MAC Development Corporation
The McCaffreys are in a sticky situation as they have tied up land for a development project and everything seems to be falling apart. They have deadlines to meet and so many moving pieces that I had to read the Case Study several times to wrap my head around it all.
At the start of the Phoenix project, there were basically three main puzzle pieces the McCaffreys had to juggle. The first one was the Village of Woodland, where the land was located, had verbally agreed to give $4.1 Million in subsidies to the property for improving a community eyesore. This was a huge upside for the project initially, but the project and this $4.1 Million still had to be approved by the board to be official. It was not guaranteed money yet. The second puzzle piece was with their loan. After a lower than expected appraisal on the project, Bank One lowered their loan offer to $2 Million and said MACD had to get a $500,000 line of credit from another source for them to issue the loan. In addition, the loan would not be approved until MACD had a signed purchase and sale agreement for one of the buildings. The last puzzle piece was regarding the purchase of the land itself. The land owner was a tough negotiator, and after 9 months of haggling, the two parties were still $75,000 apart in the purchase price. Colleen acknowledges at this time that the risks were high but so were the rewards. It was crucial that they didn’t make a mistake.
By the end of the case the odds start stacking up against MAC Development. In addition to the initial risks, more complications begin. Harwich Bank and Trust backed out of their agreement last minute for a $500,000 line of credit claiming Bank One had already claimed all the collateral. Then MACD found a client to buy the first building but the Village turned them down. Then the broker they hired to find new buyers wasn’t finding anything or working very hard, as development deals take more work and...
Please join StudyMode to read the full document