The case study titled “Holt Lunsford Commercial” explains how Holt Lunsford is debating how to grow his Dallas-based commercial real estate services firm and how to advise a long-time client who is wondering whether to lease or buy an industrial warehouse. The case focuses on the highly competitive and increasingly institutionalized $50 billion real estate services industry, which encompasses property management, leasing, tenant representation, and other activities. What makes Lunsford's firm, The Holt Companies, special? The article explores what corporate strategy Lunsford should choose for his firm, and what recommendation he should make to his client.
Holt Lunsford Commercial…show more content… The center also featured slightly above average column spacing. Welch Center was considered a Class A building, and if fully leased at market rates, might fetch between $34-$40 per square foot, on the open market.
Evaluate alternatives to the central issue
Lease-renewal option
Lunsford estimated the market-lease rate for Welch Center to be $3.35 NNN per square foot, upon renewal. The operating expenses would add an additional $1.15 in year 1, so the total expected occupancy costs in 2004 would $4.50 per square foot. Leasing had several benefits for owners like Stanton. Many companies chose to lease space and treat the expense as an operating cost, while focusing assets on their core product or service offering. Staton could sign a 3-year rental agreement with a renewal option, providing the ability to grow or contract in the short to medium term if the business hit rough times. Staton had considered changes in standard fulfillment processes, along with new technologies and equipment, but he did not anticipate any immediate changes to his logistics and distribution processes.
Buy Option
The owner had expressed a desire to sell the property for $34 per square foot, or $3,492,400. Lunsford estimated the required equity to be $873,100 assuming 75% leverage and a loan of $2,619,300. Including legal, engineering, and closing costs along with the origination fee on the loan, Staton’s total out of pocket expense could be as high as
