner of Proprium Capital Partners. Faculty advisor Tom Peck also is chief investment officer at Hageman Group.

“That’s what makes this so amazing,” said Will Huber, student president of the IU real estate private equity program and a senior from Batavia, Illinois, majoring in finance and real estate. “We are one of the few programs like this that are run by undergrads, and we raised our own money.

“Most of our investors are IU alumni who support the program and are giving us an experience and responsibility that few students like us can have. These people are CEOs and presidents of these companies. The fact that they responded to us with high interest and wanting to attend our pitches and learn more about the program is so encouraging.”

Student-run private equity funds are more common at the graduate level, where funds often come from the university or a single donor instead of investors. Unlike funds tied to courses where investment recommendations are made once a semester, the Sample Gates Management fund is more fluid, with students managing assets, making investments and raising capital year-round — all under the guidance of the fund’s investment committee and Kelley faculty advisors.

This year, students pitched prospective investors at events in Chicago and Indianapolis and met with them individually. McCoy said the overall experience, which also includes gaining real-world knowledge of securities laws and client management, makes Kelley grads attractive to top firms.

“It’s such an immersion into this whole world of real estate private equity that sets us apart from other programs around the country and is bringing people into Kelley,” McCoy said. “This is about the students; this is about learning; this is about the marketplace, and they’re being able to land in the best places.”

McCoy said student success with the Sample Gates Management fund is indicative of a growing interest in studying real estate at Kelley, in Bloomington and Indianapolis. This fall, 380 students are majoring in real estate at Bloomington, including 115 students who have made it their sole major. At Indianapolis, 72 students are co-majoring in real estate, including 31 in a new Commercial Real Estate Workshop. In December, the Indiana Commission for Higher Education approved a 15-credit hour undergraduate certificate program in real estate at IUPUI beginning in fall 2023.

The Real Estate Club at Bloomington has seen a surge of student interest and doubled this fall, from 250 members to nearly 500. From there, students can apply to be part of the Commercial Real Estate Workshop and then work on the fund.

“I wanted to be able to generate wealth but also make an impact in the communities where we invest,” said Maliq Carr of Indianapolis, co-president of the real estate club and a senior majoring in finance. “When you’re building a new apartment complex, a new retail center, a new mall or industrial building, you’re creating jobs and you’re genuinely making the area a better place. If you invest in real estate appropriately, you can bring a net positive to a lot of people’s lives. That’s what attracted me to real estate.”

A new Undergraduate Certificate in Real Estate has been approved by the Indiana Commission for Higher Education on the Kelley-Indianapolis campus. The 15 credit hour program for non-majors and real estate professionals will be available beginning fall 2023 and includes all four major real estate courses including Introduction to Real Estate, Real Estate Appraisals, Real Estate Finance & Investments, and Real Estate Law. This certificate is an excellent addition to the IU real estate program and we are excited to offer this new opportunity to those in the Indianapolis area and throughout the state.

Indiana University Kelley -Bloomington won first place in the 2022 NAIOP Indiana University Challenge on November 3rd. Team members (pictured at top, from left) Jacob Pierce, Drake Wang, Adrian Rupar, Ben McHenry, and Max Kocour led their team to victory with their case focused on developing an industrial air cargo and special manufacturing facility on a parcel of land at the Indianapolis International Airport.

Judges heard impressive presentations from six teams and then narrowed it down to two finalists: Kelley -Bloomington and Kelley -Indianapolis. The audience then heard the presentations from the two finalists and participated in a live vote, which resulted in the Bloomington team being named the winner with the tally being 51% Bloomington and 49% Indianapolis! Special thanks to case sponsors The Opus Group and Holladay Properties for their support. The winning students will share a $5,000 scholarship awarded by The Opus Foundation.

Garrett Tiberi, Kelley-Indianapolis senior and 2021-2022 Real Estate Club President, has received the Distinguished Undergraduate Student Leader Award. The Distinguished Student Leader Award, given by IUPUI Student Organizations, is an opportunity to celebrate and recognize students that have made a significant impact on the social, interpersonal, and professional development of their fellow students, as well as made contributions to IUPUI. Student organization leader awards were selected from nominations made by students, faculty, staff, and alumni based on accomplishments for the 2021-2022 school year. There are more than 500 registered student organizations and 11,000 members of the student organization community at IUPUI.

Congratulations to Garett and thank you for your significant contributions to the IU real estate program and the Kelley-Indianapolis community!

Jun Zhu, Clinical Assistant Professor of Finance at Indiana University and non-resident fellow of housing finance policy at the Urban Institute, was recently interviewed on CBS News Money Watch and Yahoo! Finance. Professor Zhu commented on Bank of America’s new program offering zero-down-payment and zero-closing-cost mortgages in a push to address racial disparities in homeownership and how effective this could be.

The IU real estate private equity (REPE) program was officially launched in the fall of 2020 with the inaugural class led by senior Patrick Engels.  As a freshman Patrick conceived the idea for the new REPE class spanning both the fall and spring semesters to allow top students the experience of raising money and investing funds on behalf of investors into real properties.

Seniors Max Mitchell and Cale Philips helped lead the second IU REPE class, which wrapped up after the spring 2022 semester.  Class 2 had the distinction of being the first class to go through the arduous process of preparing an offering memorandum, investor pitchbook, and investor subscription documents for use to raise funds for the first IU REPE investment entity called Sample Gates Real Estate Fund 1, LLC.  This culminated in the students making an in-person investment presentation in April to a group of sophisticated investors that ultimately indicated investment interest of more than $2 million.

After shadowing Class 2 during the spring semester, Class 3 will hit the ground running in the fall and will continue the fundraising process initiated by Class 2.  The initial fundraising target was $3 million, but our sights are set on a slightly higher number that we believe will place the IU REPE program as the top undergraduate program in the United States for real estate investment capital raised.  After fundraising efforts are completed, Class 3 will turn its attention to investing the committed funds and will welcome investment opportunity referrals from IU real estate alumni.

Thanks to the many people who have been instrumental in helping the IU REPE program get to the point where it is today including the many alumni who have supported the effort as advisors and investors; Dean Idalene Kesner who was instrumental in helping the program make it through the IU approval process that culminated in approval by the IU Board of Trustees; Alan Becker (Bose McKinney & Evans), Brian Fennerty (Faegre Drinker), and Josh Malarsky (Katz Sapper Miller) who provided important professional expertise; and Tim Morris (Proprium Partners), Patrick Engels (now with Evercore), and Professor Doug McCoy who have helped spearhead the IU REPE program from its inception.