Real estate MBAs evaluate Chapel Hill development ops

The annual real estate development case competition is an outstanding opportunity for first year MBAs to practice finance and design skills in a real-world application while expanding our real estate knowledge.

The full-time MBA Class of 2016 was given a 2-acre site at the intersection of Rosemary Street and North Columbia Street in downtown Chapel Hill and tasked with finding the best product mix to maximize the value of the site. The site is located in the center of town, so the first step we took was to walk the property and get an idea of the surrounding area. Given such a central and visible location, we knew that the development needed to be aesthetically pleasing, meet the needs of the area and be useful to the community. The site also happens to be the location of the former town hall, which is a historic building.

We started out by consulting the Town of Chapel Hill’s economic development plan and “Downtown Imagined: Community Visions” documents that illustrate the town’s goals for revitalizing the Rosemary Street corridor. Once we determined the potential needs for the community and which product types made the most sense, we began to explore local market data. We evaluated comparable multi-family, office, hotel and retail properties in the area and examined Chapel Hill market data to determine the asset mix in greatest need.

My team settled on a mixed-use, multi-family and retail project, then got to work investigating recent developments in the vicinity, such as Shortbread Lofts and 140 West Franklin Street. We then examined each property’s basic attributes, such as square footage, available units, rental costs, year built and sale price to determine how to maximize our property’s revenue potential. After a long design session, we concluded that there was a unique opportunity to refurbish and reposition the historic building as a dedicated community and cultural center that could be used by the town for variety of purposes. We also decided to maximize the green space around the old town hall by providing a 0.55 acre park for use by both the community and future building residents.

The proposed project consisted of two 5-story buildings with underground parking and a total of 29,700 sq. feet of retail space on the ground floors. Target retail tenants included a specialty grocery store – such as Trader Joe’s – that would meet the needs of students and families living in the area, as well as a café and an upscale bowling alley that would provide entertainment for Chapel Hill residents of all ages. The top four floors of each building totaled 102,000 sq. feet of multi-family space that was divided between a mix of one, two and three bedroom apartments, including designated low-income units. We felt the specific retail tenants, combined with the park and residential space, matched the goals of Chapel Hill’s Downtown Imagined plan by providing engaging space for young people, commerce and cultural activities.

Our team presented the recommendations to a panel of judges, including members of the Chapel Hill Economic Development Committee and local developers. We fielded questions about our assumptions, financial feasibility, proposed asset mix, provisions for amenities and parking availability. Our team was one of two selected to compete in the finals, where we presented the case in front of our classmates, faculty and staff.

Following final presentations, we convened at Top of the Hill for an alumni reception and happy hour where the winning team was announced. My team was ecstatic to be selected to take the first place spot.

The real estate development case competition was an exceptional learning experience that provided a glimpse of the real-world deals we aspire to work on post-graduation. Thanks to the Wood Center for Real Estate studies, UNC Kenan-Flagler alumni and the Town of Chapel Hill for assisting us in the process.

By Clayton Doolittle (MBA ’16)