Real Estate: Private Equity Investment in Shanghai

Abstract

In this case study, you are a consultant engaged to assess whether to invest in Project Innov Star, a Class A office project in Zhangjiang Shanghai, which currently is stalled. The hold up, and thus the opportunity to invest, arises due to a difference of opinion between the two partners. The majority investor (80%) seeks to sell its share, while the 20-percent minority investor would be willing to complete construction with a new partner, or might be open to selling the entire project. Your analysis will yield one of three recommendations: (1) pass on the investment, (2) purchase the majority, 80-percent share, or (3) purchase the entire project and engage a new construction partner. As part of the analysis, you are required to determine the value of the project, which is essentially the value of the land.