JKJ Pension Fund Harvard Case Solution & Analysis

Property 3: Wilshire Ground Leases

Wilshire Ground Lease is classified into three ground leases that includes Wilshire East Associates, Sid’s Restaurant and Banco Los Angeles. The Wilshire East Associates has no renewal policy while the lease of this option would end in the year 2043 with the Net fixed rent of $58,000 annually. In addition to this, Sid’s Restaurant has renewal options of 2*55 years @FMV along with the Net fixed rent of $74,996 annually, while lease of this option would end in the year 2017.    Lastly, Banco Los Angeles has no renewal options and lease of this option would end in the year 2023 with Net fixed rent of $85,000 annually.

Moreover, the level of the risk associated with the Wilshire Ground Lease is low as all the three available options are presently leased. The capitalization rate for the office and industrial properties is 8.5-10%.

Decision (SELL)

Sarah Griffin should sell this option as the market value $ 1,981,782 ofWilshire Ground Lease is more as compared to its investment $1,500,000.

Property 4: Riverbank Central Hotel

The Riverbank Center Hotel is a 28 story structure that contains 375 rooms and is a 161618 square foot building. The hotel is a 4-star and AAA 4-diamond rating hotel as well as it enjoys the easy contact through interstate 10 and 65. The occupancy of the hotel in the year was 53% that was expected to increase by 58% in 1994 and 60% in the year 1995.

Furthermore, the cash flows for the Riverbank Center Hotel are positive, indicating the favorable results for the future growth and earnings for the investment. While the level of risk is moderate and the capitalization rate for hotels is range between 9.5-12%.

Decision (HOLD)

Sarah Griffin should hold this option as the market value $3,712,102 of the Riverbank Center Hotelis less as compared to its investment $18,750,000.

Property 5: Riverbank Center Office Building

The Riverbank Center Office building is a 13- story, 161618 square foot office building that is connected to the 28-story Riverbank Center Hotel. It consist of three tenants that include AmSouth that expires in 1997, Ambrecht Jackson also expires in 1997 whereas Merrill Lynch that expires in 1999.

Furthermore, the level of risk is less as it is the premier office building and the capitalization rate for office building isranging between 8.5-10%. Whereas the cash flows for the Riverbank Center Office building are positive, demonstrating the favorable results for the future growth and earnings for the investment.

Decision (HOLD)

Sarah Griffin should hold this option as the market value $ 6,065,005 ofRiverbank Center Office building is less as compared to its investment of $ 12,400,000.

Property 6: Empire Hotel Rochester New York

The empire Hotel is a 7-story structure that contains the 364 guest rooms and is located in the heart of the downtown Rochester. In addition to this, it has two food and beverage outlets as well as hotel has over 16,000 square feet space that is available for the banquets.

Likewise, the cash flows for the Empire Hotel are positive signifying the favorable outcomes for the future growth and earnings for the investment. While the level of risk is less as the cash flows are showing a more positive trendand the capitalization rate for hotels is ranging between 9.5-12%.

Decision (HOLD)

Sarah Griffin should hold this option as the market value $ 10,341,730 ofEmpire Hotel is less as compared to the investment of $ 14,320,000.

Property 7: Maplewood Apartments

The Maplewood Apartments contain 304 rental units that are housed in 19 two-story buildings. An average apartment contains the space of 866 square feet and it requires some capital improvements in order to update its reputation as well as to remain competitive in the market.

Furthermore, the cash flows for the Maplewood Apartments are positive, indicating the favorable results for the future growth and earnings for the investment. The capitalization rate for the office and industrial properties is ranging between 8.5-10%, while the level of risk is moderate.

Decision (SELL)

Sarah Griffin should sold this option with the market value of 12,160,000 asMaplewood Apartments are the oldest apartments in the city and customers are mostly attracted towards newly renovated and furnished apartments in the region.Therefore,it is very important to sell it immediately.

Property 8: Midtown Mall

The Midtown Mall is a regional shopping center having an area of 920,000 square feet that includes three anchor stores and 150 shops. Additionally, the cash flows for the Midtown Mall are also positive, representing the encouraging outcomes for the future growth and earnings for the investment. The capitalization rate for the office and industrial properties ranges between 8.5-10%, while the level of risk is low...........................

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