Wharton Wins Third Annual Real Estate Challenge

The event is staged by the McCombs School of Business at the University of Texas at Austin. "We worked pretty hard," James Lenhart, Wharton's captain, told GlobeSt.com after a win that rolled $5,000 the team's way. The $2,000 second-place win went to Harvard and the $1,000 third-place check passed to Stanford. The winners were up against teams from Berkeley, Columbia, Cornell, Kellogg, Michigan, NYU, Texas-McCombs, UCLA and USC.

The Goldman case study was handed out Tuesday, with the six-member teams descending on Austin two days later for a kick-off dinner followed by Friday's daylong competition. With Lenhart as captain, Wharton's winning team consisted of Kevin Roberts, Ben Dunford, Drew Herold, Bruce Kirsch and Ephram Lustgarten. Besides their due diligence, the team credits each one's specialized perspective, ranging from consulting to development, as key factors in taking the 2004 crown.

Fifteen hours in a 500-sf apartment at Wharton went into formulating the winning presentation. When the dust settled on the Austin face-off, each MBA student had learned a lesson from the Goldman Sachs pros and a panel of judges, 16 powerbrokers from all real estate sectors. "I learned the importance of considering all possible outcomes," Dunford said, "understanding the angle of attack and angle of retreat."

The short version of the seven-page case study is a hypothetical purchase of a suburban office building by an operating entity focused on value-add investments with an eye on accumulating assets and exiting through the public markets. The problem-solving included buying a new portfolio encumbered by above-market, securitized debt in a strategic, high-growth market and the type of structuring that would be needed to provide the seller, who would continue to hold a partnership interest in the merged entity, with an indemnity against adverse tax consequences from a future sale of the contributed assets in the early years of the deal. Wharton's strategy relied on an opportunistic investment style "to buy assets that we believed were under priced and gave us an opportunity to redevelop," Dunford explained.

"It was as much about knowing real estate as making a good presentation," Lenhart said. "The judges and our competitors are incredibly talented." And much to the Wharton team's surprise, he says they "touched on almost everything" that Goldman Sachs did in its "real deal" presentation.

Billed as the nation's largest real estate challenge, this year's lead sponsors were Banc of America Securities, the Beck Group, Prudential Mortgage Capital and Goldman Sachs. Challenge supporters were ARCap REIT, Hunt Realty, Jones Lang LaSalle, JPMorgan Securities, Trammell Crow Co. and Transwestern Investment Co. C. Todd McCulloch, working toward an MBA in 2005 from UT, coordinated the event, with help from 20 volunteers from McCombs.