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MBA students Sophie Ulrike Dorrer ’14, Jacob Feingold ’14, and Matthew Nunn ’14 won first place, the Alexander Bodini Foundation Prize, at the Real Estate Project Class Final Presentations Competition and Awards Dinner at Columbia Business School on December 10. They were one of four teams to present project recommendations in this culminating event of the second-year class taught by Adjunct Associate Professor Andrew C. Jacobs ’96.
From a beach and golf resort in Baja Mexico to a landmark building in Times Square, all four projects involved pre-existing assets. Beyond that, they had little in common, reflecting the wide range of real estate projects that industry professionals grapple with today.
Under the team name BBP and working on behalf of project sponsor, the Sterling Organization, a real estate private equity fund, Dorrer, Feingold, and Nunn tackled a mixed use building on Chicago’s State Street. Though a single structure, the building sits atop four separately owned land parcels. The team analyzed four distinct scenarios, including keeping the current arrangement and leases in place and redeveloping the site, either with or without acquiring the parcels.
Their recommendation? That Sterling pursue the acquisition of all four sites, using a variety of negotiating strategies, extend the anchor tenant’s lease and take back space to clean up and to put on the market, negotiate a sale to a developer, and lease up and ultimately look to sell the retail space by 2020. This fit with Sterling’s fund objectives: 18 percent levered returns, average equity check of $7 million, and a preference for off-market transactions in major markets.
Second place was awarded to Daniel Bertz Sharon ’14, ’14, Max Rosendin ’14, and a third MBA student (unnamed) for their recommendations for the Hilton Los Cabos Beach & Golf Resort (Mexico) on behalf of Thayer Lodging Group. They advised acquiring the property, keeping the hotel operator in place, adding conference space, revamping amenities, and increasing time-share fees to improve net operating income, with an eye toward selling at a favorable point in the cycle.
Benjamin Gliklich ’14 and Alison Kimmel ’14 finished third with “Project Xerox” in the Porto Maravilha district of Rio de Janeiro, Brazil, for GTIS Partners. For this up-and-coming location, they recommended developing class A office space.
The fourth-place team was Geoffrey Bailey ’14, Palmer McArthur ’14, and Scott Meyer ’14, who on behalf of Allied Partners looked into acquiring the landmark Brill Building in Times Square. They proposed a deal to reposition retail space, modernize office space, add billboard signage, and, in a nod to the building’s history, incorporate a songwriter’s hall of fame.
Joe Smith ’99 of 1754 Properties, Erik Horvat ’04 of the Port Authority of New York and New Jersey, and Randy Giraldo ’04 of TIAA-CREF had the difficult task of judging the presentations. Their probing questions shed further insights into the students’ thought processes and analyses and suggested avenues for further exploration. Other student teams had been eliminated from contention prior to the competition.
At the post-event dinner and awards ceremony, Smith commended all of the participants on their excellent work and reminded them that the success of a project is often directly tied to “the cards you’re dealt,” rather than creativity and diligence. Noting that his firm had just signed a deal together with a previous Bodini contestant who did not win, Smith applauded all for taking the opportunity to get to know each other and work together, “which is what CBS is all about.”
Professor Jacobs praised the students for their thoughtful efforts and presentations, exclaimed over the continued improvement from year to year, and thanked Bodini and the judges, commenting on the variety of opinions during the deliberations.
This marked the fifteenth edition of the competition, a signature offering of the Paul Milstein Center for Real Estate. Established in 1999 with a generous gift from the Seevak Family Foundation, the competition was conceived to encourage students working in groups to take an idea and develop it into a comprehensive business plan. For the seventh consecutive year, the competition was intertwined with the Real Estate Project Class in which students work on group projects with industry sponsors. The competition and dinner were graciously supported by the Alexander Bodini Foundation and Daniele D. Bodini ’72.
First Place ($3,600)
|Team Members||Sophie Ulrike Dorrer ’14, Jacob Feingold ’14, and Matthew Nunn ’14|
Sterling Organization (Brian Kosoy, Michael Horne, and Jordan Fried)
The XYZ Building is a 30,000 square foot building in downtown Chicago.
Is this a good investment for Sterling? What are the investment parameters that need to be considered? What constituents need to be satisfied? What are the opportunities to add value? What are the risks?
(l-r) Project Sponsor Brian Kosoy, President & Chief Executive Officer of the Sterling Organization, Jacob Feingold ’14, Adjunct Associate Professor Andrew C. Jacobs ’96, Sophie Ulrike Dorrer ’14, and Matthew Nunn ’14 alongside competition sponsor Daniele Bodini ’72 after announcing the first place winners.
Second Place ($2,700)
|Team Members||Daniel Bertz Sharon ’14, Max Rosendin ’14, and a thirds MBA student (unnamed).|
Hilton Los Cabos Beach & Golf Resort
Thayer Lodging Group (George Dabney)
Opportunity for Thayer Fund VI to acquire a near luxury quality beachfront resort with 339-rooms (plus 36 timeshare units) and strong in-place cash flow at an attractive going-in yield with substantial upside. The seller is being forced into action by the holder of the fulcrum debt position who was recently acquired by Blackstone. The asset’s loan matured and refinancing options have fallen short of the existing debt balance. The hotel was built in 2002 and purchased by the current owner in 2006.
Is this a good acquisition for Thayer? What are the opportunities to add value? What are the risks? You must consider Thayer’s investors, their investment mandate, the status of the fund, etc.
Third Place ($1,800)
|Team Members||Benjamin Gliklich ’14 and Alison Kimmell ’14|
Development site in Porto Maravilha
GTIS Partners (Joshua Pristaw and Peter Ciganik)
GTIS Partners has acquired a development site in the port area of Rio de Janeiro known as Porto Maravilha. The site currently has an existing single-tenant office building with 4,700 sqm leased to a Brazilian corporation at R$25 / sqm until August 2014. GTIS will face multiple execution options with the property when the lease expires. They could re-lease the asset to the existing tenant, find a new tenant, expand the existing structure and upgrade it to Class A specifications, or plan a ground up redevelopment of the site. Further, as part of the transaction, GTIS also negotiated an option to purchase an adjacent building and parking lot from the same seller. The neighboring building is currently being retrofitted and is leased to a long-term tenant, but if purchased and combined with the current site, the assemblage could potentially support a much larger development.
This is GTIS’ fifth investment in greater downtown Rio, and the second one in the Porto Maravilha area. The Port is becoming Rio’s most desirable corporate office submarket for Class-A tenants, as quality space is scarce in the traditional Downtown area. The government has designated the Port for a large-scale redevelopment effort in connection with the 2016 Olympics and has drawn up plans for extensive rezoning and urban revitalization. However, the plan has faced delays and issues stemming from unclear ownership of the underlying land, a complicated rezoning that would potentially allow much taller structures and expansion of FAR, as well as involvement of multiple government agencies in the whole process. The government is investing in excess of R$8 billion in various infrastructure upgrades in the port.
How should GTIS think about the different potential uses for the site and the various expansion options? What are the opportunities to add value? How does the Brazil macroeconomic environment impact the development strategy and timing? What does GTIS need to know about the port redevelopment and the associated supply/demand dynamics of a large rezoning plan with many stakeholders?
(l-r) Adjunct Associate Professor Andrew C. Jacobs ’96 with third place teammates, Alison Kimmell ’14 and Benjamin Gliklich ’14, and competition sponsor Daniele Bodini ’72.
Fourth Place ($900)
|Team Members||Geoffrey Bailey ’14, Palmer McArthur ’14, and Scott Meyer ’14|
Allied Partners (Eric Hadar ’89)
Allied Partners has the opportunity to acquire and reposition the Brill Building, an 11 story, 180,925 square foot office building with lower level retail and billboard signage located at 1619 Broadway (49th and Broadway) in Manhattan’s Times Square submarket. Built by Abraham Lefcourt in 1931, this ornate, art-deco structure was recently named a New York City landmark due to its unique art deco design and influence on the progression and evolution of American culture and society. The Property is currently 47 percent occupied, allowing for a unique value-added repositioning. The deal’s capital structure includes Allied, Brickman & Associates (equity partner), Square Mile Capital Management (preferred equity) and Starwood Capital Group (first mortgage).
Is this a good investment for Allied? What is the highest and best use of the upper floors? What are the investment parameters that need to be considered? What options are available to Allied? What constituents need to be satisfied?
(l-r) Adjunct Associate Professor Andrew C. Jacobs ’96 with the fourth place team, Scott Meyer ’14, Geoffrey Bailey ’14, and Palmer McArthur ’14, and competition sponsor Daniele Bodini ’72.