Case | HBS Case Collection | January 1999 (Revised March 2004)

AMB Consolidation, The

by William J. Poorvu and Daniel J. Rudd

Abstract

Anne Shea, assistant vice president at the Curators' Fund (The Fund), is responsible for investing roughly $80 million in real-estate assets. Less than three years ago, Anne invested $40 million into a commingled fund run by AMB Institutional Realty Advisors, Inc., a leading pension fund advisor and asset manager. She had been pleased with The Fund's relationship with AMB; investing with AMB provided a cost-effective, value-added means for The Fund to directly own property. Recently, AMB proposed to consolidate all the properties under its management into a REIT and to take the new REIT public. Anne faces a decision: consent to the roll-up by exchanging her shares in the commingled fund for shares in the REIT, or sever ties with AMB by liquidating her position in the commingled fund at a price equal to the fair market value of the assets before the roll-up and public offering. In addition to the focus on REITs, qualitative issues in the case include the prevalence of conflicts-of-interest in most aspects of the highly fragmented real estate industry. The mechanics of a consolidation, the valuation of a management business, and the concept of "franchise value" are also addressed.

Keywords: Private Ownership; Conflict of Interests; Industry Structures; Property; Investment; Public Ownership; Real Estate Industry;

Citation:

Poorvu, William J., and Daniel J. Rudd. "AMB Consolidation, The." Harvard Business School Case 899-144, January 1999. (Revised March 2004.)