Hi All,
Was wondering if anyone with any PE experience could help me understand if there is any benefit to either model in terms of valuation?
Granted we have lower CapEx under a lease model vs purchasing outright but is there anything that favours either or?
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This isn't nearly enough information to determine what you are trying to do. Leasing or purchasing what? Land?
Serviced apartments lets say. Company currents purchases all its units and rents them out.
Consequences for moving to a lease model where they let the apartments and then rent them out further.
So weighing the decision of purchasing all of the units then leasing them out versus master leasing the units then sub-leasing them?
Precisely. Any real long term benefits?
I thought reduced CapEx but is this outweighed by increased interest expense?
There's an enormous difference in residual value/exit. Purchasing the units allows you to sell the land/improvements while master leasing the units may allow you to sell the leasehold and associated venture income stream but this would be capitalized at a much lower income multiple.
Right thank you
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