Case Study: Gingerbread Condos in City Park

Your Company: Powder Day Real Estate Advisors is a national real estate investment advisory company that provides investment advisory to an international client base with several offices across North America.

Your Role: You have been hired by PowderDay to open an office in Denver, Colorado. Your primary role in you new position is advising clients on real estate investment opportunities in Colorado, including market analysis and financial due diligence.

You decide you will pitch the property to your new client, but first you must decide how you

will market the investment to them. Some of the major attributes to consider are:

• What is the financial risk associated with apartment properties compared with other

property types (industrial, office, retail)?

• Using CoStar data and any other market information you can find, do you think the pro-

forma rents that the listing broker suggest are reasonable, and if not, what do you think

market rents are for this property?

• What is the long-term strategy for maximizing investment return? Do you recommend

any renovations to increase the income that you would get from this property? Are

there any other ways you suggest increasing the rental income of this property like

implementing a RUBS (see definition below)? Is there an opportunity for increasing

density on the site through adding a second story or redeveloping in the future with

much higher density (hint: check the zoning)?

• What will be the exit strategy for this property? Do you suggest a long-term hold,

getting NOI up and then re-selling, or some other strategy?

• Based on the best research available, what do you think is the optimal holding period of

the property to maximize returns for your client?