Town Center at King of Prussia

Basha Augustyn, a financial analyst at Retail Development Co. (RDC), has been tasked with evaluating a potential partnership with Lifetime Insurance for developing the King of Prussia Town Center. RDC, a renowned real estate investment trust specializing in mixed-use projects, aims to create a vibrant suburban downtown on a prime parcel of land. Augustyn’s objective is to assess the deal structure, profit-sharing, and overall profitability of the venture to ensure that it benefits RDC. She must decide whether the proposed partnership terms with Lifetime Insurance are viable. She anticipates potential pushback from Lifetime Insurance, if its share of the profits nets it less than the hurdle rate it typically expects for such projects. As she prepares to present her financial models and projections to RDC’s leadership, Augustyn must weigh the project’s potential returns against its risks, ensuring the deal aligns with RDC’s financial goals and strategic objectives. This partially disguised case places students in the role of a financial analyst responsible for evaluating a private equity deal to develop a town center. Students are introduced to the nuances of real estate valuation while also exploring deal structures that include multiple equity providers. They gain experience calculating returns in a private equity setting that uses a complex waterfall structure and evaluating the interplay between compensation and incentive. This case is suitable for undergraduate- and graduate-level finance courses in addition to executive education programs. It has been successfully taught at the University of Virginia Darden School of Business in the “Valuing a Company’s Equity” module of “Valuation in Financial Markets,” an elective finance course offered in the MBA program; it could also be easily included in a graduate-level course in private equity.