GRAY BAR SYNDICATIONS Harvard Case Solution & Analysis



Graybar was formed in 1937 and owned by the New York Central, it covered the area of 102.466 square Ft and consisted of 11.6% of gross rental value. The case is useful to provide information to the potential investors in the field of rental financing. In the particular situation, Graybar was the largest building of Businesses covered 30 stories with ground floors and interior shops. The story highlights the attractiveness of valuable Investors in Rental businesses.

However, sudden changes in 1977 ledto the increase the level of risk for holding the lease agreement by the investors. Therefore, following analysis has taken into consideration in order to determine the net worth of the lease and the building in the selected period. It would help the investors under the lease agreement to analyse the potential consequences for holding or withdraw the lease.

Key factors to consider when analysing the rental income

The syndication of real estate has been successful since the early 19th century. However, the inception of Graybar Building reached high ratio of occupancy which was 99.8% in 1957. It has been indicated that the gross value would be the best choice for new investors to engage in tenant agreement to generate high income.

Since there were dozens of agreements between lessors and lessees, it could make even more profits for the newcomer. The fact that every tenant acted as a broker in this case indicates that the tenantsweremade between sub-lessors and sub-lessee.

It could be further expanded by increasing the number of these tenants. This process allowed the new tenants to increase their profit margins in order to pay the rents properly. Metropolitan Life Company was the lessor of this building and provided the opportunity for each new tenant to happen. This would benefit the new participants to subcategories the process in order to pay sufficient amount mentioned in the given agreement and also to recover their drawbacks on operational costs. All the opportunities would be favourable for the investors to invest in a real estate. It would provide additional benefits and opportunities for the small investors to increase the level of size in operations and generate desirable profit margins.

Evaluation of operations

It has been analysed that some legal agreements would require in order to participate in a business of real estate. The first thing to consider was the minimum amount of investment as $10,000 in a view to qualifying for a tenant. On the other hand,25% of the fixed deposit would be consideredfor the participation in overall investment.

Under the terms of an agreement, every participant could renew the contract to expand for further years. The first contract described the period between 1957 and 1978. It could be further extended whether the parties were interested in holding or not. The term of deposit shows that every participant would pay the rentals mentioned in the initial stage of the contract.

 If the party would default due to some reason, then it should still pay the rentals according to the terms and conditions of the agreement. In that case, the investors would have the advantage to enjoy the continuous rental income. On the other hand, the structural size was huge to allow the new tenants to fill the vacant. It would allow the holder to restructure the building regarding upgrading size and all the activities associated with daily operations like water, electricity, and etc. Moreover,the building was 30 years old in 1957 and needed some changes to maintain for further years.

However, the threat for the lessor would be to resize the building's structure because the building was already filled with the occupation and this could hurt the tenants, who were already operating in the building..............

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