67 – How Strong Leases Affect Value

Good morning and welcome to Episode 67 of The LeaseSmart Commercial Real Estate Podcast, brought to you by LeaseSmart.com.

This week Craig has a special guest on the show. Greg Smershwho is a professor of finance and real estate at the University of South Florida is joining us to discuss leasing analysis and corporate real estate industry trends.

Greg has a diverse background in construction, finance, teaching and leasing analysis and investment analysis. He stresses the importance of a strong lease in the actual value assessment of a property.

When value is being measured, we’re looking at location, of course, the credit of the tenant, how many years are left on the lease, the use, and the synergy.

In one word, location is accessibility, which translates to sales. The value of a certain location is captured in the rent per foot. Walgreens is a good example. They pay top dollar for that corner square acre because they want a really prominent location to offer accessibility to their customers. The tenant cares about this, sure, but the landlord and investors do, too, in the form of cash flow. Accessibility, if you keep breaking it down, means sales.

What kind of yield does an investor want when they buy a property? The more risky the deal, the higher the yield or the higher the capitalization rate or cap rate they’ll get.

In teaching classes at the University of South Florida, Greg emphasizes networking as such an important way to make connections and learn things in a social setting that you wouldn’t typically learn in a work setting. Using his students as an example, you can become really well-versed in the CRE terminology even if you aren’t in that program, simply by rubbing shoulders with members of the corporate real estate industry.

Another good tip for leasing agents and future leasing agents is maintaining a strong moral or ethical standard so that your reputation stays strong as someone who is good to work with.

Across the board industries are just so highly disposed to sudden change, that we really need to start pushing for more flexibility in leases. 5-10 year leases are obsolete the moment after you sign. Remember that everything is negotiable and having a leasing agent gives you the advantage of knowing which terms can completely be adjusted.

As always, your host is Craig Melby, the founder of LeaseSmart, whose objective is to find companies the best facilities and get them the best terms, making their business more profitable and less vulnerable to future, unpredictable circumstances. If you’re finding yourself in this situation give Craig a call.

Craig can be reached at 800-962-2419 and craigmelby@leasesmart.com.

Have a fantastic day!

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For more information, be sure to visit LeaseSmart.com

Questions about YOUR lease? Feel free to contact us for a complementary consultation to decide how we can help your company grow and prosper.

Craig Melby, CCIM, Founder
(800) 640-9141 CraigMelby@LeaseSmart.com
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