Holt Lunsford Commercial Case Solution
Introduction
The role of Holt Lunsford Commercial under the industry of real estate has been enormous in the past decade. However, the increased competition had made the crucial changes in the activities of the business in order to survive for the future. Under the particular case, Staton was the main customer of the HLC, due to the strong relationship in both the business as well as personal terms.
Staton was focusing on the decision of Welch Centre (Owned) as the leasing term would expire after the seven months. Therefore, in order to properly decide whether to renew the agreement or to buyback the building or in other terms, the option of build-to-suit might apply. Thus,he conducted a serious meeting with HLC in order to analyse the potential difference of either of these selected options, for that Holt had offered to control the advisory service of Staton and it was agreed between the two participants.
Finally, it was decided that HLC would control the entire process of lease or other services of real estate business of Staton, therefore it has been concluded that either of the three options would benefit the counter party and would manage in a proper way according to the strong business relationship.
Decision for the Staton Tee (excluding the financing)
Before analysing the financing needs of either of the selected options, it has been determined that Staton would only remain in the position of Welch building if the proper market conditions would maintain in the form of stable economy. However, the long term strategy to maintain the position within the building would require critical evaluation of the market conditions as well as analysing the economic factors that could increase the inflation rate over the number of years. This would only be achieved if the expected results would be favourable to the property holder for the selected years of agreement.
Excluding the financing terms, it would be a good opportunity for Staton to remain in the Welch building because of the increasing value of the property in the US since 2009. Therefore, this would require the operational needs to hold the business in the selected area and it could only generate positive outcomes if the current market situation would benefit from the selected period of holding.
Decision for the Staton Tee (Financing Option)
From the following results, it has been identified that whether to decide either of the two options, the Staton would be beneficial in all the matters because of the increasing demand of real estate business and which would continue to grow in the future. However, certain difference in the two options reflects the importance of the business for the coming period.
Lease option
According to the particular analysis, it is determined that Staton would benefit from the lease option due to the large inflows coming within the period of ten years. The operational cost would charge 1.5 per square feet during the lease period, whereas rental would increase every three years due to the inflation rate factor applied in the projections.
Thus, the total cost incurred from the lease agreement shows that it would benefit Staton if the property would be sold after ten years and could increase the amount of the surplus if the inflation rate would not increase the same pace according to the given criteria.
Discounted Value under the lease agreement
From the results under the lease period, they show that the discounted value would be positive for the company due to the high payments in the selected period of lease. Therefore, it is concluded that if the inflation rate would be higher over the years then it could increase the net present value of the property.....................
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