The Multimedia, Multidisciplinary Case

As news broke last fall that the private equity giant Blackstone Group was set to buy the real estate investment trust Equity Office Properties Trust (EOP) for $36 billion, the professors and staff redesigning the SOM curriculum spotted the opportunity for a new kind of case study. The largest real estate deal in U.S. history seemed to present an extraordinary teaching moment.

SOM created a case writing department last year charged with creating the documents necessary to make business education reflect the realities of a global marketplace. Until Blackstone/EOP, the new SOM cases, more than 20 in all, were presented as standard written documents, even as they attempted to better integrate management disciplines. With Blackstone/EOP came an opportunity to build a multimedia case, presented through an interactive website, that instead of offering a neat assessment of the data for students to analyze, presented the raw data and asked students to work from it.

“This is more than just a case for us,” Will Goetzmann, the Edwin J. Beinecke Professor of Finance and Management Studies, told students at the case’s debut. “It’s a step toward building a new curriculum and toward engaging students in new ways.”

The case debuted in April in the Integrated Leadership Perspective course, which is the capstone of the first year of the new curriculum. (Read more about ILP.) Goetzmann and Jeff Sonnenfeld, the Lester Crown Professor in the Practice of Management, taught, as well as helped develop, the Blackstone/EOP case. Together, they approached the material comprehensively, with Goetzmann using his real estate expertise to break down the financial particulars, while Sonnenfeld focused on the vastly different leadership styles of the two companies’ CEOs.

Students were asked to review primary documents, including the annual 10k reports for each company and other federal filings; analyst reports on the proposed deals; data on the real estate and private equity industries; articles on how to value real estate; news reports; stock charts; and a function using Google Maps that allowed students to see where all the buildings in the deal were located, plus pictures and important information about them. In all there were about 100 jumping off points from the main website, allowing students to dive deeper into the subject than in a printed case.

The nature of the case made bringing everything together extremely complicated. After Blackstone’s initial bid became public, other companies expressed interest, sparking an auction for EOP that lasted through much of the winter. “In January and February it sort of exploded,” said Allison Mitkowski, one of the case writers. “It was in the news every day and it got a lot bigger than Will even thought in the beginning.”

After the deal was finalized, Mitkowski, along with Sonnenfeld and Jaan Elias, director of case study research, were able to sit down with the two CEOs: Blackstone’s Steve Schwarzman and EOP’s Sam Zell. During a period when Zell and Schwarzman didn’t speak to the media about the deal, the group interviewed each leader on video for more than two hours. When students went to the case website, they were able to evaluate the deal through the eyes of its two most important figures, giving the experience a sense of immediacy.

”The students were seeing the video literally a week and a half after it was done,” said Elias.

On the day the case was presented, Goetzmann broke down the hard numbers, leading students through the commercial real estate market and explaining how a private equity firm could make money on the properties where a REIT would be more constrained, prevented by law from liquidating the properties as easily as a private equity firm could. He also examined how, after Blackstone’s initial offer to EOP, other suitors made bids, driving up the price. Before Blackstone showed interest in the company, analysts generally took a dim view of EOP, valuing it at roughly half the Blackstone purchase price. This changed dramatically once the Blackstone/EOP courtship became public. As Sonnenfeld explained to the class, a major reason for the change in analyst feelings toward EOP came down to CEO image.

Sonnenfeld, who helped conduct the interviews with both CEOs, broke down their styles, from the maverick Zell, who is known for a love of motorcycles, snowboarding and an unassuming suburban Chicago office complete with an outdoor duck pond, to Schwarzman, who has emerged as one of the most prominent figures on Wall Street, complete with an elegant office and an accompanying aura of accomplishment and establishment.

“Why was EOP under priced?” Sonnenfeld asked the class. “Analysts didn’t like Zell. He said it, Schwarzman said it. Analysts found him unpredictable. Atmospherics depressed the value of the company. And now the deal was worth twice as much with Schwarzman attached to it. This was a re-branding.… This is a critical lesson of this deal. Style and substance are inextricably intertwined.”

Koichi Kurisu ’08 said this point was the biggest revelation of the new case. “Who would’ve known that any of this could impact a deal as large as this?” he asked. “Well, we do now, and this understanding couldn’t have come from presenting the EOP deal in traditional case form. It forced us to be resourceful and creative, something that is particularly valuable in today’s business climate.”

It was the new approach of the case that Lisa Howie ’08 found most impressive. “The case was messy, to be honest,” she said. “But this was really fantastic. There were tons and tons of stuff to go over and it was up to each of us to decide how far we wanted to go with it. It was just more realistic. On the job no one’s going to hand you a 20-page case study telling you what you need to know. If you’re waiting for a problem set, you’re not going to get the job done.”