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By Joseph Noon ’17
On November 17th, the University of Texas at Austin – McCombs School of Business hosted the 14th Annual National Real Estate Challenge sponsored by Invesco. Twenty of the top MBA programs participated in the competition. Columbia Business School, represented by Mark Abramowicz ’18, Samuel Fenwick ’18, Anthony Feenick ’17, Daniel Liu ’17, Nicholas Mellis ’17, and Joe Noon ’17, placed 3rd in the competition behind the host university and Northwestern’s Kellogg School of Management.
This year’s case centered on a potential Chicago suburban office investment and a downtown Boston hotel opportunity. The case was handed out to students on a Thursday evening and they then had the weekend to prepare an investment thesis, underwrite the two properties, structure the JV terms, and evaluate potential debt terms on behalf of Highland II, an opportunistic private equity fund with $150M to invest in a short 7-month investment period. Highland II had adequate funds to invest in one or both of the properties. The culmination of the case resulted in a 20-minute presentation to judges serving as the investment committee for the fund.
Judges were impressed with the Columbia team’s ability to tether a business strategy to the capitalization and financing decisions in a cohesive way. This was especially true for the suburban office complex in Chicago. The team presented numerous creative mitigants, to limit the risks of the upcoming lease roll, creating an asymmetric return profile with downside protection. Columbia’s team felt that given both assets provided 18% IRRs to investors, Highland II could simply not pass on either opportunity given the current low yield environment and the short investment period remaining to put the Highland’s capital to work. In reality, both assets – Commerce Plaza in Oakbrook, IL and the Ames Hotel in Boston, MA – traded in 2016.
The Columbia Business School Real Estate Association would like to thank Tomasz Piskorski, the Edward S. Gordon Associate Professor of Real Estate at Columbia Business School, for serving as faculty advisor to the team, providing advice and guidance prior to their receipt of the case, and the Paul Milstein Center for Real Estate for supporting student travel to the competition.
Joseph Noon, MBA ’17, is the VP of Case Competitions for the Real Estate Association.