Answering two questions
Suppose that you own a 20-acre piece of property you bought years ago as an investment property. There’s an old house in the center of it with a tenant who has a lease that does not expire for more than a year (remember, that the lease is a binding contract that cannot be broken involuntarily).
However, the lease does not give the tenant the right to use the entire property – just “a reasonable portion” in the middle of the property.
You recently found out that Amazon has plans to build a distribution center nearby; this will bring a lot of development and demand for housing to the area. A developer wants to buy the property from you so they can build a residential development of single-family homes. However, they do not want anything to do with having tenants while developing the land.
Being a “first mover” to develop residential housing is strongly to your advantage, but not necessarily the most important factor. What should you do with your “bundle of rights”?
Option 1: Subdivide the property and sell the portion without the house on it.
Option 2: Wait for the lease to expire and then sell the entire lot.
Option 3: Join with a group of investors who want to buy out the tenant (at any cost) develop the entire property.
200-250 word count
Suppose that you are invested in a software development firm that designs automotive radar software for robotics systems in cars. Your offices and most of the key employees who helped to start the company are in Tampa, but given expansion plans, your current location is no longer sufficient, and you need to decide on a location for your new headquarters. Now, your business is faced with a difficult decision: where do you locate your new headquarters?
Option 1: Lansing, Michigan You could move to Lansing, Michigan to be closer to the demand for your product for such as the Ford assembly plants in Dearborn, Flat Rock, and Wayne, Michigan, and the General Motors assembly plants in Detroit, Flint, and Lansing, Michigan.
Option 2: San Jose, California You could move to San Jose, California to be closer to other technology companies in the Silicon Valley area and benefit from agglomeration economies. Additionally, you would be closer venture capital in nearby San Francisco which may be necessary to fund your expansion.
Option 3: Tampa, Florida You can stay in Tampa where your key employees will most likely be happiest. Although Tampa does not offer the comparative advantages of demand conditions, agglomeration economies, or the factor condition of capital, it does have a relatively good quality of life, and is home to your current employees.
Which option is the best fit for the business and what factors would be most important in making the decision? Specifically comment on the comparative advantages that the location you chose has to offer.
200-250 word count