MFIN 358

Summer 2021

GROSVENOR PARK QUESTIONS

Look at Grosvenor Park from the real estate developer’s view, i.e. Dubin.

1. Location Selection: Did he pick the best possible site for this project?
Explain in a very short answer please.
2. Market Definition:
1. Identify the data in the case that supports the existence
of a market that can carry this project; calculate based
on the case data
2. Are these units affordable for his target market? Answer
by building two setups, assuming purchases with 10%,
then 20% down payments. Remember PITI (annual
principal, interest, taxes and insurance)must be a
maximum of 28% of annual income

Project Economics:

3. Exhibits 5 and 6 show the impact of a delay of 3 quarters on the

profitability; what is that amount?
4. What are the pros and cons of these units from a purchaser’s point of
view? (short answer; bullet points OK)
5. Suppose Dubin rented out instead of selling (this means built an
apartment complex instead of individual homes):
a. What impact (qualitative answer) do you believe this will have
on his financing plans? Think in terms of single homes for sale
versus apartment blocks in which apartments are rented; what
are the implications in terms of cash flow, for example?
b. On the expectations of renters versus buyers? Are there
differences in benefit expectations between the two groups,
relating to this project?
6. Suppose construction costs went up: does Dubin have a safety margin
before his project loses money? Calculate it.
7. Suppose the market went bad on him and he had to drop prices: how
much (either dollar amount, or percentage reduction) can he afford to
cut his selling price before losing money? (Assume the same rate of
sales)
You may ignore the low income housing requirement

Questions 5 a and 5 b are fairly difficult, because you do not have the
experience of such projects…So do not spend too much time on the
answers .

Tarek Kettaneh Page 1 of 1 Summer 2021

MFIN358_Case_Grosvenor Park Questions Summer 2021