New West Consulting provides sophisticated cash flow analysis and modeling services to local developers, individuals and small-to-mid sized private investor groups.

Lease Abstraction and Income Analysis

Commercial real estate leases are commonly very complex documents; with intricate provisions for increases in rental rates and the process for allocating expenses between the landlord and tenant. Additionally, terms “buried” in lease renewal options can have a profound impact on the long-term cash flow of a property and its market value.

We consider lease abstraction to be a critical foundation for both cash flow analysis and the larger due diligence process. NWC has the in-house resources to develop accurate and concise abstracts of tenant leases for our consulting clients. Our lease analyses focus on identifying those terms and provisions that could have a material impact on the future cash flow generated under a lease, such as tenant (early) termination rights, unusual abatement or concessions scenarios, unfavorable expense reimbursements, rent roll or document discrepancies, and/or upcoming (landlord-provided) tenant improvement allowances.

Our team of professionals also compares and analyzes a property’s existing or prospective leases against market-derived benchmarks identifying those tenants with above or below market rental rates. We can also assist our clients in developing pro forma rental rates for their proposed projects, what-if / sensitivity analyses, or as part of a releasing strategy for an existing project.

Lease Rollover Analysis

A comprehensive assessment of a property’s Lease Rollovers comprises another fundamental component of cash flow analysis. If applicable, a lease expiration/rollover schedule will be mapped out indicating (a) opportunities for landlords to increase any rents that are below market; (b) assist in creating effective tenant retention strategies; (c) promote better budgeting for landlord-provided tenant improvements; and (d) provide early warning of potential declines in net operating income (NOI).

Analysis of lease rollovers also includes the development of probability projections reflecting the likelihood of space renewals by tenant group and/or by specific tenant. The findings of the lease rollover / expiration schedule, together with the associated probability projections for tenant renewals, provide significant input into the selection process for yield and direct capitalization rates.

Analysis of Operating Expenses

As appraisers, we perform detailed examinations of current and historical operating statements across an extensive variety of properties. Importantly, each client or borrower’s financial information is treated with the upmost confidentiality. However, we are able to redact and aggregate this sensitive information into a form that maintains full confidentiality while also allowing us to develop proprietary benchmarks for market comparisons of a particular property’s actual or potential operating expenses.

Expense item categories identified as being out-of-pattern with the benchmarks often are indications of building deficiencies or areas of possible neglect by current or prior ownership. Sometimes prospective sellers will defer needed spending on maintenance or other key items in an attempt to achieve higher NOI numbers prior to placing a property for sale.

For the landlord, if operating expenses and/or their reimbursements are understated, the adverse impact on the “bottom line can be quite significant. Conversely, if a property’s operating expenses are unnecessarily too high or lack market support, the landlord runs the real risk of alienated tenants and resulting higher turnover rates.

Let New West Consulting help you identify operating expense categories that place out-of-pattern when compared with market benchmarks developed from aggregated (local) expense data and published national indices.

Cash Flow Modeling and Projections / Yield Capitalization (IRR) Analysis

We rely on industry standard Argus Valuation-DCF by Argus Software™ for our multi-tenant cash flow models and custom-designed MS Excel property-models for the analysis of self-storage facilities and rental apartment complexes. Argus is the industry standard commercial real estate cash flow projection, transaction analysis and asset valuations. Thus, NWC can:

• Quickly and accurately analyze commercial real estate assets and transactions;

• Profile and model market and individual property risks;

• Forecast property cash flows; including the influence of real estate a and general business cycles;

• Assist clients in developing leasing strategies, business and marketing plans;

• Calculate investment values and returns.