Living with Terminal Capitalization Rates: A Look at Real Estate Valuation Model Parameter Setting

This paper examines assumptions about future prices used in real estate applications of DCF models. We confirm both the widespread reliance on an ad hoc rule of increasing period-zero capitalization rates by 50 to 100 basis points to obtain terminal capitalization rates and the inability of the rule to project future real estate pricing. To understand how investors form expectations about future prices, we model the spread between the contemporaneously period-zero going-in and terminal capitalization rates and the spread between terminal rates assigned in period zero and going-in rates assigned in period N. Our regression results confirm statistical relationships between the terminal and next holding period going-in capitalization rate spread and the period-zero discount rate, although other economically significant variables are statistically insignificant. Linking terminal capitalization rates by assumption to going-in capitalization rates implies investors view future real estate pricing with myopic expectations. We discuss alternative specifications devoid of such linkage that align more with a rational expectations view of future real estate pricing.

Team Member’s Centrality, Cohesion, Conflict, and Performance in Multi-University Geographically Distributed Project Teams

This study examined team processes and outcomes among 12 multi-university distributed project teams from 11 universities during its early and late development stages over a 14-month project period. A longitudinal model of team interaction is presented and tested at the individual level to consider the extent to which both formal and informal network connections—measured as degree centrality—relate to changes in team members’ individual perceptions of cohesion and conflict in their teams, and their individual performance as a team member over time. The study showed a negative network centrality-cohesion relationship with significant temporal patterns, indicating that as team members perceive less degree centrality in distributed project teams, they report more team cohesion during the last four months of the project. We also found that changes in team cohesion from the first three months (i.e., early development stage) to the last four months (i.e., late development stage) of the project relate positively to changes in team member performance. Although degree centrality did not relate significantly to changes in team conflict over time, a strong inverse relationship was found between changes in team conflict and cohesion, suggesting that team conflict emphasizes a different but related aspect of how individuals view their experience with the team process. Changes in team conflict, however, did not relate to changes in team member performance. Ultimately, we showed that individuals, who are less central in the network and report higher levels of team cohesion, performed better in distributed teams over time.