It´s 1996 and Tomahawk corporation has been pursuing a path of extreme indebtedness since its humble beginnings, teaming with the national bank of Sylvania to construct office districts in the cities of this brave new frontier country, expecting that the pay-off will be good enough to buy back its independence, sometime in the future.
For the moment the situation looks rosy... but is it so? Will the new residential districts turn into a profitable business? Is the current debt manageable under present circumstances? Could we ask for further loans to finance new projects without endangering the stability of the corporation? Will the bankers show their true colours and start sharpening their knives... once they realize we have grown fat enough?
In this new article, you will follow the CEO of Tomahawk corporation from the begining as he tries to succeed carving out a business in the Real State sector, in the tiny country of Sylvania.
We´ll explore certain aspects that often remain more dormant in traditional game plays. So if you feel your curiosity piqued, come and join the living thread, as we expect you´ll find useful insights that will help you understand better some of the mechanics of the game, and maybe spark anew your love for it.
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We begin the gameplay in 1990, and will be using both the subsidiary DLC as well as the city economic simulation DLC.
My main objective by writting this article will be (hopefully):
to provide an enjoyable discussion of Tomahawk´s progress, our Real Estate (RE) corporation, through time.
to show how playing a RE game can be both fun and challenging, and
to provide useful insights, for your next game.
At the beginning we´ll be focusing primarily on our corporation´s perceived value: our assets, and their growth. That is, the value of our property, and it´s appreciation.
As we have a very small amount of money when we start, we need to find an investor willing to provide the cash we lack to fund our expansion.
So, we´ll choose Sylvania´s commercial bank as our main financing agent, and try to avoid stock market investors.
Most games focus on selling merchandise by producing and retailing it. In our case we´ll be selling something different, but selling nevertheless, these being claims on our property.
We´ll report every year money rates as they price such claims.
The bank will keep looking at the value of our property and will estimate how much to lend to us using mainly that criteria, so the more value we add, the bigger the credit line at our disposal.
We´ll start inflating our "30 million cash" assets by creating new RE districts in Sylvania´s cities. We´ll have to choose carefully the location of our first RE stronghold, and keep adding to it, maximizing the increase in value in our land purchases.
And to do so we´ll build on that land our own offices, and later on, apartments.
We´ll also try to enrich the gameplay providing a few off-game sheets that are fed by the game´s data, periodically:
One to measure how profitable some of our residential buildings are: We´ll try to know the years it took them to pay back their credit funded set-up costs with their rent.
One to show in one place the income and value we get: per building; per class of RE firm; per city; per square of land (as we consider our offices and apartments income-bearing land assets).
One to try to size our liabilities (our debt) so they can be properly assesed and managed.
One where we´ll compare our residential districts to our commercial districts, in terms of income and value, per city and globally.
One where we´ll try to asess the viability of whole city sectors, considering our total liabilities and money rates.
Finally, if possible, we´ll attempt a modest nation building approach: by setting up new subsidiaries to engage in regular business, as well as by bidding for political power in every city.
Always trying to properly manage our debt, which we´ll have no particular reason to fully "return"...
Office space
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colonel_truman
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Office space
Last edited by colonel_truman on Tue Jul 03, 2018 11:10 am, edited 2 times in total.
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colonel_truman
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Re: Office space
Ok, so below you´ll find a save file for February 1990.
I wait one month to see where the commercial district is located, as it flips from the area around the stock exchange to somewhere else, and I haven´t figured out how it flips. My guess is there is a "mass" of office space and the game tries to find the center of masses for each city.
Edited: my new guess is it´s attracted by land value.
The cities are Funk, Lynden, Glen Fork and Lambs grove.
There are 2 ports in each of them.
There are 4 real state companies that have bought land to develop a neighborhood of their own. (Guess a bit irrelevant, but for the record)
The city detail screen shows a strong demand in all of them for commercial buildings (about -50 to -60)
We have 2% inflation, and 6% interest on loans, so a 4% real interest rate.
I have chosen Lambs Grove as a starting point. Lynden has already 2 supermarkets spoiling the area.
These two have the highest wages, so the rent collected from the buildings will be higher. Also the land value is higher so it will pay the most to increase it there, in relative terms.
One might argue I could start in the cheapest city, but I prefer to have it tough at the beginning and easier later on.
I wait one month to see where the commercial district is located, as it flips from the area around the stock exchange to somewhere else, and I haven´t figured out how it flips. My guess is there is a "mass" of office space and the game tries to find the center of masses for each city.
Edited: my new guess is it´s attracted by land value.
The cities are Funk, Lynden, Glen Fork and Lambs grove.
There are 2 ports in each of them.
There are 4 real state companies that have bought land to develop a neighborhood of their own. (Guess a bit irrelevant, but for the record)
The city detail screen shows a strong demand in all of them for commercial buildings (about -50 to -60)
We have 2% inflation, and 6% interest on loans, so a 4% real interest rate.
I have chosen Lambs Grove as a starting point. Lynden has already 2 supermarkets spoiling the area.
These two have the highest wages, so the rent collected from the buildings will be higher. Also the land value is higher so it will pay the most to increase it there, in relative terms.
One might argue I could start in the cheapest city, but I prefer to have it tough at the beginning and easier later on.
Last edited by colonel_truman on Tue Jul 03, 2018 1:27 am, edited 1 time in total.
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colonel_truman
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Re: Office space
FEBRUARY 1990
There you are!
Humble start.
I borrowed 30 million and bought a nice square, with a building in the middle to increase the value of the land around it.
There you are!
Humble start.
I borrowed 30 million and bought a nice square, with a building in the middle to increase the value of the land around it.
- city view 1feb1990.png (1.02 MiB) Viewed 26184 times
- financial report 1feb1990.png (614.33 KiB) Viewed 26184 times
Last edited by colonel_truman on Tue Jul 03, 2018 1:32 am, edited 2 times in total.
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colonel_truman
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Re: Office space
FEBRUARY 1990 - FEBRUARY 1991
Here is the commercial district of Lambs Grove after one year of buying land and "placing" the skyscrapers. Notice how tight they are located in order to maximize the lift in land value, as each of them "support" the land below the others.
Very nice improvement to have the BIG office building as a 3x3 now. I called it the "value bomb" in previous games when it was a 4x4.
It doesn´t compete with the 2x2 in terms of rent income, but it increases the value around it the most. Correct me if wrong.
We owe the bank about 100 million. The increase in the company´s value has been about 77 million net (I discount the 30 million of starting capital), so the bank will allow its lending department to increase their line to us every passing month, or so. We´re paying 2.7% in real rates thanks to inflation (I changed it to inverse) So we are having cheap financing.
Here is the stock performance. It has doubled its price and is currently undervalued at 0.61 PB. We are not planning to issue new shares as we have cheap money from the bank, and most important, because we believe the company will become very profitable, very soon. So no need to offer cheap stock to new investors.
Here is the commercial district of Lambs Grove after one year of buying land and "placing" the skyscrapers. Notice how tight they are located in order to maximize the lift in land value, as each of them "support" the land below the others.
Very nice improvement to have the BIG office building as a 3x3 now. I called it the "value bomb" in previous games when it was a 4x4.
It doesn´t compete with the 2x2 in terms of rent income, but it increases the value around it the most. Correct me if wrong.
- city view 1feb1991.png (1.07 MiB) Viewed 26182 times
- financial report 1feb1991.png (616.91 KiB) Viewed 26182 times
- stock market 1feb1991.png (556.64 KiB) Viewed 26182 times
- Attachments
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- saves feb1991.rar
- (2.42 MiB) Downloaded 405 times
Last edited by colonel_truman on Tue Jul 03, 2018 1:34 am, edited 1 time in total.
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colonel_truman
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Re: Office space
FEBRUARY 1991 - AUGUST 1991
After one and a half years: We have completed building the financial district in Lambs Grove. We sell the land lying south so we have a bit more of capital to expand, and we´ll be selling the land north as soon as it increases in value.
The demand for office space in the city now stands at zero, so we have to move on to greener pastures.
The company now has a value of 168 million, so the building of the district was worth roughly 138 million, to date.
The real interest rate is 2.2% now thanks to an increase in inflation, so we have cheap financing still.
The price of the stock now stands at roughly 37$ per share, and climbing, and we have the best p/e of any company in the realm, what means we are already making a buck!
Still undervalued at 0.67 pb. So no need to issue shares at all.
After one and a half years: We have completed building the financial district in Lambs Grove. We sell the land lying south so we have a bit more of capital to expand, and we´ll be selling the land north as soon as it increases in value.
The demand for office space in the city now stands at zero, so we have to move on to greener pastures.
- City View aug1991.png (1.06 MiB) Viewed 26179 times
The real interest rate is 2.2% now thanks to an increase in inflation, so we have cheap financing still.
- Financial Report aug1991.png (615.62 KiB) Viewed 26179 times
Still undervalued at 0.67 pb. So no need to issue shares at all.
- Stock Market aug1991.png (554.55 KiB) Viewed 26179 times
Last edited by colonel_truman on Tue Jul 03, 2018 1:35 am, edited 2 times in total.
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colonel_truman
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Re: Office space
AUGUST 1991 - FEBRUARY 1992
Next objective is Glen Fork. The land a bit to the south east of the commercial district area is cheaper and has bigger room for expansion. So we buy the land and place the skyscrappers with less concerns as in Lambs Grove.
Always focusing on placing the big value commercial buildings in the middle of our purchased land, bit by bit, to make it increase in value, and keep the bank financing our project. Notice the commercial district should be ideally closer to the fire station in the left, so it isn´t too far away.
As the demand for commercial buildings gets to zero, shown in the city details screen, we know the city has enough of them and there´s no need to push it further, altough we could. The "distance to CBD" is the most important variable to consider, as the other two can be "manipulated" later on. So if we build close to it the commercial buildings owned by the city and the AI players won´t be able to compete with ours as they are farther away. That´s why we can keep adding new buildings without too big concerns, but the thing is we have two more cities with high demand at the moment...
A last observation, the minimum land I tend to purchase is two squares away from any new building, ideally, so here you see we have an extra lot towards the stadium that I planned to develop, but didn´t. Still that land is an asset, can be sold to pay down the loans if interest rates go up or inflation down (recession) or to buy the land in the other cities next if the bank tightens a bit.
Or also keep it in case the city grows and needs extra office space...
The increase in the value of the company has been 254 million in two years, and up 115 million in half a year. As always, the beginning is the hardest and now business is going to keep rolling. The real interest paid is 1.6%, so even better for us real estaters.
The stock price is booming, still undervalued with a p/b of 0.79 (picking up) and with a very good p/e. Already the most profitable company in the realm.
Next objective is Glen Fork. The land a bit to the south east of the commercial district area is cheaper and has bigger room for expansion. So we buy the land and place the skyscrappers with less concerns as in Lambs Grove.
Always focusing on placing the big value commercial buildings in the middle of our purchased land, bit by bit, to make it increase in value, and keep the bank financing our project. Notice the commercial district should be ideally closer to the fire station in the left, so it isn´t too far away.
As the demand for commercial buildings gets to zero, shown in the city details screen, we know the city has enough of them and there´s no need to push it further, altough we could. The "distance to CBD" is the most important variable to consider, as the other two can be "manipulated" later on. So if we build close to it the commercial buildings owned by the city and the AI players won´t be able to compete with ours as they are farther away. That´s why we can keep adding new buildings without too big concerns, but the thing is we have two more cities with high demand at the moment...
A last observation, the minimum land I tend to purchase is two squares away from any new building, ideally, so here you see we have an extra lot towards the stadium that I planned to develop, but didn´t. Still that land is an asset, can be sold to pay down the loans if interest rates go up or inflation down (recession) or to buy the land in the other cities next if the bank tightens a bit.
Or also keep it in case the city grows and needs extra office space...
- City View feb1992.png (1.01 MiB) Viewed 26163 times
- Financial Report feb1992.png (618.09 KiB) Viewed 26163 times
- Stock Market feb1992.png (558.44 KiB) Viewed 26163 times
Last edited by colonel_truman on Tue Jul 03, 2018 1:36 am, edited 1 time in total.
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colonel_truman
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Re: Office space
FEBRUARY 1992 - FEBRUARY 1993
About one year later we have developed the office space in the other two cities, making our company quite profitable (as things stand at the moment) thanks to the rents we collect from the offices, and also a par player with the big companies (in terms of assets) we compete against.
In Funk city the financial district is not shown because it was displaced to a point above the river. The location was chosen because it was the neatest area and the closest possible to that elusive cbd dot.
In Lynden city our chosen spot, as well, had factored the distance to the cbd, the neatness and price of its surroundings and of course the spoiling web of supermarkets south of its location.
Here is how the commercial district in the other two cities stands.
The real rate we keep paying the bank gets every time closer to zero. When it equals zero we´ll be returning principal with the interest payments, and if the central bank keeps lowering the rate to stimulate the economy (in theory, unproved), inflation will eat even a bigger chunk of our debt. But that´s common knowledge.
The important part is to develop quickly so we have the maximum accrued debt that we expect to incur in the best of possible times, that is, central bank easing and inflation rising.
Our net assets now equal 710 million of which 680 have been added through our little project.
The price of the stock keeps skyrocketing, now at 216$ a share. We still have our friend the banker rolling out dollars so we won´t issue new shares.
We believe the price of the land under our buildings will increase further, as well as our revenues from renting out the offices, this coming year. In this fashion the book value and the earnings are expected to improve which will lift the price of the stock even more.
About one year later we have developed the office space in the other two cities, making our company quite profitable (as things stand at the moment) thanks to the rents we collect from the offices, and also a par player with the big companies (in terms of assets) we compete against.
In Funk city the financial district is not shown because it was displaced to a point above the river. The location was chosen because it was the neatest area and the closest possible to that elusive cbd dot.
In Lynden city our chosen spot, as well, had factored the distance to the cbd, the neatness and price of its surroundings and of course the spoiling web of supermarkets south of its location.
Here is how the commercial district in the other two cities stands.
- City View Funk feb1993.png (921.35 KiB) Viewed 26158 times
- City View Lynden feb1993.png (967.87 KiB) Viewed 26158 times
The important part is to develop quickly so we have the maximum accrued debt that we expect to incur in the best of possible times, that is, central bank easing and inflation rising.
Our net assets now equal 710 million of which 680 have been added through our little project.
- Financial Report feb1993.png (577.36 KiB) Viewed 26158 times
We believe the price of the land under our buildings will increase further, as well as our revenues from renting out the offices, this coming year. In this fashion the book value and the earnings are expected to improve which will lift the price of the stock even more.
- Stock Market feb1993.png (532.98 KiB) Viewed 26158 times
Last edited by colonel_truman on Tue Jul 03, 2018 1:39 am, edited 1 time in total.
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colonel_truman
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Re: Office space
OBSERVATIONS:
The debt problem: You could easily overcome it, at this time, by having started as a private firm and then undergo an IPO, issuing 3 million extra shares to investors when the price reaches about 226$. But we like it the hard way.
Current income after interest payments is about 1,175 million/month.
We expect it to steadily increase the coming year as more office space gets occupied, but we have no estimates.
Debt accrued gets vaporized at the current rate of inflation. At the moment 5.5%.
An adverse scenario would be inflation 0% and rates 10%, making us pay 68 million in interests per year to the bank, without reducing principal.
But that´s a possibility a bit further away in time. As long as profits stay above 5,6 million per moth we won´t go under water, accordingly. Currently below.
All of the above should be kept in mind if we are going to increase our debt, so we know our margins beforehand.
So, what now? as always with this game the possibilities are a bit dizzying.
As a Real Estate developer, we can try to increase the appeal of our "displaced" offices in Funk city by building some residentials close because their commuting ratings are quite low. In all cities the demand for residentials is about zero, so any expansion there is going to find some headwinds. We don´t know if such an investment will pay nicely for the borrowed money. Although, as soon as immigrants find prospects of nice housing facilities, they move in, and so increase the demand for office space, which we dominate.
Another possibility is to go full tech. A bit of in-game research shows there isn´t a single firm focusing on cosmetics, so that´s encouraging.
Acquisitions: maybe a bit too early, but we could start buying some shares. Most public listed companies (all of them?) are overvalued in terms of price to equity, are seemingly having a tough time selling their stuff or the harbor´s, are already foolishly into mining , and losing money, and so on. So they make bad purchases. There are two exceptions that have a good P/E ratio but these have apparently sold their technology and will be experiencing a temporary price rush at best.
And, of course, in case you didn´t notice, we don´t want to stain our manicured hands with menial activities. No retailing, nor manufacturing, nor farming/mining and so on.
We´ll be delegating that to our subsidiaries and acquisitions in that case... we deal cash.
Stay tuned and thanks for reading.
The debt problem: You could easily overcome it, at this time, by having started as a private firm and then undergo an IPO, issuing 3 million extra shares to investors when the price reaches about 226$. But we like it the hard way.
Current income after interest payments is about 1,175 million/month.
We expect it to steadily increase the coming year as more office space gets occupied, but we have no estimates.
Debt accrued gets vaporized at the current rate of inflation. At the moment 5.5%.
An adverse scenario would be inflation 0% and rates 10%, making us pay 68 million in interests per year to the bank, without reducing principal.
But that´s a possibility a bit further away in time. As long as profits stay above 5,6 million per moth we won´t go under water, accordingly. Currently below.
All of the above should be kept in mind if we are going to increase our debt, so we know our margins beforehand.
So, what now? as always with this game the possibilities are a bit dizzying.
As a Real Estate developer, we can try to increase the appeal of our "displaced" offices in Funk city by building some residentials close because their commuting ratings are quite low. In all cities the demand for residentials is about zero, so any expansion there is going to find some headwinds. We don´t know if such an investment will pay nicely for the borrowed money. Although, as soon as immigrants find prospects of nice housing facilities, they move in, and so increase the demand for office space, which we dominate.
Another possibility is to go full tech. A bit of in-game research shows there isn´t a single firm focusing on cosmetics, so that´s encouraging.
Acquisitions: maybe a bit too early, but we could start buying some shares. Most public listed companies (all of them?) are overvalued in terms of price to equity, are seemingly having a tough time selling their stuff or the harbor´s, are already foolishly into mining , and losing money, and so on. So they make bad purchases. There are two exceptions that have a good P/E ratio but these have apparently sold their technology and will be experiencing a temporary price rush at best.
And, of course, in case you didn´t notice, we don´t want to stain our manicured hands with menial activities. No retailing, nor manufacturing, nor farming/mining and so on.
We´ll be delegating that to our subsidiaries and acquisitions in that case... we deal cash.
Stay tuned and thanks for reading.
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colonel_truman
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Re: Office space
The city competitiveness for cosmetics in Glen Fork is below that in Funk, but just a little and we have extra land already purchased, so we decide to build our tech complex there: 4 labs to research each of the cosmetic products and the HQ to hire a head of research and to keep an eye on the technology market.
Here´s how it looks from above.
And here´s the CEO, and the head of research.
The tech complex will cost about 40 million in two years, so 10 million estimated cost per technology.
We place some residential buildings in Funk and we´ll be watching how the ratings in the offices behave.
Finally we drop the remaining of the cash in a stock pick: Fusion corp. The manager has good research capabilities and his specialty is furniture. At the moment he´s focused on retailing (exclusively). The company has a strong ownership but we think we could make the AI firms dump their shares if we bid high enough.
And no more cash available.
Let´s wait one year until the office space consolidates and see what income we finally get. In the meantime we´ll keep adding to our stock pick without borrowing.
Also, we´ll let the value of our assets dictate the bank how much to lend us next, and do nothing more. Hopefully we´ll have a ton of cash to borrow for our residential expansion in the coming 1994.
Here´s how it looks from above.
- City View Glen Fork feb1993.png (1.04 MiB) Viewed 26132 times
- HQ feb1993.png (645.01 KiB) Viewed 26132 times
We place some residential buildings in Funk and we´ll be watching how the ratings in the offices behave.
- City View Funk feb1993.png (978.49 KiB) Viewed 26132 times
- Stock Market Acquisitions feb1993.png (566.97 KiB) Viewed 26132 times
Let´s wait one year until the office space consolidates and see what income we finally get. In the meantime we´ll keep adding to our stock pick without borrowing.
Also, we´ll let the value of our assets dictate the bank how much to lend us next, and do nothing more. Hopefully we´ll have a ton of cash to borrow for our residential expansion in the coming 1994.
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colonel_truman
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Re: Office space
FEBRUARY 1993 - FEBRUARY 1994
So, it´s now February 1994, 4 years after our start, and the company has a stable net income of 5,6 million/month.
We´ve been purchasing Fusion´s stock and our ownership stands at 25%. Tomahawk Corp. shares have reached a plateau at 300$/share.
The bank has more than 250 million available to lend, so we´ll be in the lookout for land development oportunities in the residential sector this same month.
The real interest rate has become negative, at -1.12%. Great time to be indebted.
The overall cost of our lab complex is about 16 million/year (less than previously projected).
I have noticed income from residential buildings owned by the city that pay their setup costs in 5 years. That will be our anchor....
So, it´s now February 1994, 4 years after our start, and the company has a stable net income of 5,6 million/month.
We´ve been purchasing Fusion´s stock and our ownership stands at 25%. Tomahawk Corp. shares have reached a plateau at 300$/share.
The bank has more than 250 million available to lend, so we´ll be in the lookout for land development oportunities in the residential sector this same month.
The real interest rate has become negative, at -1.12%. Great time to be indebted.
The overall cost of our lab complex is about 16 million/year (less than previously projected).
I have noticed income from residential buildings owned by the city that pay their setup costs in 5 years. That will be our anchor....
- Balance Sheet feb1994.png (624.1 KiB) Viewed 26115 times
- Income Statement feb1994.png (526.81 KiB) Viewed 26115 times
- Stock Market feb1994.png (554.9 KiB) Viewed 26115 times
Last edited by colonel_truman on Tue Jul 03, 2018 1:40 am, edited 1 time in total.
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