In February 2008, Madison International Realty was presented with the opportunity to buy an additional equity position in the partnership that owns the Mayfair House—a 10-story, trophy-quality office building located in the Mayfair submarket of London’s West End. Although the fallen Lehman Brothers firm was the principal holder of the property, it was still seeking to maximize proceeds from the estate and was not accepting bargain-basement valuations.
A new Columbia CaseWorks case by Lynne B. Sagalyn, “Liquidity-Driven Investment Opportunities: Mayfair House,” challenges students to consider the pros and cons of Madison acquiring this remaining unsold equity, determine whether and how much to invest, and think through the provisions in the partnership agreement. The case provides students with information on the UK real estate market, the terms of the partnership agreement, and an investment spreadsheet.
The case highlights a dramatically different profile than that of a typical real estate private equity fund and prods students to understand the business model of an enterprising firm in an underexploited niche: buying illiquid partner interests. In order to come up with a clear recommendation on the case problem, they will have to integrate both quantitative and qualitative elements of valuation.
The case, published in summer 2012, was taught by Professor Sagalyn in the spring 2012 Advanced Seminar in Real Estate, and the student presentation from that class accompanies the teaching note. Sagalyn is the Earle W. Kazis and Benjamin Schore Professor of Real Estate and director of the Paul Milstein Center for Real Estate and the MBA Real Estate Program.
Columbia CaseWorks develops teaching cases and materials for use in Columbia Business School classrooms. All material is closely tied to and based on the research and expertise of Columbia’s world-class faculty. Columbia CaseWorks Cases are available to both Columbia Business School and outside faculty.
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