Financial Analysis
July 29, 2010 1:29 PM   Subscribe

What are some key items to look at when analyizing financials for a potential tenant in a commerical building?

I am familiar with financial analysis and ratios but there are so many ratios... which ones are really relevant when looking to lease an office to a tenant?

What are some other key things to look at?
posted by HollyAnn to Work & Money (2 answers total)
 
Are you asking the potential tenant for audited financial reports? If so, I would look at things like liquidity ratios and solvency ratios.

In addition to financial reports, I would also ask to see a bank statement/letter of credit from a bank (this will depend on the size of the company whose tenancy you are considering), references from a previous landlord, judgments against the company and its principals (if it's closely held), etc.

This assumes we're talking about the United States. Other areas of the world may have slightly different practices/limitations on what kind of data you can get for potential commercial tenants.
posted by dfriedman at 1:38 PM on July 29, 2010


I don't have an answer for the exact question you asked, but i have a good suggestion for the overall goal you are trying to accomplish.

You want a commercial tenant who will be able to pay the rent with you not having to worry about the tenant not bring able to pay, about having to look for another tenant, and about you worrying that the space is empty and not accruing income (rent).

Offer them a deal if they pay in full in advance.

10% off if they pay for a year in advance.
25% off if they pay for 2 years in advance.
Something like that, the percentages are supposed to entice the potential tenants to pay in advance..a.alter them as you wish.

But in doing it, figure out how long it would take for you to find a tenant. If the space would take about 3 months to find a tenant who wants it for a year, that's 3 months out of 15 months that you aren't being paid. 20% loss of rent over 15 months.

A 10% discount over 15 months would work out well for both the tenant and he landlord in that situation.

Good luck.
posted by hal_c_on at 2:25 PM on July 29, 2010


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