Concord Center Harvard Case Solution & Analysis

Concord Center Case Study Solution

What are the steps involved in the real estate investment process?

The investment into the real estate is very complicated because of huge and long-term investment. The steps are involved as acquisition of land, investment plan about what business would be suitable at this location, and construction as per the business plan, and prior to construction permission from the government, and other legal issues are negotiated before commencement of the construction. State and Federal governments are stakeholders into the real estate investment, so taking them into confidence is important.

Firstly, the real estate investment is very complicated given that huge investment is required for a long-term period, and that it is also not most liquid investment. Secondly, the investment plan has to be built based on the market research considering various factors, such as if shopping mall has been planned, then its location should be prime, and near to population, and nearby residential areas to let customer come for shopping. Thirdly, the permission about the construction of building should be acquired, and all legal and regularity issues should be addressed appropriately.

What are the conflicts?

Sturgess and Galactic had worked on this project for 10-years, and they had already put good amount of money into the project. The conflicts raised from as the bank financing was insufficient for the project that created chaos as the Jennifer White commented that project would be able to get financing between the $85 million to $100 million construction loan, leaving gap of $5 million to $20 million in the investment project.

So, the Morgan Sachs was not ready to finance the Super-regional shopping center with amount of $133 million. On the other hand,Government has also backed from investing into improving the roads around the shopping center, and improvements to roads would costs around $20 million to both partners. Meanwhile, given these complexities into the project many anchor tenants went backward from their commitment to project, and cancelled their registration as anchor tenants.

Some local environmentalists has also denounced the project as harmful to the natural beauty of the site, and that it would overburden the capacity of local streets that would lead to traffic jams, and local merchants also attempted to criticize, attempted to put barriers to project. Due to these conflicts, and issues the construction delayed, because it could not start at contracted time, the Redevelopment authority rejected to give extensions on the project given that contractors has lost their rights to construction building because they had not started work yet.

What are the goals and tasks to be accomplished in each step for each party?

The goals and tasks for the both parties are project’s feasibility, and successful construction of the building, and operations of accommodating the tenants and make itprofitable for the partners. Specifically, the acquisition of land should be on the true value at prime and commercial location of the area based on the investment plan or business plan. Because, the land once acquired, could not be sold out immediately. So, a strong market research, and knowledge of demographics, economy, and area was necessary to make decision about the acquisition of the land.

Similarly, the second step is acquiring the permission from the State and federal governments, and other regularity authorities to construct the building. Since, the both partners has to comply with the government rules and regulations and meet with any obligation that might upon the project. So, both partners have to meet with these obligations, and they also have to ensure completion of the construction on time without any delay because any delay might result in fine or cancellation of construction permission, and no extension might be given to the project.

The third step of the project is the construction of the building, and accommodation of the anchor tenants into the building. So, in this step the goals and tasks of the both parties should be that construction of the building should be as per the business plan, and considering all environmental and social factors as some community members has already showed their reservations over the construction of the building. So, the construction of building should be as per the business plan, and it should not delay as well, and it should also try to address the reservation of the community members.

Concord Center Harvard Case Solution & Analysis




How would you put the deal together if you represent these parties?

The deal is very attractive in term of long-term investment at the prime location that has good potential into the market near future. Since, the NPV of the project is positive $64.67 million, based on 20 years projections with IRR of 4%. See Spreadsheet for calculations.This is minimum level of NPV based on some key assumptions, no NPV is calculated based on optimal level as potential level of the shopping center. So, it can be determined that from investment point of view the project is profitable, and makes sense. Since, other factors would likely to increase revenues such as the car parking fees, and the stalls at shopping center. The deal worth to be finalized, and financed by bank or financial institution in terms of profitability, and operations. There is huge potential growth and expansion opportunity after the successful completion of the project.........................

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