Summary

This case introduces Nodal Logistics, a real estate investment trust established in New York City and engaged in the acquisition and development of logistics property and industrial warehouses. Similarly, it was engaged in North America, Asia and Europe. Furthermore, it enables the investor to invest in a liquid investment model in real estate. However, most of the company’s revenues were generated from property rent and leases. Nodal mostly invested in properties that were close to distribution nodes, including Airports and sea ports to fulfill the material movement and storage requirements of their clients. Similarly, the company was well averse in operations and distributions facilities and had developed expertise to assess the high density market where they identified that the storage requirements of both producer and end-user was immense. However, they both wanted to move their merchandise as efficiently as possible as well as to decrease their cost of holding the inventory. Furthermore, Nodal was considering expanding its horizon by engaging in the Brazil’s real estate market. However, the company in light of its operating policies practiced of writing all industrial real estate agreements in US Dollars. Moreover, it presented a major hurdle where, the Brazilian regulating bodies had stipulated that Commercial real estate must be dominated in the Brazilian currency. Furthermore, as most industrial lease lasted for 5 to 12 years short and long-term respectively, therefore this would expose the company towards Brazilian currency risk. However, it was identified that Brazilian currency had spiked recently and the US currency would decrease. Hence, Nodal was faced with a tough decision towards how to mitigate the currency risk and how it could use the different strategies to reduce its currency risk. However, the approach taken by the management of the company should enable it to enhance its economies of scale and increase it profitability in the Brazilian real estate market so that it could gain its competitive advantage to compete effectively in the market and to ensure its long-term survival in the highly diverse and competitive market of Brazil. In addition to this, the growing economy of the country presents tremendous opportunities to enhance its market share and exploit the emerging real estate market.

Forward Contracts: Nodal Logistics could effective and efficiently implement forward contract techniques in which two parties engage in non-standardized contracts of buying and selling of assets at a fixed future price agreed upon by both parties today. This would enable the company to mitigate its future currency risks. However, it could further enable it to ensure its survival in the highly diverse and competitive Brazilian market. Furthermore, the company’s expansion could result in increasing its profitability and would further increase its economies of scale, as a result, ensuring that it could effective manage any adverse situation that would be present in its future endeavors. However, the company’s management had identified that the Brazilian currency was at its peak in 2007 and was expected to decrease in its future, whereas the US currency is expected to increase in its future...............

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