If you reside in an organization such as a company, government or religious organization, what assets should you consider strategic?  There does not necessarily have to be a set of strategic assets, but if an asset is strategic it must be key to the business.  Examples would be a church for a religious organization, perhaps R&D facilities for a pharmaceutical company, truck terminals for a freight firm and restaurants for a chain of food providers.  Key assets tend to be utilized for a term that is long.  Therefore ownership is preferred to leasing.  Non strategic assets are therefore all other classes of real estate and should thus be leased. 

How does an organization decide if an asset is strategic?  The following questions will help guide the discussion:

  • What happens to the organization if the asset location needs to be changed such as at the end of a lease?  For example, is there a very large investment in tenant improvements such as a laboratory ( up to $300 PSF) that would be abandoned, relocated or rebuilt? 
  • If a twenty to thirty year horizon is used for the financial analysis, how does the lease vs. buy analysis change?
  • Can the asset be duplicated at a reasonable cost or a reasonable time in another location?
  • Will my customers be retained if the asset is relocated?  Is there an element of the buying decision that is location centric?
  • What are the organizations requirements for capital and does that affect the choice of ownership vs. leasing?

 

NAI Global provides strategic advisory services with experienced professionals who have dealt with these questions as employees of organizations who are contemplating these issues and these professionals have helped guide others in this area.

-Ted Parcel

Ted Parcel is Executive Vice President of Corporate Services for NAI Global.