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2 IESE Business School-University of Navarra F-957-E AZA Group. Investment in a Hotel Despite the crisis, AZA began to prepare an ambitious investment plan, especially in real estate and logistics, which explains the increase in the group's total assets from 52 to 93 million (72 of them in real estate). The presidents motivation was twofold: to take advantage of the crisis to get better prices, and also the responsibility as a businessman of creating employment in hard times for society. The Coln (Columbus) Project The Coln project consisted of developing several lots on Calle Coln in Valencia to build 20,000 square meters dedicated to parking, a shopping area, a hotel and a public school2 . The

estimated investment was 35 million euros (17 for land and 18 for construction). AZA Group had been working on this project for years, with the purchase of plots of land, permits from the city council, search for tenants for commercial premises, etc. The projects concerning the commercial premises, parking and school were already decided in all their detail (necessary investment, financing, expected cash flows, etc.). Now it was time to make a decision about investing in the hotel. The data (forecasts) and alternatives that the Board was considering to make the decision are shown below. The Hotel Investment The land for the hotel had been purchased previously (in 1996, 2005 and 2010) at a price of 6 million. This cost, updated with the Housing Price Index gave 7.7 million. An appraisal carried out at the end of 2010 gave a value of 13 million, which in 2014 seemed very optimistic. The strong economic crisis since 2008 had deeply affected real estate prices3

. A more reasonable

value would be between 8 and 10 million. The 4-star hotel would be located on Calle Coln, in the commercial and tourist center and one of the best premium locations in Valencia. It would have 100 rooms and a built area of 3,750 square meters. It was aimed at executive clients and/or tourists, with a medium-high price. The idea was to rent it to some large chain, like NH, AC Marriott, Hotusa, etc. The construction cost of the hotel was estimated at 7.0 million (4.8 construction, 1.2 equipment, 1.1 fees and taxes). 75% of construction was expected to be completed by the end of 2014 (year 0 of the project) and the rest (up to 7 million) by March or May 2015 (year 1). A relevant question was what price to assign to the land: a) The acquisition cost: 6 million. b) The acquisition cost, updated with the Housing Price Index: 7.7 million. c) The 2010 appraisal value of 13 million, or perhaps the most realistic 8 or 10 million.