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| | Retail Market
Feasibility Studies - Continued...
The first
question every new Rainmaker client asks is, "why do we need a
market feasibility study?" The answer lies in the way in
which we go about deciding whether a given investment opportunity is
deserving of funding support. The person who does this is the
underwriter. The underwriter's job is to investigate the various
issues surrounding a loan request (or equity float, as the case may be)
to determine whether the risks to investment loss are outweighed by the
potential economic gains. The underwriter only gets into real
trouble by accepting the risks for a given transaction and then that
transaction becomes a non-performing asset. So... the
underwriter only gets into trouble by saying "yes"; therefore,
"no" is the starting position (i.e.: "prove to me that I
should say something other than "no"). The underwriter
will exercise "all due diligence" regarding the underwriting
process requirements for investment approval. The term, "all
due diligence," is a legal term and it means that no stone should
be left unturned - you only walk on the pebbles.
The underwriter knows the business will be developed, constructed
and operated within the market capitalism envelope where the winners and
losers are picked by the consumer, so it helps to know:
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What attributes of the project are being mirrored by the
market? |
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What relative revenues will the project likely be able to
generate? |
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What services, amenities and project physical configurations
will the market require the project to provide? |
Very simple questions. The market feasibility study created
for the retail marketplace will provide the following answers that are
interpreted in terms of the key questions:
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Revenues
(sales/s.f., sales by retailer, leasing rates, CAM
rates, gross sales participation rents) |
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Traffic counts (indicators that can be used to compare the
relative sales of different locations for the purposes of creating
statistically-significant tenant sales levels) |
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Absorption (indicators of sales saturation levels and lease-up
of spaces) |
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Store size (based upon peer-group
sales/s.f.) |
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Tenant improvement allowances (indicators of costs of leasing
the project) |
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Retail groups (ranking of retail segments for the purposes of
creating the leasing information packages) |
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Services and amenities (what consumers may require in terms of
common areas, services, amenities and related project development
items) |
The answers to these questions are played out through the
feasibility process and result in the capital funding plan that is used
to solicit lender participation in the developer's project. Talk
to Rainmaker and get a complete program that gives you the edge in
capital funding. Talk to one of our consultants today. | |
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Do
You Know The Secret?
When it comes to commercial real
estate development finance, it doesn't matter whether you need to raise
$5 million or $50 million, the out-of-pocket costs, advance fees and
project due diligence costs will always require the same relative
investment dollars the promoters have to fund. Do you know what
that amount is? Do you know the Secret? |
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