Assignment

• Based upon your analysis and market research would you sell the warehouse today or hold the warehouse for future lease income. If you held the warehouse, would you sell it in the future or keep it?

Skills to Apply

• Market analysis to determine future rental income, sales cap rate, cost of capital.
• Various financial calculations with emphasis on IRR and sensitivity analyses.
• Creativity and imagination regarding the future of this market and the need for warehouse space.
• Capital deployment to improve an asset's appeal to the market.

Assignment Directions

• Create an Excel workbook and upload it to D2L. Include spreadsheets for Index, Assumptions, Sell Scenario and Hold/Lease Scenario by the due date.
• Create a one-page Word document response defending your recommendation to either sell or hold/lease the warehouse and upload it to D2L by the due date. Use the entire page to defend your recommendation.

Resource Materials (Uploaded to D2L)

• 100 North Branch Street Underwriting Report https://d2l.msu.edu/d2l/common/viewFile.d2lfile/Database/OTI3NjgzNTA/100%20North%20Branch%20Underwriting%20Report.pdf?ou=1807673
• 100 North Branch Street Property Summary https://d2l.msu.edu/d2l/common/viewFile.d2lfile/Database/OTI3NjgzNTQ/100%20North%20Branch%20Property%20Summary.pdf?ou=1807673
• 100 North Branch Street Financials https://d2l.msu.edu/d2l/common/viewFile.d2lfile/Database/OTI3NjgzNTE/100%20North%20Branch%20Market%20Financials.pdf?ou=1807673
• 100 North Branch Street Property Analytics https://d2l.msu.edu/d2l/common/viewFile.d2lfile/Database/OTI3NjgzNTI/100%20North%20Branch%20Property%20Analytics.pdf?ou=1807673
• 100 North Branch Street Peers https://d2l.msu.edu/d2l/common/viewFile.d2lfile/Database/OTI3NjgzNTM/100%20North%20Branch%20Peers.pdf?ou=1807673
• www.r2.me website (Investigate this company and its investment strategy. Look at press releases.)
• Excel help room.

Assumptions You Will Need to Research and Justify

• Sales cap rate if you hold the warehouse for lease.
• First mortgage interest rate if you hold the warehouse.
• Market rent for the warehouse. Keep in mind the rent may be different depending on the space within the warehouse. For example, the first floor may rent for a higher price give ease or loading and unloading materials.
• Consider demographics in the market and trends for warehouse space.
• Consider ESG investment motivations of R2 or subsequent purchaser.
• Would you convert this building into another use based upon your research? This approach will require you to make assumptions for alternate income sources. For example, could the warehouse be converted to event or retail space? The warehouse cannot be converted to residential or hotel.

Background Information

• R2 Companies acquired the building in 2014. See Property Summary for acquisition price (I.e., Sold Price in the Summary)
• The building has been vacant since the acquisition date. The company has accrued carrying costs since the date of acquisition including property taxes, maintenance expenses and utilities. See Financials.