Citic Tower Essay Example for Free

Citic newspaper column EssayStakes in firms such as Cathay Pacific, Dragonair and a string of trading and property companies * Citic Tower (Original) Property development team had gained extensive expertise and knowledge in the property business * Development began in 1995 and completed in less than dickens years * Despite post-Asian financial crisis, Citic Tower maintained a relatively high occupancy rate Concerns * The discounted cash flow analysis shows a disconfirming net present valueCommercial real estate market is extremely cyclical * No guarantee that Citic Tower II would be suitable to survive the economic downturn (perform as well as Citic Tower I has performed) Situation Larry Yung is interested in this property but hesitant repayable to uncertainty of future economic conditions * Member of the property development team suggested that CPL acquire rights to the land, and thus the development by offering to purchase an exclusive excerption from the seller * In the pas t land owners would not even have considered negotiating an option to purchase development sites but property developers are much to a greater extent cautious after the Asian financial crisisCalculated by finding the standard deviation of return on assets proportional to time * Net option value=51 million Decision * CPL should (NOT? ) purchase the option *it seems like the price of the option is 77 million (5% equity stake) and if the option value is still 51 million then it seems like a bad idea for them to purchase the optionso Im confused a subatomic about this part stillmaybe you guys could talk to him about this or figure it out