Case: SouthPark IV.

This case relates to a very different kind of property -- an industrial building -- but the basic process of evaluation is very much the same. In the case, an individual investor -- who has raised some equity from friends -- is searching for their first industrial property. He has studied the market and reviewed the "set-ups" of a number of properties.

The case focuses principally on the financial aspects of his decision to bid on SouthPark IV and details some of the calculations he -- and the Bank offering the foreclosed property -- have prepared. He makes a number of revisions to the Bank's numbers -- and now must decide how to proceed. As you prepare this case, please place yourself in the potential investors' shoes and think about these issues:

• Do you want to own this property? Why? Why not?
• What are the economics of owning it? What are the risks?
• What is the value of the property to you? What are the key assumptions you must make to arrive at this value?
• If you go ahead with this deal, what else will you have to do well to make it a success?

Please participate to the discussion and voting on e-campus.

ASSIGNMENT: Please create and submit before class an EXCEL spreadsheet  pro-forma analyzing the profitability, return, and value of this property, including its NPV, based on buying it at a price you feel you can negotiate, and holding it for five years before re-selling it at a price nine-times fifth year expected net pre-tax income.  You may use parts of the Anderson Street approach to speed this process.

In class, we will review these Draft projections -- but we will not grade them.. After the next weekend, you will then submit a revised, final version of your projections and a 1/2-page recommendation to investors -- using e-campus to submit them..