JKJ Pension Fund Harvard Case Solution & Analysis

JKJ pension fund


Sarah Griffin is a portfolio manager at JKJ Pension Fund.She is in charge of the real estate investment department of the company. Sarah Griffin was hired by the company to make the strategy for the company, which includes the plan that how the company should deal with its real estate portfolios as well as to provide advice on the new investments opportunities for the company.

Moreover, the pension funds are one of the fastest ways of savings in the domestic markets and these are the largest pool of private capital in the global market. Furthermore, JKJ pension fund is considered as the significant player by Sarah Griffin in the real estate industry. Sarah Griffin needs to consider a range of issues, from the diversification by property type to the ease of management in order to effectively evaluate the overall portfolio strategy. JKJ pension fund did not make any new investments or sales for three years; instead it focused its efforts to manage the eleven existing properties due to the collapse of the real estate market in the year 1990.

Problem Statement:

Sarah Griffin is facing an issue to provide top management with best advice on eleven real estate properties of the company whether to hold or sell the existing properties and to provide attractive investment opportunities for the company.

Case Analysis:

In the analysis of the case, we will analyze the portfolio and the diversification of all available properties of the company in the case and will analyze the cash flows and level of risks associated with each investment and to suggest whether to sell or hold the portfolio.

Portfolio Strategy for existing properties:

Undeveloped Land

There are three undeveloped sites in this portfolio that are labeled as Lots A, B and C in the Will shire section of Los Angeles. The Lot A’s area is of 120,000 square foot land where, according to current zoning 812,000 SF can be built, Lot B consists of the 180,000 parcels where 900,000 SF space can build and Lot C consists of the 60,000 square foot land where according to current zoning 270,000 SF can be built. Moreover,Lot A can generate the annual return of $35,000 while the Lot B contain Carrying costs about $24,000 per year.

The cash flows of this property have positive future cash inflows. On the other hand, the risk associated with the investment is also low. The capitalization rate for retail and residential is ranging between 7.5 - 9.5% and this hotel is currently leased for 20 years, therefore, the level of risk is low for the property 1 option.


Wilshire Plaza Garage

Wilshire Garage’s area consists of 3,500 spaces on five levels from three are subterranean; this area is located beside the Royale Plaza Hotel. Additionally, there is approximately 1600 monthly car parking as well as 1000 transient spaces that are available on daily and hourly basis. There are also approximately 900 spaces that are used by a near located hotel.
Moreover, the cash flows for the Wilshire Garage show the earnings inflows for the future growth and earnings of the investment. The market capitalization rate for the garage is ranging between 10.0% - 12%, whereas the level of the risk for the Wilshire Garage is medium as Wilshire Garage is giving earnings presently by three different markings............................

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