Case Study of River Triangle Associates

919 Words Jan 9th, 2018 4 Pages
RTA was a profitable real estate investment firm that specialized in buying strip malls and apartment buildings below replacement costs, then remodeling them, using marketing to reposition them, and selling for strong returns. The company showed relatively strong performance, about 14% to investors, so well above bank and money market averages. Rents on the newly remodeled buildings were highly competitive, averaging about 30% below new construction. Seventeen Steel Street is a 6 story building, built in 1920 with 5 floors of office space, and a ground floor dedicated to retail. It has approximately 49,000 gross square feet with renovation costs at $69/sq. ft. The planned rent should be between $8-15/sq. foot. This is considerably less than $150/sq. foot for new construction, particularly with a desirable location and building with "charm." However, this is RTAs first office renovation, and they lack experience in that area, having focused on residential properties. Their cash flow projections, in fact, require that they rent some of the residential spaces while completing construction, an inconvenience for residents. Indeed, as some of the tenants moved in, the City Inspector received calls from residents complaining about safety concerns. Leasing projects were down, the market was becoming distressed, the architect was behind, and the project had been shared…
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