Case Study #1 – “BioMedica” Chain Drugstore – Build-to-Suit Investment in Colombia (Case Only)
In this triple net lease case study, we explore a real-world scenario involving the development of a build-to-suit commercial property for a leading drugstore chain in Colombia. By examining this scenario, you will gain hands-on experience analyzing a triple net lease (NNN) structure, a common type of lease in commercial real estate, where tenants are responsible for property expenses. The project involves the acquisition of land in a strategic location and the construction of a property tailored to meet the tenant’s operational needs, providing a strong example of a development-focused NNN deal.
Practice makes perfect! This is a real scenario based on actual properties and situations. Names and locations have been changed for confidentiality reasons, but the fundamentals are real-to-life. Each case study shared in this series mirrors real world situations, either in terms of the types of deals you will look at in various roles or the types of modeling tests you’ll be required to perform as part of the interview process. You can browse this and other case studies in the A.CRE Library of Real Estate Case Studies.
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Background
You are a recent graduate of the University of Central Florida (UCF) with a degree in Business Administration, specializing in Real Estate. While studying in Florida, you developed a keen interest in international real estate markets, particularly in Latin America. This interest was fueled by your family ties to Colombia, where you spent many summers visiting relatives and witnessing firsthand the rapid urbanization and growth in cities like Bogotá and its surrounding areas.
Upon graduating from UCF, you worked in the banking sector in the U.S., gaining valuable experience in financial analysis and investment strategies. However, your passion for real estate led you to join a small real estate investment LLC, where you quickly advanced to a role that involved overseeing financial modeling for various projects. During this time, you took the A.CRE Real Estate Financial Modeling Accelerator course, becoming an expert in the field.
Property Description:
- Address: Calle 2 #12-24 Chía, Cundinamarca – Colombia
- GLA: 34,400 SF
- Land Area: 34,444 SF
- Constructed Area: 6,300 SF
- Replacement Cost (including land): $45/SF
- Land Value: $18/SF
- Year of Construction: 2024
Lease Details:
- Lease Term: 15 years
- Option: 5-year renewal option
- Rental Increases: Linked to Colombian IPC (Consumer Price Index)
- Lease Type: Triple Net Lease (NNN)
- Tenant reimburses landlord monthly based on annual breakdown
Financial Assumptions:
- Land Cost: $620,000 USD
- Closing Costs: 4.5%
- Development Cost: $843,566 USD
- Approved Lease Rent: $14,355 USD/month
