Asset Performance Studies in commercial real estate can vary greatly based on the specific needs of the client and the property in question, but they typically aim to provide a comprehensive understanding of the asset’s current performance and future growth potential. Here is a general breakdown of the key sections that you might typically find in an Asset Performance Study:
Executive Summary: This section provides a brief overview of the entire report, highlighting the key findings and conclusions.
Asset Overview: This part of the report presents a detailed description of the asset, including its location, physical attributes, condition, current use, tenancy details, and any other relevant characteristics.
Financial Analysis: This section presents a thorough analysis of the asset’s financial performance. It may include details such as the asset’s current income, operating expenses, net operating income, capital expenditure requirements, and cash flow projections. This section can also present various financial metrics like capitalization rate, internal rate of return, and cash-on-cash return.
Market Analysis: This segment compares the subject asset to the broader market, analyzing trends such as comparable property values, rental rates, vacancy rates, absorption rates, and more. This helps to understand how the asset is performing in relation to similar properties in the market.
Risk Assessment: This section identifies potential risks associated with the asset, which could be environmental, financial, regulatory, or market-related. The objective is to provide a complete picture of potential challenges that could impact the asset’s performance.
Future Performance Projections: Based on the historical and current performance, this section projects the asset’s future performance. This might involve forecasting future rental income, occupancy levels, operating expenses, capital expenditure needs, and other key factors affecting the asset’s profitability.
Recommendations: The report concludes with a set of recommendations based on the study’s findings. These could include strategies to enhance asset performance, potential opportunities for value addition, risk mitigation strategies, and whether the asset should be held or sold based on the projected performance.
Again, this is a general guideline, and the specifics can vary based on the particular requirements of the client and the expertise of the team conducting the Asset Performance Study, such as the MORGENSTERN TEAM at HRE Commercial Real Estate.