Operating expenses for logistic property (modeling test)
Hi Forum,
I have a modeling test coming up with a UK logistics fund. However my background is more in office/retail/resi. In order to have some realistic assumptions on hand, has someone any idea what number I should use for the operating expenses? I cannot find any research on non-recs, or operating expenses in general. No troubles finding yields or rents for UK logistic properties, but nothing on the cost side.
Maybe someone deals with logisitc here and can give me a rough estimate for the test.
Much appreciated.
pm me
Non-recoverable admin $.05/SF or a dime if you're feeling salty. In which case you'll want to stripe and seal the parking lot every 3 to 5 years. Probably update the shit office space; which costs whatever office finishes costs there in the UK per square foot. Maybe put a buck in at the end of the analysis for a roof job. To finish it off I bet they want some more dock doors punched and some new lighting. Or reimburse all of that because real assumptions won't help you win the deal.
just curious, in whatever market you are....how can you do a good roof job for just a buck a foot?
also,i think he means opex not capital so 75 cents for common area/ins/uti, taxes are whatever, 2/3% egr management fee and some sort of cap reserve a couple cents a yr
Well if it's a logistics building and new; you have your warranty; then you probably won't need to replace the whole roof so you just assume $1/SF and you'll have a general estimate. I'm not talking some 70's vintage dilapidated 3 layer roof that needs a complete tear off.
If you're just looking for general numbers, you could go with: - $0.10/SF annually for capital reserves - $0.60 - $1.10/SF annually in total OpEx (comprising 2-3% management fee, CAM, insurance, and real estate taxes)
Assuming you'll get a NNN deal, depending on your market, you could assume $1.00-1.50/SF for warehouse TI and between $30-50/SF for the office component of the building (if there is one). Good luck.
I agree with these. Also, to clarify I would put the capital reserves above the NOI line. Then if the fund is equity I probably would take anything for general vacancy. If it's a debt fund I take 5% for general vacancy.
Agreed with this. For anything other than BTS development, we typically pencil in a 2% vacancy loss 1% credit loss.
Estimating Operating Expenses (Originally Posted: 03/12/2015)
Curious to see what methods everyone uses to estimate operating expenses on ground-up and redevelopment where historical data isn't available. Based on past projects? Formulas?
calling people and praying for the best
Pretty much this. I work on a pretty active platform so we usually have previous jobs that we can look at. Some construction companies offer free consulting estimates which is always great. A lot of it though is conservative guesstimations.
See if you can find some operating expense rates either listed online for a similar type building/structure or through a broker. Highly dependent on location for utility rates, property taxes, etc.
Depending on the similarities between past projects and the new project, the past opex rate can be used but it depends how similar.
We would be using comps from competing properties.
If you are planning a development, then one would assume you rent comped the area. You do the same thing, but with expenses.
Past projects, prop management peeps, and online records
There are a lot of resources in each market, if you make 10 calls to local operators, leasing brokers, developers, etc. you'll find someone with a few minutes to chat.
These specialists can help with expenses unique to your development, but I imagine the largest operating expenses will be:
Taxes - check your County Assessor's page online
Insurance - varies by user/owner, but you can get quotes
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