Street Street Case

1. Evaluate River Triangle’s business strategy. Should the Cousins have invested in Seventeenth Steel Street from the beginning? Were the risks worth the returns?

River Triangle’s business strategy consisted of the following 4 essential benchmarks, that the firm would evaluate any potential property investment prior to acquisition:

1. Give investors strong returns.

2. Complete renovation within six to nine months of acquisition.

3. Bypass many of the regulations from City Hall through renovation versus new construction.

4. Target the middle-income market and so reduce business risk by avoiding the upper- or lower-income markets, which had less depth.

Moreover, based on their property portfolio, the firm has only invested in multi-family home apartments building and strip-mall properties. Typically, the firm would follow the below steps throughout the investment process:

• Target and acquire a some-what rundown property

• Perform repairs and renovate it within 6-9 months

• Lease it out at much higher rates than before

Because they would renovate a property, rather than a complete redevelopment, they would typically achieve rents that are 30% lower than new developed properties. However, because they are renovating older properties, their costs are generally 40% less than developing a whole new property, making them make money on the spread, and generate an average cash-on-cash return of 14% to their investors.

Because they were a lean organization, they knew that cutting costs would go a long way; this is why instead of hiring professional contractors to perform repairs and renovations Colmo would organize teams of carpenters, plumbers, and painters from his local church to do the necessary contract work. Up to the point of before Steel Street, it seems that the strategy of the firm has been sound since they have accounted for their limited resources when seeking and executing investments.

Taking in mind the above business strategy that...