Final Project Real Estate Development Harvard Case Solution & Analysis

Final Project Real Estate Development Case Solution 

Proposed Structure

There is no clear data given in the case with respect to the ownership structure of the project. It is expected that 55% of the total development cost will be financed through bank loan as the bank promised to provide finance at a fixed interest rate of 5% for next eight years. Hence, 55% of the development cost will be financed through debt and it is expected that the remaining part of the development cost will be financed through equity.

It is expected that the owners will provide land only and will hold stake of 35% of the project as the land is occupied at a developed area and it has significant worth, therefore the land owner attained 35% of the total project. The remaining part of the ownership is entitled to the finance provider and developer.

It is expected that the finance provider will provide more finance in order to develop the land and bears most of the risk with respect to the project, therefore the finance provider will hold 50% stake in the project.

The project development manager is investing his time and efforts in the project, however he is not bearing any significant risk as the land owner and finance provider are facing because he is not investing any capital into the project.Therefore, the ownership percentage of the project development manager is lowest among all which is just 15%.
Linking project manager’s stake with the projected return from the project will be beneficial for both investors and land owner as the project manager will try to perform all processes effectively in order to increase his return. As there is a significant potential of positive inflows with respect to the project, therefore 15% ownership for the project development manager will be sufficient............

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