The strong building: a case study in direct investment

Purpose - The purpose of this case study is to examine direct investment in commercial real estate from the perspective of the individual. While most research is dominated by studies concerning direct investment by institutions (REITs, pension funds, etc.), the bulk of direct investment in commercial property is still conducted by individuals. Design/methodology/approach - The paper presents accounting and financial data from the original purchase, management and disposal of a small-scale office building. Cash flows, returns and risks are measured and analyzed. Findings - The case demonstrates that successful direct investments may be characterized by short-term time horizons involving older, small-scale properties. Practical implications - This case illustrates the non-academic nature of real world direct investment in commercial property. The case demonstrates that emotion and good timing are just as important to a successful venture as are cash flows and thorough risk estimates. The case also shows that successful direct investment in commercial property may be limited to smaller, older properties held for short-term time horizons. Originality/value - This case study is unique because it identifies the property, the investor, the purchase price, the operating revenues and the sale price and net proceeds. Most case studies conceal many of these facts in order to preserve anonymity.