Woodmere Properties, Inc. Case Solution & Answer

Woodmere Properties, Inc. Case Solution

This shows that the company might not generate the margins associated with the past but it would include the cost of expansion in different parts of the country which will allow to reduce the level of profits but could attract the investors for the future benefit through long-term growth.

Management alignment with shareholders

Woodmere’s shares were heavily contributed by the owners and the strong management consist of managers and directors. Therefore,the acquisition might allow to reduce the size of management control and to allow the new independent shareholders to participate in the company’s overall profits. This would help to reduce the risk of control and to manage the contribution among the management as well as shareholders.

Analysis of reported data given by the company

Exhibit 5c shows that how much area Woodmere acquired from its inception and what the annual return through these acquisition. Moreover, it also illustrates that the total properties acquired by Woodmere were 268, which shows that the business was highly involved to expand the size of operations into different regions of U.S. whereas, the annualized rate of return was much better than other big real estate businesses.

Exhibit 5d defines the shares value in the past two years and shows that it would likely to increase according to the demand of the industry and could attract the shareholders related to the performance.

Exhibit 5e clearly shows the expected operations of post-acquisition, it is a prospectus to provide the related information to the existing as well as the potential shareholders. The information included the level of activities involved in the rentals and other sources of income and the expenditure allowed to increase the size of operations in order to have high yield volumes and earnings.

Acquisition of other companies and the potential risk of the growth strategy

The benefit gain through the acquisition of Lanier do not mean that this strategy would apply for the other companies as Lanier realty trust was an already established entity.Therefore, the acquisition would allow to expand the size of operations and to meet the criteria under business strategy model.

However, the same strategy might not apply for the other acquisition because the company knew that other real estate business could not provide the positive results according to the poor performance as compared to Woodmere.

If the acquisition with other companies would take place, then it could negatively affectthe company’s overall performance, which might lead to a loss for the investorsas well as it could also drive towards the risk of liquidity according to the expected market situation of real estate business.

Therefore,in order to acquire other businesses, the company should implement different business strategy along with the decision given by the existing shareholders about the future gain or loss of the business.

Exhibit 1

Trading of Shares
 Total shares sold  Per share Value  Total price of shares sold  Purchase of Lanier  Capital expenditure
                     10,000,000                                                    27                                  268,750,000                  297,000,000                      (28,250,000)
                     11,500,000                                                    25                                  292,847,500                  297,000,000                        (4,152,500)

Exhibit 2

Free cash flows  
EBIT 98547
Add: depreciation 25024
Less: capital expenditure 28250
FCF 95321
Terminal Value 1411278.564
Total FCF 1506599.564
WACC 11%
NPV $1,356,999
EBITDA Multiples 268,761

Exhibit 3

ke 14%
kd 11%
Vd 0.472317589
Ve 0.527682411
Tax 30%
WACC 11%

Exhibit 4

Internal operation analysis
Operation Calculators Total Value
FFO (Funds from operations) 117083
Cap Rate 6.98%
NOI 98547
Net Asset Value 70.808
Multiple 2
FFO per Share 4598
Yield on FFO 18.89%
Debt to asset ratio 0.450
Debt to Equity ratio 0.936
Debt coverage ratio 0.178
Breakeven occupancy rate 3.55


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