Economic Recession and Land Case Study

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Beacon Lakes Case Analysis

Armando Codina is the chairman and CEO of Armando Codina Group of Company, which is one of the most active developers in Florida. However, Armando Codina is facing a challenging decision whether to abandon the Beacon Lakes development project worth $220 million or go ahead with the project. However, Codina has already spent $2 million to obtain the necessary approval to develop the 6.6 million square foot warehouse project Despite the approval, Codina is facing various obstacles making him considering whether to go ahead with the project or abandon the project. Codina feels that an unsuccessful project such as the Beacon project can affect his untainted career. Among the problems facing Codina is the uncertainty regarding the getting an approval for the project and expansion to the UDB (Urban Development Boundary) towards the west that is currently zoned to prohibit further development. (Segel, Barlick, & Gonzalec, 2008). Moreover, the negative press coverage regarding the project investment at Beacon Lakes is given Codina a consideration whether not to go ahead with the project. For example, the latest news of The SFBJ (South Florida Business Journal) shows that the press is against the project. The current weekly business news of the SFBJ reveals that the author is biased about the project because there are many illegal contaminations and dumping at the site. (Segel, Barlick, & Gonzalec, 2008).

Similar to the negative press coverage, the local government agencies are also placing obstacles to the approval of the project. Thus, Codina needs to obtain a wide variety of approval, reviews, and permits from more than 20 different local, state and federal government departments and agencies. Additionally, Codina is considering that the approval will affect the market conditions of the project looking at the recession and downward markets that have been affecting the US commercial real market sector since the last 12 months.

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After estimating the project costs, Codina believes that the project cost is substantial. Apart from the environmental mitigation, operating costs are also pushing project costs high The unexpected demand by the local authorities can also push the cost liabilities high. Moreover, the developmental costs such as land acquisition, construction, infrastructure and other developmental costs are significantly high. Additionally, the stock market decline coupled with the economic recession compound the problem of a decline in market demand for the properties. For example, the supply of industrial properties outpaces the demand. In 2001, developers delivered more than three million square feet of new industrial warehouse space in Miami. However, the demand was unable to match the supply with 12.5% vacant rate of properties. Moreover the average asking lease price for the warehouse properties fell to $16.50 per square feet. (Segel, Robert, & Jose, 2008).

The major barrier to the project was the GU rezoning that is designated to the Beacon Lakes. Codina would need to ensure that amendment of county master plan is carried out. The press is not helping the matter. In the last few weeks, SFBJ is written series of articles that are against the project. A report even emphasizes that an involvement of Armando Codina in the local politics will assist him securing the approval for the project. Typically, SFBJ published a series of the misleading campaign with the goal of derailing the project. Moreover, some group of environmentalists is also opposing the project believing that the project may lead to the environmental degradation.

2. Hypothesis

Armando Codina Group is to ahead with the project amidst of the barriers because the benefits of the project in the long run are more than costs.

3.Analysis to Support the Hypothesis

Several indications in the case support that Codina should go ahead with the project despite the barriers. The cost-benefit analysis.....

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