Asset Tools
With an experienced team of top analysts, Corporate Portfolio Analytics provides customized quantitative and qualitative analysis. As CRE groups grow increasingly lean, we can complement and assist your internal team by providing project support and capacity for outsourced analytics.
Deal Zones
The current commission-based system of compensating brokers on size of deal all too often conflicts with corporate interests of minimizing lease rates, increasing flexibility or matching term to business need. Corporate real estate managers seldom have external due diligence processes to independently verify real estate recommendations endorsed by their brokers. The Deal Zone®, a customized benchmarking product, provides transaction managers with this required intelligence.
A Deal Zone® sets the upper and lower boundaries at where a lease rate should price given market conditions and occupancy criteria and provides a recommended transaction strategy to support a company’s efforts to negotiate more favorable lease terms. The Deal Zone utilizes independent, data driven analysis on current or prospective leases using the same independent real estate market research used by institutional investors, as well as proprietary qualitative assessment methods to evaluate the client’s relative bargaining power in the marketplace.
Deal Zones® benefit clients in many ways:
- Benchmark Lease Negotiations: The Deal Zone® provides an objective reality check to guide lease negotiations. Broker comparables are useful but do not provide the whole picture of current and future market conditions. The Deal Zone® provides a check to the broker comps on the high end of the zone, as well as sets a floor price at which a client may be comfortable with finalizing the decision. Our Clients use Deal Zones® at multiple points in the process: pro-actively before beginning negotiations, during the negotiation process, and retrospectively to verify service provider performance.
- Improve Approval Process: Deal Zones® can support internal CRE processes by providing an objective, external check on lease pricing. The pricing impact of specific term requirements, capital investments, or other specialized corporate needs can be estimated and quantified, facilitating discussion with line of business customers.
- “Balance of Power”: Deal Zones® strengthen a client’s bargaining positions with landlords because available supply and future pricing trends are identified. The Landlord likely has the same market intelligence information on their side of the table. Understanding the context of the landlord’s pricing empowers a tenant’s negotiating approach.
- Evaluate Deal Outcomes and Third Party Service Providers: After a transaction is complete, Deal Zones® provide a means to objectively measure deal outcome compared to a benchmark. Over a number of deals, Clients can compare transaction performance across types of leases, properties, or transaction management firms. While every deal is different, we have found that patterns can be assessed over a series of deals, usually over a year-long time frame. A performance bonus based on “beating” the market can be made part of the firm’s compensation agreement/bonus system.
- Organizational Learning: By using Deal Zones®, Clients can learn about factors that contribute to greater or lower bargaining power. For instance: Are there things your company asks for in leases that increase pricing overall across deals? What other factors, such as negotiating time, special occupancy requirements, or the degree of TI influence the final deal?
Can Deal Zones® Save Me Money? How Much?
- Many clients have asked if Deal Zones® can help them achieve cost savings. The answer to that question is yes. Though all deals are different, consider the following example. A recent examination of lease rates paid by several large, yet diverse corporations revealed that corporations were paying a 13% premium over current market lease benchmarks, on average, without the use of Deal Zones®. Though some of this premium may be due to the timing of the leases and market cycles of the deals examined, assume that a Deal Zone® could enable a corporate client to eliminate 10% of this premium. Then, given a five year lease for 10,000 sf at $20 psf annually, a potential savings of $100,000 over the lease term could be achieved.
What is the Market Coverage for Deal Zones®?
Deal Zones® can be performed for leases in locations for which there is real estate forecasting data. Corporate Portfolio Analytics has subscribes to or has relationships with data providers that cover most metropolitan areas in the US, as well as many international markets. The map below shows the wide range of locations where Deal Zones® have and can be performed.
Troubled Asset Analysis
The economic consequences for a tenant in a foreclosure situation can be significant. Having as complete knowledge as possible about a landlord’s current and future financial solvency can help a corporate occupier avoid economic loss and possibly even achieve cost savings. Corporate Portfolio Analytics can identify specific properties in your portfolio that may be either distressed or potentially troubled and can recommend strategies to terminate, relocate, or purchase a property to achieve the optimal economic results.
Move/Stay Comparison
Corporate Portfolio Analytics’ Comparative Location Analysis product quantifies the financial impact of moving to a new location compared to staying at a current location. Comparison among two or more locations can consider not only rent and operating expense costs, but also moving and capital costs. The analysis will determine if the benefit to the line of business by moving outweighs the financial costs. The Comparative Location Analysis is presented as a clear summary that can facilitate discussion with business lines and support efficient decision-making.
Buy Versus Lease Analysis
Corporate Portfolio Analytics’ Buy Versus Lease Analysis product compares the costs and benefits of leasing versus purchasing real estate. This analysis includes rigorous present value calculations of both the lease and purchase option including the impact of taxes. The analysis also discusses the more qualitative pros and cons to a business of leasing versus owning. The Buy Versus Lease Analysis is a clear summary that can be presented to business leaders to help facilitate efficient decision-making.