Bonnie Road Harvard Case Solution & Analysis

Bonnie Road Case Solution

Introduction

Garden State Bank has offered to sell Bonnie Road Distribution center, in a short period. The property has an area of 160,000 square foot. It is primarily a warehouse located in Somerset County.  The quoted price for sale is $9.7 million.

Alexander, who was living in Los Angeles from his age of 8, had moved to New York after completing his studies. He worked at Goldman Sachs and after graduating from Harvard Business School, he worked as a research associate at HBS. After sometime, he took the position at AT Realty mainly engaged in acquisitions matters.

He, after several years experience in the real estate investment, wanted to invest and build his own equity. This offer to acquire the Bonny Road property is considered as a great opportunity. He has successfully collected $2.2 million, including $2 million from his 10 friends with each friend contributing in equal proportion. The remaining amount can be obtained through the mortgage loan by the seller.

Property Details

Bonnie Road is a multi-tenant industrial building, and has different functional area including warehouse facility and office place. This building is place on 10.55 acres, has 24 inch clear height, 40x40 column spacing and 24 loading doors.

Qualitative Advantages

Operating efficiency

One of the main attribute of this facility is that it has operating efficiency with reduced operational costs. This is because it has modern technological features such as energy-conserving features, surveillance system and motion detectors etc. the building has well-built infrastructure this adds to the marketability.

Location and marketability

Another positive quality is gained by this property due to its location; it is situated in between the Philadelphia metropolitan regions and the New York City. This enables to have easy access to these populated and industrial regions. Another feature is that it is within the thirty mile radius and has reachability to millions of consumers, employees, household and suppliers. Thus this attributes increases its attractiveness and marketability.

Existing tenancy

The building had been leased to three tenants in the year 2008. At current these three tenants has agreed to extend their tenancy period. Moreover the lease was at triple net, thus any operating cost incurred will be reimbursed by the tenants. Since accepting the existing tenants, the costs and time that would have been incurred to secure new tenant would be saved.

Market Value

As per the valuation made by the expert, the property has value of $10.5 million. The replacement cost which consist of acquiring the property in the same location and manufacturing the industrial building, will be $12 million. Thus the offer to buy the property at $9.7 million is reasonable and even better........

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