Analysis of financial feasibility of industrial buildings
Market analysis in the development of industrial buildings is carried out over several stages. The data must be clarified at least three times: 1) prior to the granting of a contract with a deposit condition; 2) before entering into negotiations with creditors; 3) until the time when the deposit under the land purchase agreement becomes non-refundable.
Pa each stage of the development of information. accuracy and accuracy of data on the project and preliminary estimates of the cost of production financial calculations. However, one should not wait for the completion of all these studies in order to proceed with financial analysis; In the early stages of a financial analysis, preliminary information obtained from secondary sources may be used. Estimation of the cost of construction based on the average cost of the cost of square meters. Contractors and other developers, as a rule, receive similar information.
The methodology used to analyze the development of industrial buildings:
Development of business parks is a formal land development and involves an approach to the analysis of real estate.
The stage of analysis of the development of industrial buildings corresponds to the five stages of DCF-analysis.
In the case of decision-based building development, a DCF analysis was conducted in the format of forecasts for five to ten years. This calculation takes into account rental rates, discounts, rental period, projected rental changes during the tenure period.
When calculating the internal rates of return, donor and post-tax cash flows are taken as the basis. Developers of industrial buildings prefer IRR for the total cost of the project to be 13-15%, when the project requires serious equity accounting (without debt financing) and mortgage loan debt to zero. The 1RR value without debt financing, equal to 15%, usually corresponds to the IRR value taking into account debt financing (with an LTV value of 70 to 75%) exceeding 25%. To meet investor requirements, the IRR value of equity must be between 20 and 30%.
The developer must use projected financial statements to conduct a sensitivity analysis to verify the effect of changes on the analysis result:
IRR rental plans for the development of industrial buildings?
• How sensitive the IRK is to changes in indicators such as rental rates and discounts. construction costs, financing costs, interest rates, bail and inflation?
• How will the IRR change with the development of an industrial park to speed up the sale?
How to change the IRR. if the initial offers are increased. engineering networks and access roads to the objects in order to speed up sales or increase prices?