BROOKWOOD CP INVESTORS, LLC Harvard Case Solution & Analysis

BROOKWOOD CP INVESTORS, LLC  Case  Solution 

INTRODUCTION

Brook wood CP investors, LLC, isa limited liability company. The company will acquire ownership interest in commercial place 1 and 2 located in the commercial boulevard sub market of Fort Lauderdale, Florida, as a tenant-in-common with a wholly-owned subsidiary of Brook wood U.S Real Estate Aggregator.

The company has a business plan to increase the property’s occupancy and to renew the existing tenant leases. The company will offer attractive leasing plans with improvement in the project. The company will need finance for funding of its entire project.

Business plan

The property consists of the four-story office building and three-story office buildings that are constructed back in 1990 and 1999. The property is currently having occupancy of about 83.9%. The property offers tenants standardized amenities and utilities as well as café, conference rooms and fitness club.

The company has a plan to offer in its proposed offerings and it has strategies for it which areas follow:

Firstly, offering competitive prices for leasing that will be in a complete package with all value addition. Secondly, the company wants to make its position strong in the market, as a leader in quality property dealer through making huge capital improvements. The seller has already invested $800,000 in capital improvements and is planning to make another $1200000 to make further enhancement to the property.

Problem statement

The projections presented and estimations made are not worthwhile and reliable as per investors’ point of view. They have concerns over its accuracy and doubt the assumptions made may be unrealistic and non-standard. Moreover, they have other risks that they perceive in the project. All these need to be successfully accounted for and solved so that investors’ confidence in the project becomes strong and their risks and concerns are removed in order to make them interested and willing to invest in the project.

Opportunities for investor

The plan has the potential of being attractive investment for the investor sector. The manager of the project is assuring that the project will yield steady cash flows for the investors and potential for capital appreciation. Following are the reasons that will catch the investors’ attention for investment:

Favorable location

The location of the property is near the main north-south highways. The renowned Florida Turnpike is within the limit of minutes drive. Furthermore, the property is within 2 miles of the Fort Lauder dale, and 14 miles of the Miami International Airport. The location also provides excellent exposure and proximity to the business infrastructure. The suburban Fort Lauder dale area has a large array of institutional owners, income trusts and other public and government authorities’ buildings.

Quality Asset

The quality is at its highest since the property is in commercial boulevard sub market and has new construction, high quality amenities available. Furthermore, the quality will be enhanced more by investment in the capital improvement by the seller. There will be addition of the mechanical system and high class elevators. The property is able to compete with the same class property in the other market easily.

Attractive purchase price

The purchase price offered is attractive and below the market aggregating to $133.96 per square foot, which comprises of by taking into account as follow:
• The estimated current replacement value of $269 per square foot is discounted by 50.2%
• A discount of 30.7% was given on the paid price of $33.9million
• A discount of 23.7% discount to the average acquisition cost of $175.63 per square foot in comparable property purchase..............

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