Crown Jewels in the Real Estate Market: analysis and appraisal of Ca' di Dio's acquisition

Abstract

Real Estate is among the five investment assets – together with stocks, bonds, cash, and commodities. In recent years this market soared abruptly, representing a profitable investment, especially for high-value assets.

This paper focuses on Commercial Real Estate Market in Venice, Italy. The tourism-related sector in Venice is facing a huge escalation, to the extent that property purchases have sky-rocketed for both hotels and tourist apartments. The study investigates the role of “Crown Jewels” in this context, focusing on luxury hotels. In real estate, Crown Jewels are referred to as property acquisitions whose price is much higher than their fair value. Why does it happen? What does their hidden additional value entail? The case presented will try to answer those questions by analyzing the recent acquisition of Ca’ di Dio, a former nursing house that was completely renovated to build a 5-star hotel.

After a general introduction of the Real Estate Market, this study will give insight into the approaches used to value a property, and the financial reasoning behind it. It will then be dedicated to Ca’ di Dio’s acquisition assessment at the time of proposal, the comparison between its fair value and the price paid, and the “Crown Jewels” relation.