Financial Analyses

Making Informed Decisions: Understanding Commercial Real Estate Financial Analyses

In the dynamic world of commercial real estate, making sound financial decisions is crucial for businesses and investors alike. Financial analyses play a pivotal role in assessing the viability and profitability of various real estate strategies. In this article, we will delve into five essential commercial real estate financial analyses: Lease vs. Buy, Build-to-suit to Lease, Design-bid-build to Own, Equity Participation & Joint Ventures (JVs), and Sale/Leasebacks. Understanding these analyses empowers stakeholders to make informed choices that align with their long-term objectives and financial goals.


Services


Financial Analyses
  • Lease vs. Buy Analyses
  • The Lease vs. Buy analysis is a fundamental evaluation conducted by businesses considering whether to lease a property or purchase it outright. This analysis involves comparing the total costs and benefits associated with each option over a defined period, typically several years. It considers factors such as upfront costs, monthly expenses, tax implications, potential appreciation, and exit strategies.
    A Lease vs. Buy analysis allows companies to assess their financial capacity, risk tolerance, and growth projections to determine whether leasing or owning aligns better with their overall business strategy.

  • Build-to-suit to Lease
  • Build-to-suit to Lease analyses are performed by tenants seeking custom-built spaces for their specific operational needs. In this scenario, tenants work with developers to design and construct a property that suits their requirements. Upon completion, the tenant signs a long-term lease for the purpose-built space.
    This analysis assesses the overall cost of the build-to-suit project, including design, construction, and lease terms. It helps tenants evaluate whether the long-term benefits of having a tailor-made facility justify the initial investment and lease obligations.

  • Design-bid-build to Own
  • In contrast to build-to-suit to lease, the design-bid-build to own analysis involves developers or investors constructing a property with the intent to own it outright for long-term investment purposes. This analysis examines the development costs, market potential, projected rental income, operating expenses, and potential return on investment over the holding period.
    The design-bid-build to own analysis assists investors in understanding the feasibility of developing a property from scratch and aligning their financial goals with the property's long-term earning potential.

  • Equity Participation & JVs
  • Equity Participation and Joint Ventures (JVs) analyses are essential for evaluating partnership opportunities in commercial real estate. In these arrangements, two or more parties pool their resources to invest in a property or development project. Equity participation involves sharing ownership and profits proportionally based on each party's investment, while JVs involve formalizing the partnership through legal agreements.
    The analysis assesses the financial contributions, profit-sharing structures, risk-sharing arrangements, and exit strategies to ensure a mutually beneficial and successful partnership.

  • Sale / Leasebacks
  • A Sale/Leaseback analysis is a strategic financial move often employed by businesses seeking to unlock capital tied up in real estate assets. In this scenario, a company sells its owned property to an investor and then leases it back for its operations. This arrangement allows the company to free up capital for other investments or operational needs while maintaining control of the property.
    The analysis evaluates the tax implications, lease terms, and the impact on the company's financial statements to determine whether a Sale/Leaseback is a viable option for the business.

  • Commercial real estate financial analyses are essential tools for businesses and investors to make informed decisions that align with their strategic objectives and financial goals. Lease vs. Buy, Build-to-suit to Lease, Design-bid-build to Own, Equity Participation & JVs, and Sale/Leasebacks are all critical analyses that provide valuable insights into the financial implications of various real estate strategies.
    Incorporating these analyses into the decision-making process enables stakeholders to navigate the complexities of the commercial real estate market, seize profitable opportunities, and achieve long-term success in their real estate ventures. Whether it's assessing the best option between leasing and buying, evaluating the potential of custom-built spaces, exploring partnership opportunities, or leveraging real estate assets through Sale/Leasebacks, financial analyses serve as invaluable tools for strategic planning and informed choices in the ever-evolving world of commercial real estate.
     


  

Contact Us

Email: vconcello@gmail.com
Phone Number: 1(650) 804-1185

Mailing Address:
50 Woodside Plaza, @# 206
Redwood city, CA 94061

Department of Real Estate Corporate Real Estate Number # 01807779
Department of Real Estate License #
​Valerie Concello
# 00953158