Creit Case

CREIT '' The Property Investment Decision Problem Identification Vice-president Richard Dansereau is faced with the challenge of presenting a property investment decision to CREIT’s senior board. In assessing each possible alternative, he must bear in mind factors contributing to each property’s attractiveness, their price levels in the context of today’s markets, and whether the potential acquisition(s) are consistent with CREIT’s strategy, all the while considering the trust’s recent, aggressive moves to increase the overall size and diversity of its portfolio. Dansereau has two choices: a residential property outside Montreal called Lakeshore Towers and Oak Brook Place, a retail complex in a suburb of Chicago. He must choose to acquire one or both properties. Current Situation Analysis CREIT’s investment strategy is “to invest in quality assets for long-term ownership.” Its investment portfolio is diversified by both region, and by asset-type. Generally, its financing strategy is on the conservative side (with an average of 43% debt). CREIT ensures each property meets its potential by redeveloping older properties, renovating, and attracting the ideal tenant mix. There are nine other REITs operating in Canada. Criteria Each alternative presented to Dansereau must be evaluated against a clear set of criteria. The following have been outlined as key factors that affect the value of real estate: location; income-producing factors such as age and quality, environmental conditions and replacement value; the strength of tenants; newly constructed competing properties within the trading area; attainability of financing; and macro factors such as vacancy rates, the strength of the economy, and the strength of the specific market. In terms of specific criteria based on the asset-type, residential factors that pertain to Lakeshore Towers including price per unit; high-rise vs. low-rise; and concrete vs. wood-framed. Retail factors that pertain to Oak Brook Place...