Better Corporate Real Estate Decisions with Financial Analysis

Guest Post by Jim Breitenfeld, President, Sidecar Commercial Real Estate, LLC

Even in the short term, there are many essential factors to consider when leasing or buying corporate real estate. It’s easy to get lost in the immediacy of considering what’s available now, then running the numbers to find which option fits your budget.

However, this financial analysis takes on another complicated but crucial dimension when considering that where you lease or buy real estate today must align with your goals for where you’ll be in 3-, 5-, 10 or more years.

When leasing space, comparative lease analysis involves looking at multiple lease options side by side, weighing what you gain, risk, and lose in each choice. There are many applications and templates where you can plug in the information, weigh your options, and decide what your best choice is. These analyses can account for such information as rent escalations, the time value of your money, subleasing, build-outs, and pass-through expenses.

Unfortunately, a good decision today doesn’t always equal a good decision in the long run. While a real estate broker could help to ensure that your lease is financially favorable, providing you flexible terms and the necessary leverage when the term is up, that’s just the beginning. When prepared by an experienced Real Estate Advisor, this analytical data is a powerful tool for evaluating options and making sure your next step is the right one.

For companies with owner-occupied real estate, financial analysis can serve a different, yet vital purpose.  Depending on different factors, from what’s going on in the world to adjusted business projections, you might be exploring options for your asset. One of those decisions might be whether to simply continue-to-own or execute a sale-leaseback.

During a sale-leaseback, you would sell your property to an investor and at the same time sign a lease to continue using the space. There are definite pros and cons to either option, again depending on your plans for the business. If having cash on hand is your top priority, a sale-leaseback might be your best option. It also may free you from certain liabilities and responsibilities of property ownership, from taxes to maintenance, depending on the structure of the lease. Using market data and your company’s return requirements, your Advisor can help you determine which option makes better financial and tax sense.