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Industrial
Case Study
Background
An investment fund considers purchasing a single-tenant building
of a consumer discretionary product manufacturer. The
tenant's business is seasonal with the peak quarter representing
~70% of annual profits.
Issue
The purchaser must make the investment decision before the
seasonally strong quarter results are announced.
Analysis
By extensively analyzing the tenant's quarterly results for the
past few years CTA determined fundamentals were very weak as the
Company entered the key selling season. Despite assurances
from management that 'the worst was behind them,' CTA concluded
the quarter would be a significant disappointment and the
tenant's credit position was weaker than most people would
conclude.
Result
The tenant's results were dismal and significantly below
management's expectations.
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