NORFOLK HOUSING ASSOCIATION: SOCIAL ENTERPRISE
CONSIDERS GROWTH OPPORTUNITY CASE STUDY
SOLUTION
e
pl
SYNOPSIS
m
Sa
As Chief Executive Officer Maya Kambeitz sat in her Calgary office preparing for the upcoming mid-2018
board meeting, she considered a potential growth strategy for Norfolk Housing Association (Norfolk Housing)
that would align with its core values: to offer inclusive and affordable housing, and to maintain financial stability
in 2019 and beyond. Norfolk Housing was a social enterprise registered as a non-profit corporation in Calgary,
n
Alberta, offering rentals of affordable and priced-to-market apartments in shared buildings. Kambeitz wanted
tio
the board to consider whether or not to acquire another building, ideally near the current locations, to expand
their operations. The increased number of units would improve operational efficiency through economies of
scale and serve more people, aligning with the social enterprise’s dedication to both long-term financial
lu
sustainability and social purpose. However, expansion would require financing and support to acquire and
manage the new building, which could put Norfolk Housing’s financial sustainability at risk.
So
The challenge was to achieve Norfolk Housing’s purpose to expand and provide affordable housing to more
Calgarians while also maintaining long-term financial stability, which ensured that current tenants would
not lose their homes if the association failed. Kambeitz had learned about Riley Park Place, a property with
24 units that was for sale. The location was close to their current properties and its acquisition had potential.
However, there were some questions about whether the opportunity aligned with Norfolk Housing’s
purpose and financial sustainability.
The Case Solution Starts From page 6
, e
pl
m
Sa
n
tio
lu
ASSIGNMENT QUESTIONS
1. Conduct a financial analysis to evaluate the Riley Park Place acquisition. Is this a good acquisition
So
opportunity in the context of Norfolk Housing?
2. What qualitative factors should influence Kambeitz’s decision about whether or not to recommend the
purchase of Riley Park Place? What are the pros and cons of the acquisition?
3. Would you recommend that Norfolk Housing buy Riley Park Place? Why or why not?
The Case Solution Starts From page 6
,ANALYSIS
1. Conduct a financial analysis to evaluate the Riley Park Place acquisition. Is this a good
acquisition opportunity in the context of Norfolk Housing?
• Exhibit -1 analyzes whether the purchase of Riley Park Place makes sense financially.
• Exhibit -2 combines the analysis of Exhibit TN-1 with the combined operating statement for Norfolk
Housing (see case Exhibit 2).
• Exhibit -3 generates the benchmark ratios used in the assumptions of Exhibit -1, based on the
operating statement of the Gaynor building (the Gaynor) (see case Exhibit 4).
• Exhibit -4 provides the mortgage repayment schedule used in Exhibit -1 and automatically
updates if the price of Riley Park Place has changed. A number of cells in the assumptions of Exhibit
-1 are highlighted to simplify the exploration of different key assumptions in price, capital cost, etc.
e
Overall, the financial analysis suggests that Norfolk Housing should not purchase Riley Park Place unless
pl
the price or cost of capital (opportunity cost) are lower. financial
model based on the seller’s price and the interest rate in the case. Once the model is understood, a discussion
m
should explore the implications of the board member’s estimated price and whether negotiations could
make the price even lower, with the objective of helping students see the sensitivity of the model’s net
present value (NPV) to the price.
Sa
n
tio
lu
So
The Case Solution Starts From page 6
, EXHIBIT -1: ANALYSIS OF RILEY PLACE ACQUISITION
Assumptions
Riley Park Place - number of units Notes
Bachelor - 1 bedroom 10 Based on information provided by Norfolk Housing
2-3 bedroom 14 Based on information provided by Norfolk Housing
Total residential units 24
Monthly market rent per unit
Bachelor - 1 bedroom $ 994 Average rent in the local market - provided by Norfolk Housing
2-3 bedroom $ 1,261 Average rent in the local market - provided by Norfolk Housing
e
Monthly Norfolk Housing subsidized rent per unit
Bachelor - 1 bedroom $ 411 Rent geared to minimum income in Calgary
pl
2-3 bedroom $ 758 Rent geared to minimum income in Calgary
Deal terms
Proposed price per unit or door $ 187,500
m
Sa
n
tio
lu
So
The Case Solution Starts From page 6
, e
pl
m
EXHIBIT -4: LOAN AMORTIZATION TABLE (SIMPLIFIED VERSION FOR CASE ASSUMPTIONS)
Sa
Loan Amount 4,250,000.00 Assumptions & Notes
Annual Interest Rate 3% Annual payment is made at the end of a year
Years (Periods) 15 Compound period is annual
Annual Payment 360,000.00 Loan term is 15 years
n
Payment Payment Interest Principal Remaining
Period Balance
tio
0 4,250,000
1 360,000.00 127,500.00 232,500.00 4,017,500
lu
2 360,000.00 120,525.00 239,475.00 3,778,025
3 360,000.00 113,340.75 246,659.25 3,531,366
So
4
The Case Solution Starts From page 6
CONSIDERS GROWTH OPPORTUNITY CASE STUDY
SOLUTION
e
pl
SYNOPSIS
m
Sa
As Chief Executive Officer Maya Kambeitz sat in her Calgary office preparing for the upcoming mid-2018
board meeting, she considered a potential growth strategy for Norfolk Housing Association (Norfolk Housing)
that would align with its core values: to offer inclusive and affordable housing, and to maintain financial stability
in 2019 and beyond. Norfolk Housing was a social enterprise registered as a non-profit corporation in Calgary,
n
Alberta, offering rentals of affordable and priced-to-market apartments in shared buildings. Kambeitz wanted
tio
the board to consider whether or not to acquire another building, ideally near the current locations, to expand
their operations. The increased number of units would improve operational efficiency through economies of
scale and serve more people, aligning with the social enterprise’s dedication to both long-term financial
lu
sustainability and social purpose. However, expansion would require financing and support to acquire and
manage the new building, which could put Norfolk Housing’s financial sustainability at risk.
So
The challenge was to achieve Norfolk Housing’s purpose to expand and provide affordable housing to more
Calgarians while also maintaining long-term financial stability, which ensured that current tenants would
not lose their homes if the association failed. Kambeitz had learned about Riley Park Place, a property with
24 units that was for sale. The location was close to their current properties and its acquisition had potential.
However, there were some questions about whether the opportunity aligned with Norfolk Housing’s
purpose and financial sustainability.
The Case Solution Starts From page 6
, e
pl
m
Sa
n
tio
lu
ASSIGNMENT QUESTIONS
1. Conduct a financial analysis to evaluate the Riley Park Place acquisition. Is this a good acquisition
So
opportunity in the context of Norfolk Housing?
2. What qualitative factors should influence Kambeitz’s decision about whether or not to recommend the
purchase of Riley Park Place? What are the pros and cons of the acquisition?
3. Would you recommend that Norfolk Housing buy Riley Park Place? Why or why not?
The Case Solution Starts From page 6
,ANALYSIS
1. Conduct a financial analysis to evaluate the Riley Park Place acquisition. Is this a good
acquisition opportunity in the context of Norfolk Housing?
• Exhibit -1 analyzes whether the purchase of Riley Park Place makes sense financially.
• Exhibit -2 combines the analysis of Exhibit TN-1 with the combined operating statement for Norfolk
Housing (see case Exhibit 2).
• Exhibit -3 generates the benchmark ratios used in the assumptions of Exhibit -1, based on the
operating statement of the Gaynor building (the Gaynor) (see case Exhibit 4).
• Exhibit -4 provides the mortgage repayment schedule used in Exhibit -1 and automatically
updates if the price of Riley Park Place has changed. A number of cells in the assumptions of Exhibit
-1 are highlighted to simplify the exploration of different key assumptions in price, capital cost, etc.
e
Overall, the financial analysis suggests that Norfolk Housing should not purchase Riley Park Place unless
pl
the price or cost of capital (opportunity cost) are lower. financial
model based on the seller’s price and the interest rate in the case. Once the model is understood, a discussion
m
should explore the implications of the board member’s estimated price and whether negotiations could
make the price even lower, with the objective of helping students see the sensitivity of the model’s net
present value (NPV) to the price.
Sa
n
tio
lu
So
The Case Solution Starts From page 6
, EXHIBIT -1: ANALYSIS OF RILEY PLACE ACQUISITION
Assumptions
Riley Park Place - number of units Notes
Bachelor - 1 bedroom 10 Based on information provided by Norfolk Housing
2-3 bedroom 14 Based on information provided by Norfolk Housing
Total residential units 24
Monthly market rent per unit
Bachelor - 1 bedroom $ 994 Average rent in the local market - provided by Norfolk Housing
2-3 bedroom $ 1,261 Average rent in the local market - provided by Norfolk Housing
e
Monthly Norfolk Housing subsidized rent per unit
Bachelor - 1 bedroom $ 411 Rent geared to minimum income in Calgary
pl
2-3 bedroom $ 758 Rent geared to minimum income in Calgary
Deal terms
Proposed price per unit or door $ 187,500
m
Sa
n
tio
lu
So
The Case Solution Starts From page 6
, e
pl
m
EXHIBIT -4: LOAN AMORTIZATION TABLE (SIMPLIFIED VERSION FOR CASE ASSUMPTIONS)
Sa
Loan Amount 4,250,000.00 Assumptions & Notes
Annual Interest Rate 3% Annual payment is made at the end of a year
Years (Periods) 15 Compound period is annual
Annual Payment 360,000.00 Loan term is 15 years
n
Payment Payment Interest Principal Remaining
Period Balance
tio
0 4,250,000
1 360,000.00 127,500.00 232,500.00 4,017,500
lu
2 360,000.00 120,525.00 239,475.00 3,778,025
3 360,000.00 113,340.75 246,659.25 3,531,366
So
4
The Case Solution Starts From page 6
