Georgetown Steers Students Address Distressed Office Asset During Annual Real Estate Case Competition
The Steers Center for Global Real Estate at Georgetown’s McDonough School of Business recently hosted the annual McDonough Real Estate Case Competition (M-RECC) to give students an opportunity to gain hands-on experience presenting real estate valuation methodologies to a panel of industry professionals and alumni.
In this year’s case study, “2000 Duke Street – A Distressed Office Case Study,” undergraduate and graduate students were tasked with evaluating a potential investment in a distressed office property that was encumbered by a 99-year ground lease a few months before the building was scheduled for a foreclosure auction. The building’s occupancy had dropped from 95% to 44% after the building’s anchor tenant chose to exercise an early termination option and leave the building. Additionally, as a result of the COVID-19 pandemic, the owner was unable to easily find a replacement tenant for the vacant office space.
The duality of ownership interests presented special challenges in terms of valuation techniques and strategies. Students were tasked with recommending an auction bid price to the investment committee for the ownership interest in the building. To determine the value that generated an appropriate risk-adjusted rate of return, the teams had to first determine which scenario resulted in the highest value for the asset, which included either maintaining operations as an office building or converting the building to multi-family use.
“Our annual real estate case competition provides current undergraduate and graduate student teams an opportunity to compete, showcase their knowledge, and learn from each other through the analysis of complex real-world real estate projects,” said Tim Reardon, executive director of the Steers Center. “At Steers, we take pride in giving our students the real-world experience and industry connections needed to be successful after they leave Georgetown, and competing in case competitions like this is a big part of that success and an important part of our student engagement.”
Students presented their findings to a panel of judges and were assessed based on their ability to evaluate distressed real estate by using proforma cash flows, discount rates, and direct capitalization rates to derive a stabilized value; their ability to understand the rights of real estate ownership and the unique bundle of rights associated with fee simple, leasehold, and leased fee interests in a property; and how to determine alternative investment scenarios by evaluating risk-adjusted returns.
The judging panel included:
- Zack Albert (MBA’20), Vice President of Development, Wood Partners
- Colin Chiarodo (MBA’20), Senior Development Manager, Timberline Real Estate Partners
- David Crowley (MBA’16), Senior Associate of Acquisitions, FD Stonewater
- Sam Goodman (MBA’21), Director of Lodging Development, Marriott International
- John Kevill (EMBA’00), Managing Principal, Solitude Cove Capital
- Thomas Moran (B’00), Managing Director, Peak Rock Capital
- Margarita Muzzall (MBA’02), Senior Vice President and Senior Relationship Manager of Healthcare Banking, M&T Bank
- David Sislen, Adjunct Faculty, Georgetown McDonough; President and Managing Director, Bristol Capital Corporation
This year’s winners were Jack Childs (B’27), Juan Cadena (MBA’25), Juan Pablo Aguirre (MBA’26), and Colin McCullough (MS-GRA’25).
“Coming into the competition I had an understanding of the office market and the scarcity of successful office-to-multifamily conversions – due to the nature of office buildings, these conversions can be costly and dysfunctional, however, this case taught me more about how separation of ownership can affect a deal and some of the issues that can arise when ground ownership is separated from the fee simple,” said Jack Childs (B’27). “Hearing opinions from industry professionals on the judging panel was valuable and enlightening, and the competition was a great learning experience overall.”
Learn more about the Steers Center and the student experience at globalrealestate.georgetown.edu.