CapStruc is short for Capital Structure, and we provide investment trusts, private equity firms, limited partnerships, family trusts, and individuals investors with the most comprehensive analysis of commercial real estate and related capital structure analysis to be found anywhere.
Conventional commercial real estate analysis involves formulating a direct capitalization, a discounted cash flow analysis, or both for either one of a series of net operating incomes. These NOIs are derived by deducting vacancy and collection losses, as well as both fixed and operating expenses from historical or projected potential gross income.
The quality of such an analysis is highly dependent on the depth and quality of research behind each of these numbers. A cursory analysis might simply derive numbers from market averages that are available from several proprietary publications. A more in-depth analysis might incorporate a review of the rent roll for the property along with an analysis of historical vacancy rates expenses and various factors that might cause these to change in the coming years.
At CapStruc Advisors, we go far beyond this. We’ll conduct a procedure equivalent to a lease audit to discover the potential gross income for the property. We’ll research the likelihood of tenant renewals and the potential for tenant replacement in case they don’t renew, along with the credit quality of each tenant, to formulate a reliable, professional estimate of vacancy and collection loss.
Our market analysis includes not just the demographic characteristics of the local market, but also the lifestyles of area residents.
We also have a deep understanding of the factors that drive real estate expenses. These include the various types of property taxes, the various types of insurance, utilities, and labor markets. Our principal, Doug McKnight, literally wrote the book on appealing property taxes in Pennsylvania and has given seminars of electricity and natural gas markets.
Finally, we analyze bank credit, capitalization rates, and economic cycles in the framework of economic theory known as the Austrian school of economics. Adherents to this theory accurately predicted both the dot.com crisis of 2001 and The Great Recession of 2008. In both cases, they were able to identify, not just the fact that the crises were imminent, but from what sector of the economy they would sprout.
This extreme level of thoroughness might seem like overkill to some, but the extra time and effort devoted before committing to an investment nearly always provides the foundation for much higher returns to a portfolio over time.
If you are considering investing in any interest in any type of commercial real estate, please contact us so that we can provide you with additional guidance.