Coca Cola Building – Real Estate as an Intangible and Tangible Asset Example
The attached article and link below are a real world example of how a corporate acquisition (Columbia Pictures by Coca Cola) which included a beneficial leasehold interest (through long term lease to Columbia for 50 years at a contract rate which was well below market), effectively an intangible interest in real estate, can be acquired to unify the leased fee and leasehold interests into a full bundle of rights, or fee simple interest. Then almost 40 years later, that same tangible interest can be sold to a new buyer for over $900 million.
Assignment:
in an excel document, what would the present value of the beneficial leasehold be from 1983 to 2020. Assume a weighted average cost of capital of 8% and 10% in the document, explain how the lease fee interest, the leasehold interest, and then the future fee simple interest when the fixed lease expires in 2020 and how all that fits together.
