An investor is considering Oakview Industrial Center, a fully leased industrial property with an asking price of $4.75 million. All three tenant leases expire during his planned five-year holding period. He has asked us to underwrite the acquisition and help him determine what he can afford to offer. His plan is to renew the existing …
Suppose we are considering a property whose owner reports $414,750 of net operating income for the past year. Before using that figure in a valuation, we would want to understand what produced it and how much we can reasonably expect during our first year of ownership. A new tenant may explain part of the difference. …
In commercial real estate, one of the key metrics investors and lenders use to assess a property’s stability and risk is the Weighted Average Lease Term (WALT). WALT measures the average remaining lease term of tenants in a property, weighted by their rental income contribution or square footage occupied. A longer WALT indicates more predictable …
Effective gross income is a line item on a real estate proforma that is commonly used by appraisers, investors, and other commercial real estate professionals. Although the effective gross income is easy to understand conceptually, the calculation itself can sometimes be confusing. In this article, we’ll take a closer look at effective gross income and clear …
Year over Year (YoY) analysis is a powerful tool for financial analysis that provides a direct comparison of performance between two periods of time. In this article, we will explore what YoY analysis is, how it is calculated, and why it is useful. We will also look at the advantages and disadvantages of YoY analysis …
When working with a commercial real estate data set, there are occasions where it is necessary to create a sum for a range of values, but only if they meet certain criteria. Fortunately, there is an easy way to accomplish this task using a built in Microsoft Excel function known as “SUMIF.” In this article, the SUMIF function …
Suppose that a medium sized accounting firm is looking to expand its footprint by leasing office space in a new city. After touring several spaces, they have narrowed it down to two options. The options have similar rental rates, but the firm wants to conserve capital so they need to figure out which one is less …
The development spread is a back-of-the-envelope calculation real estate developers use to evaluate whether a project is worth pursuing. It compares the income yield a developer expects to achieve on the cost of a new project with the cap rate investors are paying for similar, already stabilized properties. The idea is simple. If you can …
There is a wide spectrum of lease types in commercial real estate. To make it easier to communicate with others, it is not uncommon for complicated leases to be described using simple language. The ‘double net lease’ in commercial real estate is a term that describes a certain type of lease agreement, but it’s not …