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IBET Pension Fund Case Solution

Solution Id Length Case Author Case Publisher
1325 1071 Words (7 Pages) Arthur I Segel Harvard Business School : 800133
This solution includes: A Word File A Word File and An Excel File An Excel File

The objective of this analysis is to understand how property valuation functions in real life scenarios. Considering that Marisa considers IBET a significant player in the real estate sector, she knows that there is ample opportunity for the fund to increase its exposure in the real estate market. Since the Trustees are willing to invest an additional $100 million in this market, there is a good opportunity for Marisa to capture another major chunk of the market. The analysis will focus on four of the properties presented in the case study and an overall opinion on how their valuations should be viewed from an investor’s perspective.

Following questions are answered in this case study solution

  1. Greenway Point

  2. The Lakes at Brice

  3. Garden City

  4. Downtown Dallas Land

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Case Analysis for IBET Pension Fund Case Solution

1. Greenway Point

Source: Excel Sheet

i. Market Analysis

The market is developing at a rapid pace, and the research and development business also raises a certain level of uncertainty. Moreover, the company also has a mortgage of 10 years timeframe so using simple capitalization approach will not be suitable. The two new properties being constructed near the facility also raise questions regarding future stability for the property’s business.   

ii. Valuation Strategy

The strategy used here is the detailed discounted cash flow approach as simple capitalization will not be suitable. Since the case itself points out that other than Greenway Point, most of the properties can be valued by capitalization method, so it has been used here. The strategy does not assume stable Cash flow from operations, unlike the capitalization approach. However, after five years cash flows are projected the resultant value is then worked under capitalization approach to arrive at a valuation.

iii. Assumptions

As mentioned earlier, Cash flow from operations is assumed to have not stabilized which is the reason for choosing detailed discounted cash flow approach. The growth assumption for operating revenues and operating expenses is at 3% as given in the case. For cap rates the suitable values from Table 1 for research and development buildings have been incorporated over three different scenarios.

iv. Potential Improvements

This is quite a detailed approach and more reliable than other measures hence no potential improvements are required.  

2. The Lakes at Brice

Source: Excel Sheet

i. Market Analysis

The market is developing at a gradual pace in downtown Columbus and Port Columbus area. Since new supply coming online is minimal so cash flows will be stable, and furthermore, the rents are also not expected to vary by a significant margin in future years. The cap rates have been used as suitable for apartment units as given in Table 1. The various rates provide a range of values that might give a more holistic view of the valuation.

ii. Valuation Strategy

The strategy used here is the capitalization method. Since the case itself points out that other than Greenway Point, most of the properties can be valued by capitalization method, so it has been used here. The strategy assumes stable Cash flow from operations which has been divided by a range of cap rates.

iii. Assumptions

As mentioned earlier, Cash flow from operations is assumed to have stabilized which is the reason for choosing capitalization approach. For cap rates the suitable values from Table 1 have been incorporated over three different scenarios.  

iv. Potential Improvements

Given more time, a detailed discount cash flow model would provide additional insights into the analysis. However, extra information such as utility rates, taxes, etc. would have to be provided.   

3. Garden City

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