Professionalizing the Teaching
More than a need for professionalism was motivating the seeking out of academic help. There was the matter of just how brokers were estimating the return an investment might produce.
For years, it had been figured according to the equity rate of return, which ignored the “time value of money,” to the higher value of money now in hand over money expected. Put another way, it assigned equal value to present and future cash. Now another way was being discussed, the internal rate of return, or IRR, which “discounted future cash flows,” in the language of the commercial Realtor.
In November 1971, Vic Lyon brought it up at the National Institute's meeting at Las Vegas. The old measurement approach was not working in his part of the country, the Pacific Northwest. Investors were discovering their equities shrunken and unrecognizable after the death of the Supersonic Transport contracts and subsequent downturn un the economy. Investors were not happy, and neither was Lyon.
Lyon talked up the other way to measure an investment, IRR. Some 18 senior instructors were sufficiently convinced to see the need for a revamping of the CCIM curriculum, which for years had been teaching the equity rate of return.
Other considerations counted, as we have seen. The instructors were being nagged by the possibility that their work was not sufficiently professional. Committed to professional goals in real estate, they wanted professionalism in their teaching, too. They supported Lyon in his desire to seek out a professor.
The road led east, to the University of Connecticut, which had the nation's first and premier real estate program. Lyon as chairman of the CI council saw Robert Harvey, who was doing consulting for the National Association of Realtors. But Harvey couldn't spare the time. Neither could another who Lyon named. The second named a third, Stephen Messner, who Lyon had not heard of. Messner was available.
Who was Messner? He was former head of the University's finance department, one of the country's top 10 finance departments. He was young, eager, competent. He would come to Chicago for the scheduled meeting of instructors in March 1972.
Messner came in March. His plane was late, and he had to join 18 arguing instructors over dinner. Starved, he sat to a big meal, apparently oblivious to the turmoil into which he had landed.
Lyon sent Ruth Ellis, the CI division's administrative secretary, a note. Nothing's to be accomplished tonight, he wrote, rueful. The dinner meeting broke up, Messner well fed and the instructors still hot over their argument.
Next day it was another story. The next three days, in fact, were different. Messner and the instructors battled it out, and when it was over, everybody won -- he, the long-haired professor, they the hard-nosed Realtors. Out of seeming chaos, they devised a professional program. It was magic. That's what Ruth Ellis called it, and the name stuck.
All those independent-minded people, everyone an entrepreneur, in one room for three days, and out of it came unanimity. Since then CCIM instructors have held periodic “magic meetings” -- long-range education planning sessions, which are wipe-the-slate-clean time, time to rethink it all, from top to bottom. It's one of the secrets of their success.
That was 1972. Messner remained a CCIM consultant for many years until retirement. What happened in Chicago has turned out to be a happy marriage between the academic and the practical. From it came from a demanding program with half-day examinations at the end of each week-long course, a comprehensive day-long exam at the end, and an impressive dropout rate.
Academics survey the course periodically and rank it “university level stuff and useful to boot,” says Messner, who calls CCIM courses “as rigorous as the CPA or bar exams.”
CCIM instructors are evaluated yearly by a faculty committee. Course materials are sent out for critique by university professors. They had what they know about what is not yet in use by practitioners. If the courses tell only what's being done already, says Messner, they have no “cutting edge.”
IRR is an example of cutting-edge instruction. Before its adoption by CCIM, commercial real estate was the laughing stock of the investment world for its clinging to equity rate of return, according Bob Ward, CCIM, who served as a CCIM instructor from 1972 until his death in 2015. CCIM didn't discover it, but it was introduced by CCIM to the industry and beyond it to mortgage bankers, pension fund, and savings & loan professionals who learned it in CCIM classes.
The new courses following on the first magic meeting premiered in December 1972. The following year opened with new “point credit chart” for CCIM candidates. The new curriculum offered six-day courses about financing, taxation, exchange, acquisition, and investment analysis. Courses A and B gave fundamentals for investor and user. Course C gave marketing approaches. Course D used case studies.
The candidate earned 25 points per course and 25 for three required “demonstration reports.” He had to earn 75 more for various electives, as five for each year of candidacy, 10 for the introductory course, five per non-CCIM course, five per year of pre-candidacy experience, and more. The candidate was admitted to the course only after passing an interview by an admissions committee and presenting a resume of transactions completed over the preceding two years.
More than 3,100 took the courses in 1973, more than 4,200 the next year, not quite 3,900 the next year, more than 4,500 the next year, and up and up: 5,400, 7,200, 8,800. But in 1980, in a time of economic downturn, the number dropped to 6,500, then rose to 6,600. That early 1980's downturn was industrywide.
But even with the drop, the course takers more than doubled in eight years. CCIM was selling. The brokers' Institute became the Realtors National Marketing Institute. CCIM and the other educational programs, in brokerage management and residential sales, had a marketing emphasis in common. So RNMI it was, or “Rinmy” to the regulars.
Some years later, the commercial-investment, or CI, Council got a new name too, the Commercial Investment Real Estate Council at the same time it achieved a degree of independence.
Other issues arose periodically. One had to do with marketing or salesmanship, as opposed to investment analysis -- “numbers” vs. marketing, as some said. Or as Jay Levine put it in saltier language, numbers vs. “love-me people.” At any rate, in 1974 a fifth core course was added, in communications.
“It was a course you couldn't fail,” Levine says. At the same time, it filled a need some took seriously, “on the behavioral side,” as Bob Ward said. The course was “treated as a stepchild,” he noted, but was later integrated into the rest.
Meanwhile, the IRR was discovered to have some flaws. It gave too narrow a view of an individual's investment situation, Jay Levine discovered. He was working with a computerized investment-analysis operation in Detroit called Realtron, which gave answers by telephone in the early 1970s to Realtors in California. But Realtron could not make its way past certain obstacles. Levin, frustrated, turned to Steve Messner.
Messner and a colleague named Finley went to work on it and devised yet a better yardstick than IRR, which as good as it was, wrongly assumed that money could be invested at an “internal rate” to cover future losses, or “negative cash flow.” IRR ignored differences in size and duration of investment.
Finley and Messner wrote about the new yardstick in 11 journal articles and eventually put their names to it, calling it the Finley-Messner Rate of Return, or FMRR. Otherwise, it is called the Financial Management Rate of Return.
FMRR called for more computing than then unaided mind could achieve, however, even more than IRR had, and with its ride came the rise to prominence of the first hand-held calculators. They were followed by computers, some of which were too noisy to allow into the CCIM classrooms. Eventually, the personal computer became standard, at least for some. Even in 1998, the issue was still being debated about whether the CI practitioner had to be proficient with the personal computer.
Messner argued it was essential. The young practitioners coming out of business school would have it as standard ability. CCIM courses could do no differentially. For some it may have been déjà vu realizing that the new exchange and taxation ideas of the late 1960s may have their counterpart in personal computers of the late 1980s.
Some educational-marketing changes followed in the early 1980s. The old introductory course was replaced by the “showcase” course, which would now act as feeder to enrollment. It was the road-show equivalent of the Intro course, a series of one-day stands like the traveling course given in the Southeast in the early 1970s.
The showcase approach didn't go over well, but in the same year, CCIM unveiled its continuing education programs for designated CCIMs -- a member service that was to multiply in the 1980s. The first of these covered development of shopping centers and office buildings.
Also, that year a course was given by negotiation expert Gerard Nierenberg. Such super sessions are still given in 1988, in a “university” format offering half-day electives over three dates. Course revisions continued as well. The case-study course was changed greatly in 1983. This is when the personal computer was introduced to CCIM classes as a tool in analyzing income-producing properties.
By 1988, the program was five courses requiring 200 classroom hours. These were taught by 84 entrepreneur-instructors, including CCIM founders Lyon and Levine. There were 8,000 in the program -- 5,000 in courses, 3,000 already designated.
The ferment was still there. A survey showed that only 15 percent of commercial real estate professionals were doing much investment brokering while the CCIM program was 85 percent investment-oriented. As a result, more course work went into user brokering.
CCIM courses have an appeal beyond CI practitioners, with up to 35 percent of students coming from outside their ranks. Mortgage, tax, and corporate real estate companies, including McDonald's and Southwestern Bell, to name two, send their professionals to CCIM courses. The issue is sensitive in some CI quarters. At a 1988 national meeting, it was argued that the CI council should not give discounts to prepaying corporate buyers of classroom seats, as was proposed and eventually approved by the Council.
Jay Levine and veteran Jim Baker, of Portland, Ore., opposed this, holding for course availability to the “little guy” whom no one else cared about rather than corporate buyers like Coldwell Banker. But nine of the newly minted CCIMs were from Coldwell Banker, argued supporters of the proposal. Besides, as others said in other contexts during the meeting, CCIM was a product as well as a program; and it deserved marketing like any other good product. So the Council voted to give the discount.
The desire to succeed in these courses is strong indeed. After examinations are given, 350 calls a day are taken by the Chicago office from students wanting to know if they passed or failed. Some 7,000 take courses and exams a year. As tough as they are, only 20 percent fail.
The instructors also worry about how well they do, to judge from the soul-searching at convention time. Should they have more and more “discovery learning” in small groups, rather than lecture style classes? How much should they depend on audio-visual techniques? How much emphasis should be given to computers? These and other questions are debated.
That's education. The Council itself -- commercial and investment Realtors within the National Marketing Institute -- is something else. With its success with CCIM education have come questions about the Council's situation that are in process of being answered. They who have learned to be professionals are wondering whether they must do it more or less alone in the world of real estate. That's what the final chapter is about: autonomy.
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