Retail Building Operation Management Assignment Help With Solution

Posted on March 7, 2017

Retail Building Operation Management Assignment Help With Solution

 
Questions #1 – #5 all follow the same Retail Building. Each question (i.e. #1, #2….), however, addresses different topics. Here is the introduction to the case:
 
“You and your friend purchase a Retail Building in Harvard Square which is currently rented by a Book Store operator. Being so close to Harvard, the Book Store has a strong customer base in the form of students who are always needing textbooks. Moreover, the vibrant and bustling Harvard Square attracts a diverse stream of other potential customers who visit the square to shop at one of the many other stores, eat lunch at one of the many restaurants, or just linger to watch the antics which take place in the public square.
 
For years, this location has been a Book Store which, according to the zoning, is the only possible use for the land.”
 
Q1(a). Of the different types of Comparative Advantages discussed in class, which TWO best apply to your Retail Building when it comes to its profitability for Book Store operators? No explanation is required.
 
Q1(b). From a conceptual standpoint, what do we mean when we say aLOCALE has a “Comparative Advantage?”
 
Q1(b). From a conceptual standpoint, what do we mean when we say aLOCALE has a “Comparative Advantage?”
Question #2SETUP:
 
Visiting the area, you notice there are several other “In-the-Square” bookSTORES (i.e. located directly in Harvard Square) as well as several other “Around-the-Corner” book stores (which are near, but not directly in Harvard Square).
 
After detailed market research, you find that theNUMBER of textbook sales per month which a book store operator can expect from each property type are as follows:
 
In-the-Square:100 textbook sales per month
Around-the-Corner: 80 textbook sales per month
 
You find that the current marketPRICE of textbooks (regardless of location) is $75.00 and a bookSTOREoperator’s costs (including their minimum required profit) is $3,000 per month. All leases for book stores are month-to-month and there is no cost of moving.
Important: Going forward the word “profit” refers to profit in excess of an operator’s minimum required profit. For example, a Book Store operator with $3,001.00 in revenue would have a “profit before rent” of $1.00.
 
Note: If any new assumptions are made, they willCONTINUE to be in effect for subsequent questions.
 
Q2(a). What is a Book Store operator’s profit before rent, per month, from each of the two types of locations? ShowYOURCALCULATIONS in the form of a table (Hint: You may wish to use Excel so you can build on the table in subsequent questions).
 
Q2(b). The Around-the-Corner shops are charging for $2,100.00 per month for rent right now.
 
According to Ricardo’s Law, how much can you charge for rent on your In-the-Square property? Show your calculations with the help of a table and briefly explain your reason with reference to the operator’s decision-making.
 
Q2(c). A recent change to zoning laws now allows for book storesTO OPEN up at more distant, though less desirable, Down-the-Street locations. Down-the-Street bookSTORE operators can count on selling 60 textbooks per month. Since there is an abundance of new Down-the-Street locations, the rents there areFREE.
 
Given this new development, what rent will owners of In-the-Square and, separately, Around-the-Cornerproperties be able to charge now?
 
ShowYOURCALCULATIONS using a table and briefly explain your reason with reference to the operator’s decision-making analysis.
 

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Q3(a). Several potential renters have looked at your building but decided not to rent because its lacks the wiring needed for the flat screen TV displays and interactive kiosks common in modern book stores.
What type of obsolescence is your building experiencing? Briefly explain what that term means.
 
Q3(b). While you wereBUSY answering that question, your current renter called and left a voicemail letting you know the basement flooded again after the recent storm as a result of the crack in the foundation.
 
What type of obsolescence is your building experiencing now? Briefly explain what that term means.
 
Question #4SETUP:
 
A few years go by and you read in the paper that a brand new, state of the art BookSTORE on an identical parcel of land was just completed and sold for $900,000. You call the general contractor who built the new Book Store and he assures you he can build it for $675,000 (including the demolition ofYOUR current building).
 
Q4(a). What is the value of your land? Show yourCALCULATIONS and briefly explain the components of the formula you used.
 
Q4(b). A broker reports that a Book Store property which is identical to your “vintage property” just sold for $720,000. Assuming the broker’s information isCORRECT, what is the value of the structure sitting on your land?
 
Question #5 Setup:
Wanting toCONFIRM the broker’s valuation, you decide to do some research ofYOUR own. Based on recent neighborhood sales, you find that the Return on Assets investors are expecting for similar retail properties is 5%. Your property currently earns annual income of $32,000 per year.
 
Q5(a). Based on the Return on Assets you’re observing in the market, what should the market value of your property be?
 
Q5(b). Assuming the Return on Assets mentioned above isCORRECT, what annual profit would investors expect to receive on a Retail Property with an actual market value of $720,000?
 
Q6. We learned that current occupancy alone doesn’t give us enough information to understand where we are in the Real Estate Cycle.
 
What TWO other pieces of information (related to occupancy) are necessary for understanding which phase of theREAL ESTATE MARKET we are in? (No explanation of the two pieces of information is required).
 

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