Case Analysis: Steel Street Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Case Analysis: Steel Street Case Solution

Decisions that led the cousins in to the current state of problems

Selecting the Rights Architect

The company chose Yvette Lastanga as its architect, as she was an award winner in making exterior designs and had sufficient experience to renovate old building to look like new. However, the cost was higher as compared to Michael Romeo and associates as Romeo was providing the same services in $15,000 while Lastanga was charging $35,000. The reason behind selecting her was her competencies and skills in renovations. Moreover, the decision was correct to choose her as the architect but lack of integration among the contractor and architect made this decision wrong and led the project towards late completion.

Choosing the Appropriate Contractor

The company viewed many contractors and asked them to bid for their services. However, the reason behind this was to keep the work on track and to stay cost efficient. There were several contractors,which submitted their bids. Among them two contractors were under consideration, Harper and Polowski,while the other one was American syndicate. Moreover, American Syndicate submitted its bid at $150,000 per floor, which was almost 50% above the projected cost. However, the company gave this contract to Polowski and chose him as the general contractor as the cost provided by this contractor was same as per the forecasts. Furthermore, the selection of this contractor was quite feasible however, he did something wrong as he didn’t followed the safety precautions during the renovation process which threatened the company to face more legal problems.

Financing the Deal

The company mainly financed the project from three primary sources; the first source was a mortgage of $1.08 million for 10% interest rate while the second source was a mortgage of $1.03 million at the same rate. However, in the second mortgage, the cousins had to pledge their homes as collateral. Finally, the last source was a hedge fund which raised $600,000 for a 15% interest rate and 10% of proceedings. Overall, the sources of funds were incredible however, the last source had a greater cost. Nonetheless, the second option was also very risky since, if the owners failed to payback, then they would have to sell their homes. Conclusively, it can be said that the sources of funds are acceptable but have higher costs and greater risks.

Entry Towards a new Market: First mover advantage or a Distraction

As far as the market analysis is concerned, it can be said that the company chose Pittsburgh, as the tenant rates were expected to grow significantly. Moreover, a lot of experts were flooding towards the area to start their careers whereas, due to this shift many companies were also moving towards this area to open their offices. This was a great opportunity for the cousins to setup an entirely new business in this area as they had expertise and experience in their relative field. Finally, it can be said that the selection of the market was appropriate to grab the opportunity.

Projections Under the recent Situation

The company has funded the project initially from three different sources as discussed earlier. However, the company’s present situation is not good to continue the project without making any changes. Furthermore, Current Pro forma (Appendix A) after applying some projections and assumptions shows that the company will not be able to repay its debts if it follows the same track of growth. However, when an additional 10% was applied to rent for three consecutive years i.e. 2014, 2015 and 2016,all the rates were same after these assumptions and it can be clearly seen that the company would only be able to pay off its hedge fund loan while all the other mortgages would leave some balances..................

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Case Analysis: Steel Street Harvard Case Solution & Analysis