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Case Details:
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Citic Tower II: The Real Option  
 
Product Ref: 02/136C Company: Citic Pacific Lmited

Product Type: Case Industry: Real Estate

Related Product(s): Teaching Note
Citic Pacific Ltd. (CPL) had to decide whether to purchase newly reclaimed land at the waterfront of Victoria Harbour, Hong Kong, and develop a Grade A office building for investment purposes. The decision was to be made at an approaching cyclical high point in the market for Grade A office space, in the second half of 2000. CPL knew that the commercial real estate market was extremely cyclical and that very few companies active in the market had managed to time rental cycles and investment strategy successfully. If Citic Tower II came onto the market at the right time, it might be far more promising than it appeared in mid-2000. Nobody knows when the "right time" is, of course, but being able to defer the decision to develop while still retaining control over the site could buy time and the option to retain what could be a very good opportunity. In other words, CPL had to value its options.
Functional Area : Finance & Investments
Strategy & General Management

Issues: Real Options Analysis, Capital Budgeting , Project Evaluation, Project Management
Length: 7 pages Country: Hong Kong SAR

Pub. Year: 2002 Level of Difficulty: 2
         
This product type is available in the following language(s):      English   Japanese
         
Related Information: This case can be taughtly singly or used with the first case Citic Tower II (ref: 00/88C).
 
This case is UGC funded.
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