Case Detail

Case Summary

Golden Opportunity: Commercial Real Estate Valuation

Case Number: 5-311-507, Year Published: 2011

HBS Number: KEL595

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Authors: Craig Furfine; Sara Lo; Daniel Kamerling

Key Concepts

Commercial Real Estate, Pro Forma Analysis, Sale-Leaseback

Abstract

Aurelia Dimas had been sent to investigate the various properties being offered by the State of California in the form of a sale-leaseback agreement. The opportunity was perfect for her firm, Orrington Financial Partners, which had recently expanded its fixed-income portfolio to include real estate. The wide range of offerings in the Golden State Portfolio provided both diversification and stability over a period of decades. She had spent the last week walking the halls of each and every building to see the offering first hand. Now, the task of valuing the portfolio rested on her shoulders.

Learning Objectives

There are two primary teaching objectives to Golden Opportunity: (1) to expose students to real estate valuation and (2) to understand the issues with a sale-leaseback investment.

Students are required to justify how and why they make adjustments to the cash flow forecasts provided to them by a real estate advisory firm, to explain their methodology for arriving at a specific value for a piece (or a portfolio) of commercial property, and to debate the pros and cons of a sale-leaseback structure.

Number of Pages: 18

Extended Case Information

Teaching Areas: Finance, Real Estate

Teaching Note Available: Yes

Geographic: California, United States

Industry: Real Estate

Organization Name: Orrington Financial Partners

Organization Size: Small

Decision Maker Position: Head of Real Estate

Decision Maker Gender: Female

Year of Case: 2010