9-905-053
JANUARY 03, 2005

DEEPAK MALHOTRA

Hamilton Real Estate:
Confidential Role Information for the Executive VP of Pearl Investments (SELLER)
You are Executive Vice President of Pearl Investments, a holding company that specializes in real estate investments. Earlier in the year, key executives of Pearl Investments held a meeting in which a number of strategic initiatives were adopted. Among these was an initiative aimed at divesting land and property in certain geographical regions. Among your many real estate holdings is a large piece of property located in Hamilton, a mid-sized town at the outskirts of a large metropolitan area. The Hamilton property is among those that are to be sold. Because the Hamilton property is by far the largest piece of real estate earmarked for divestment, you are personally responsible for negotiating its sale. One of the first decisions that you made with regards to the Hamilton property was to sell it in its entirety rather than piecemeal – you will not break it apart and sell separate parcels of land. Virtually every expert appraisal and valuation suggests that the real estate will fetch a higher selling price if the property is sold in its entirety to one buyer. While this is likely to maximize sale price, it also limits the number of potential buyers for the land. How much a potential buyer will pay for the Hamilton property depends on a number of factors, including the buyer’s ability to pay, their degree of desperation, and the planned use for the property. Each of these factors is critical. For example, your experts have estimated that if the land were developed for commercial use (e.g., a set of office buildings), the land might be worth 1.5 to 2 times as much as if it were developed for residential use (e.g., apartment buildings). While property value would be maximized if the land were developed for commercial