Business Case Studies & Business Publications

Hotel Rhythm Lonavala: Financial Feasibi...

Das, Prashant, Gup...

Case

Hotel Rhythm Lonavala: Financial Feasibility of Commercial Real Estate

Das, Prashant; Gupta, Ashish

IIMA-FA0568 | Published February 7, 2023 | 15 pages Case

Collection: Indian Institute of Management, Ahmedabad

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Learning Objectives

A commercial real estate expert contemplated the best use of his family-owned land parcel through hotel development. The venture- and capital-structures were put in place as a lender committed to the debt capital. After considering operations, financing and taxation cash flows, the project could have potentially met the equity holders’ return expectations. But things did not go as expected, and the costs overshot to outlier levels.

A commercial real estate expert analyzes the financial feasibility of developing a hotel on a land parcel. LEARNING OBJECTIVES a. Steps in financial feasibility analysis of a commercial real estate project b. Estimating sources and uses of finance c. Asset valuation d. Working of debt contracts in commercial real estate development projects e. Nuances of depreciation expense in commercial assets f. Strategic perspective on income and capital gains taxes g. Leveraged IRR estimation for equity holders h. Sensitivity of a commercial real estate project to various assumptions