Medical Office, Modeled
Halston Office Center
A small suburban medical-office building where the vacancy and TI assumptions were far too optimistic.
Medical Office, Modeled
Halston Office Center
A small suburban medical-office building where the vacancy and TI assumptions were far too optimistic.
Client
Confidential — Private Equity
Client
Confidential — Private Equity
Location
Denver MSA, CO
Location
Denver MSA, CO
Industry
Office
Industry
Office
Timeline
48-hour turnaround
Timeline
48-hour turnaround
A private equity team was repositioning a suburban office asset. We tested the vacancy and tenant-improvement assumptions against current submarket comps.
Stabilized vacancy was closer to 18% than the 6% assumed, and TI costs were materially understated. The reposition didn’t pencil — we returned a Walk Away.
A private equity team was repositioning a suburban office asset. We tested the vacancy and tenant-improvement assumptions against current submarket comps.
Stabilized vacancy was closer to 18% than the 6% assumed, and TI costs were materially understated. The reposition didn’t pencil — we returned a Walk Away.
Key Highlights:
An investor brought us a roughly 8,500 SF suburban medical-office building, priced on a lease-up that assumed it would fill faster, and cheaper, than the market allowed. We modeled the real cost to stabilize.
Stabilized vacancy re-set to the submarket, not the pro forma
Tenant-improvement and leasing costs rebuilt to market
Downtime and free rent added to the absorption schedule
Stabilized NOI and value re-derived on realistic assumptions
Key Highlights:
An investor brought us a roughly 8,500 SF suburban medical-office building, priced on a lease-up that assumed it would fill faster, and cheaper, than the market allowed. We modeled the real cost to stabilize.
Stabilized vacancy re-set to the submarket, not the pro forma
Tenant-improvement and leasing costs rebuilt to market
Downtime and free rent added to the absorption schedule
Stabilized NOI and value re-derived on realistic assumptions
Challenges
The reposition story depended on a vacancy figure and a TI budget that no comparable building was actually hitting.
Key Challenge Points:
Stabilized vacancy understated by roughly 12 points
Tenant improvements and leasing commissions budgeted below market
Absorption assumed no downtime or concessions
Challenges
The reposition story depended on a vacancy figure and a TI budget that no comparable building was actually hitting.
Key Challenge Points:
Stabilized vacancy understated by roughly 12 points
Tenant improvements and leasing commissions budgeted below market
Absorption assumed no downtime or concessions
Results
With market vacancy, real TI, and honest downtime in the model, the stabilized return no longer justified the basis. We returned a Walk Away.
Results:
Roughly 12 points of vacancy understatement corrected
TI, leasing, and downtime costs added to the lease-up
Stabilized value re-derived below the asking basis
Verdict: Walk Away
Results
With market vacancy, real TI, and honest downtime in the model, the stabilized return no longer justified the basis. We returned a Walk Away.
Results:
Roughly 12 points of vacancy understatement corrected
TI, leasing, and downtime costs added to the lease-up
Stabilized value re-derived below the asking basis
Verdict: Walk Away
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Related Case Studies
See
How
We
Re-Underwrite
Every
Asset
Class
Browse more deals we rebuilt from the ground up — each re-underwritten to a clear Proceed, Conditional, or Walk Away verdict.
