Hospitality Management Real Estate Investment Management, assignment help

timer Asked: Oct 12th, 2016
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Question Description

Hi the course is  Hospitality Management Real Estate Investment Management

The instruction is in additional files

IF IS NEEDED PLEASE USE THE ZIP FILE" COURSE"  use the model in the case study

please follow the format talked about in instruction files, use numbers equations to answer the questions

for sources please only use sources i give, do not use outside source

This is connected with what we learned in Class, in additional files you can see class materials

Please follow the instruction,is you have any questions please message me thanks 

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HB 382 – Investment Structure Case Study The School of Hospitality Business Michigan State University Assignment Due Date – Wednesday, October 12th Jim-Singh Investments owns a hotel located in a gateway city and received an unsolicited offer to buy the hotel for $100 million. Jim-Singh acquired the hotel 4 years ago for $75 million (closing costs equated to 1.5% of the purchase price) and completed an initial renovation of $7.5 million. The ownership group was able secure a loan equal to 65% of the purchase price, closing costs and initial renovation, at a fixed interest rate of 5%. The Net Operating Income (“NOI”) in the first year of ownership was $5.0 million and increased by 10% in Year 2, followed by 5% in Year 3, and 3% in Year 4 (the sale year). In Year 3 the ownership group decided to make an additional investment of $1 million into the asset to convert some underutilized office space into an executive meeting center and the existing gift shop into a Starbucks kiosk. If Jim-Singh Investments sells the hotel for $100M the selling costs will be 2% of the sales price as they need to pay the broker involved in the transaction. There are two things driving interest in this asset from buyers: 1) the hotel has good existing cash flow, and 2) there is a proposed development of a new 1.5 million square foot office building that will house over 5,000 government employees, which are being relocated from other office buildings throughout the metro area. However, development of the new government facility (and additional demand) isn’t definitively moving forward just yet as it needs to be approved by the City. The hotel’s NOI is expected to materially increase as the office building comes online and the employees are relocated from other buildings throughout the area. The main item driving this increase in NOI is that the delta between the hotel’s current Average Daily Rate and the government per diem is $30, which would have a positive impact on the hotel’s profitability. The hotel needs a capital infusion of $5 to $7 million to renovate the hotel to maintain good standing with the brand, which will need to be done in the next few years. However, Jim-Singh is a private equity group that doesn’t want to go through another significant re-investment of capital back into this property. Jim-Singh generally likes to achieve an Internal Rate of Return (IRR) between 17% and 19%, and an Equity Multiple of 2x or greater on their investments. However, they’re also very risk averse in their investment strategy. Based on the above facts and investment return model, please provide a written recommendation in paragraph form to the Jim-Singh Investment committee advising if they should accept the unsolicited offer of $100 million (and accept the returns they have realized) or continue to hold the asset, and some reasoning behind your recommendation. ...
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Tutor Answer

School: Cornell University



Jim-Singh Investment (Study Case)
Student Name [your name]
Affiliation No
Submission Date




According to the information provided Jim-Singh investment should accept the offer in
that they will make a huge profit. After accepting the offer the firm would have Internal Rate of
Return ≥17 which is already 17.5% from the calculations. In case of sales proceed there will be a
profit of $24,183,438 when the cash flow analysis is done.
Jim Singh will reduce the costs involved in maintaining and upgrading the hotel and the
expenses will be imposed to the firm in need of buying the hotel. There is additional of stocks in
the hotel to ensure that the customers are comfortable and there is need of increasing the net
operating income to realize the profit. When Jim-Singh m...

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