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Cricket Road

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Submitted By lakporowho
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Executive Summary
In September 2003, Mason Sexton, a young, inexperienced developer, was making plans to replace a rooming house he had inherited next to the University of Virginia campus in Charlottesville with a new 14-unit, 5-story apartment house. In his attempts to assemble the information, approvals, and resources necessary to go ahead, he runs into many problems associated with the development process. While Sexton is able to carry out most of the conceptual, investigative and planning stages of this development, he runs into many problems because of his inexperience and his initial plan changes over time. He runs into issues obtain financing, has to spend money to obtain a certificate of occupancy, underestimates the construction costs and has unrealistic targets to begin receiving rental income. As a result, he has to adjust the development costs and is faced with making an additional equity investment. His return compared with his setup is reduced over time due to some circumstances beyond his control, but also some that are a avoidable. Sexton has not been able to obtain permanent financing on acceptable terms and is now faced with missing the January 2005 target rental date and the possibility of incurring large additional carrying costs. Sexton should abandon the project and consider selling the existing structure now.

Action Rationale
The proposed action to abandon the project and sell the existing structure now is the best approach to solve Sexton’s problems for the reasons listed below.
• Option 1 (Sell Existing Structure Now): Even though the existing 108-year old structure is deteriorating, it is on valuable land located only one block from the main campus of the University of Virginia. The market value of the land is $150,000. With the boom in the Charlottesville real estate market that began in the spring of 2003 and the rise in

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