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Warehouse Lease Analysis

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Submitted By pattymap
Words 3188
Pages 13
M.A.T.T.S Real Estate Consulting Group
Mark Brown, Ashley Rogers, Taryn Wusterbarth, Tammy Watt, Simon Scurrah
QRB501
November 19, 2012
Dr. Kenneth Strang

Week 2 Warehouse Lease Analysis

Introduction
We are M.A.T.T.S. Real Estate Consulting Group, a consulting firm specializing in strategic quantitative analysis when a company is making strategic consideration of sites for real estate rental. W2G has engaged our firm to conduct a brief yet fully-substantiated recommendation to lease an existing 2000 square foot heated and cooled warehouse building for one year in various locations throughout the United States. In conducting this analysis and price/cost comparison, we will take into account the electrical costs for the area, estimated for one year, plus any additional costs identified in any advertisement (e.g., other utilities, parking, etc...) for the alternative sites identified. Taxes will be considered and will be set at rate of 7% per annum for comparison purposes.
The formula for achieving the pricing and subsequent recommendation of the sites selected for evaluation, as well as an explanation for the variables within the formula will also be clearly identified for W2G to review. We will recommend a site we believe will meet W2G’s needs as identified in the requirements documentation.

*****
Mississippi State Site recommendation.
Property location: 1964 Highway 84 East, Laurel, MS 39443 and rents from an average of 0.05 to 10.00 per square foot with a 2000 square foot minimum per year. This tells us that the minimum rental space is most likely the higher end of the quoted process per square foot.
Using the following simple equation is x = 10 (2000) where cost is x and 10 represents the $10 fee per square foot fee and 2000 represents our square footage need. Results from this formula is x = 20,000 or $20,000 per year for the rental fee.
Dixie Electrical Power Association (a co-operative power company) manages the power supply for this location, and they state there are set up fees, management fees and of course power consumption fees associated with setting up an account in the Mississippi warehouse site location in Lauren, Mississippi. As a power broker, Dixie sources power generated from coal, gas, oil, clean-coal and nuclear. We will take these fees into consideration when presenting a formula for computing the final annualized cost for this location.

c = c(.07) + i + 12e
Where:
i = initial set up fee where: i = m + f + s + n m = Membership fee: $50 f = Meter fee: $50 s = Service fee: $30 n = Service fee2: $80 e = electrical cost and c = Annualized rental cost

Based on the rate schedules published by Dixie (2012) monthly average electrical costs can be represented by the following table:
Energy Charge (1350 kWh * .1023 $ 138.11
Power Cost Adjustment (1350 kWh * $.0069-) $9.32
Consumer Charge $20.00
Total monthly Charges $ 148.79
So electrical for 1350 kWh per month: e = 148.79
Annualized at 1350 kWh would be e*12 = 1785.48
Daily rate for 1350 kWh = 1785.48/365 = 4.89 e for 10,000 formula is 10,000 / 1,350 = 7.407
So the true daily rate of e = 4.89 * 7.407 = 36.20 e for 360 days is written as 360(e) = $13,032

So using a substitution equation we can determine annualized costs for the warehouse space as follows: c=20000(.07) + m + f + s + n + (e) c=1400 + (50+50+30+80) + 13,032 c=1610+13,032 c=16,427.48
Annualized Mississippi warehouse space cost is $16,427.48
Taryn Wusterbarth’s Site
I chose to look in the state of Nevada for my warehouse space, because of my knowledge or relatively inexpensive real estate market.

Building Information:

6355 S Pecos Road- Airport Business Park
Las Vegas, NV 89120

http://www.showcase.com/?src=ppcg_State_NEVADA_IndNV&mkwid=s20SLsV36_pcrid_12794765569#&&/wEXAQURV29ya2Zsb3dIaXN0b3J5SUQFJDIyNWQzZDU3LTU0ZDktNDJiYi1iM2I2LTdhNGIwNzAwMmI1MutqSeLHvFsmy1n1rmJkQ2j93AEm

Summary:

Square Feet: 3,600
Cost Per Sq. Foot: $2.40 (estimate= 8,874/3,600)
Annual Rent: $8,784
Initialization Costs: $8,784/12= $732.00
Annual Electricity Cost: $128,502.00
Total Annual Cost: $234,108

Electric Company Information: NV Energy https://www.nvenergy.com/

Nevada Electricity Seasons & Hours:

Summer Season (July1-September 30) or 3 Months & Winter Season (October 1- June 30) or 9 months

Summer Peak Hours: 1:01-6:00pm Weekdays
Summer Mid-Peak Hours: 10:01am-1pm & 6:01-9:00pm Weekdays
Summer Off Peak: All other hours (9:01pm-10:00am)
Winter Hours: All hours, all days

Warehouse Hours of Electricity Usage Use Per Year:

24 hours x 360 Days = 8,640 hours

Average kilo-watt-hours-per-day= 10,000

Average kilo-watt -per-hour= 10,000/24= 416 KWh

Rates:

Summer Peak Per KWh= ($0.07783)
Summer Mid Peak Per KWh= ($0.06018)
Summer Off Peak & Winter Per KWh= ($0.04681)

Kilo-Watt Cost Per Hour:

416 x 0.07783= $32.38 Peak
416 x 0.06018= $25.03 Mid Peak
416 x 0.04681= $19.47 Off Peak/ Winter

Variables:

A=Days
B=Weeks
C=Cost Per Month
H=Hours
L=Months
T=Hours per month
X = Cost Summer Peak Per KWHour
M=Cost per Summer Mid Peak Per KWHour
Y = Cost per Summer Off Peak & Winter Per KWHour

Determining Hours Per Month:

Formula Hours Per Month= Hours Per Day x Days Per Week x Weeks

Summer Peak Hours: 5 Hours per Day/ 5 Days per week:
5x5=25 hours per week

Summer Mid Peak: 6 Hours per Day/ 5 Days per week:
6x5= 30 hours per week

Summer Off Peak: 13 hours Day/2 days per week:
13x2= 26 hours per week

T= 25x4=100 Peak hours per month
T= 30x4=320 Mid Peak hours per month
T= 26x4=84 Off Peak hours per month

Winter: 24 hours per day/7days per week:
24x7= 168 hours per week

T=168x 4= 672 hours per month

Determining the Cost per Type of Hours per Month:

C = Peak hours/mo * x
C=H*X

C=Mid Peak Hours/mo*m
C= H*M

C = Off peak hours or winter hours/mo * y
C=H*Y

Rate Per Time of Day Per Month

Summer
W=H*X
W= 100x 32.38= $3,238 per month

W=H*M
320x 25.03= $8,009.60 per month

W=H*Y
84x 19.47= $1658.16 per month

Winter
W=H*Y
672x 19.47= $13,083.84 per month

Cost Per Seasonal Period

Summer Z=L(w+v+u)

Z= 3(3238+8009.60+1658.16)= $38,717.28 rate per summer period

Winter Z=L(V)

Z=9(13,083.84)= $117,754.56 rate per winter period

Total Electricity Cost Per Year (365 days of Operation):

$38,717.28+117,754.56= $130,838.40

**Total Electricity Cost Per Year 360 days of Operation: 24 x 5= 120 hours

120 hours x $19.47(off peak rate)= 2,336.40

$130,838.40-2,336.40=$128,502.00

Formula Total Cost Per Year= (cost per sq foot + electricity + deposit) tax

(8,874+128,502+ 732)= 138,108

$138,108.00
X .07%
$96,675.00 tax

Total Cost Per Year= 138,108+96,675.00= $234,108

Tammy Watt’s Site

I chose Montana to research my project.
Building Information:
111 N Higgins Avenue - Florence Building
Missoula, MT 59802 http://www.showcase.com/property/111-N-Higgins-Avenue/Missoula/Montana/6987220 Property Listing Summary:
Square Feet: 200 SF – 6000 SF
Cost Per Square Foot: $21.00 - $33.00 / SF
Annual Rent: $198,000.00
Monthly Fee: $198,000 / 12 = $16,500.00
Annual Electricity Cost: $126,353.00
Total Annual Cost: $324,353.00

Electric Company: Northwestern Energy, http://www.northwesternenergy.com
Northwestern Energy Hours
Winter Season (October 15-March 15)
Summer Season (March 15-October 15)
Warehouse Hours of Electricity Usage Per Year:
24 hours * 360 days/year = 8,640 hours/year
Average kilo-Watt/hour/day: 10,000
Average kilo-Watt/hour = 10,000/24 = 417kWh
Rates:
$0.095kWh ELECTRIC
$0.754Therm NATURAL GAS
$2.18/gallon PROPANE

kilo-Watt Cost/Hour:

417kWh * $0.095kWh = $39.62 ELECTRIC
417kWh * $0.754Therm = $314.42 NATURAL GAS
417kWh * $2.18/gallon = $909.06 PROPANE

Variables:

D = Days
W = Weeks
C = Cost/Month
H = Hours
M = Months
X = Hours/Month
Y = Cost/kWh

Hours/Month:

Hours/Month = (hours/day) * (days/week) * (weeks/year)

12 hours/day * 5 days/week = 60 hours/week

Hours/Month = 60 hours/week * 4 weeks = 240 hours/month

Cost/Unit/Year:
To run the facility 360 days/year or 51 weeks.
Electric: 240 hours/month * $39.62 = $9,508.80
Natural Gas: 240 hours/month * $314.42 = $75,460.80
Propane: 240 hours/month * $909.06 = $218,174.40
Total Cost/Year:
(cost of square footage + electricity or natural gas or propane) * 7%
($63,000.00 + $9,508.80) * 0.07 = $5,075.62
Total Cost/Year for Electric = $63,000.00 + $9,508.80 + $5,075.62 = $77,584.42
($63,000.00 + $75,460.80) * 0.07 = $9,692.26
Total Cost/Year for Natural Gas = $63,000.00 + $75,460.80 + $9,692.26 = $148,153.06
($63,000.00 + $218,174.40) * 0.07 = $19,682.21
Total Cost/Year for Propane = $63,000.00 + $218,174.40 + $19,682.21 = $300,856.61

Mark’s Site
4295 Cromwell Rd, Suite 413
Chattanooga, TN 37421
Size:
3,900 sf
Base Rent
$5.00/sf/yr

$19500/yr $1625/mo

a = cost per square foot b = total electrical cost c = deposit ($1625 for one month's rent)
Tax = (a + b + c) * 0.07
3900a + b + c + d = total cost per year

3900 ($5.00) + $69990 + $1625 = $91140.00
Tax = $91140.00 * 0.07 = $6379.80
Total cost per year: $97519.80

Electrical Costs: Electric Power Board – hydroelectric and nuclear
Constants:
2880 hours in each period
720 peak hours in Winter and Summer periods
2160 offpeak hours in Winter and Summer periods
2880 offpeak hours in Transition Variables:
X = Cost per peak hour
Y = Cost per offpeak hour W = Peak hours/mo * x
V = Offpeak hours/mo * y Z = Total rates per period = 4(w + v) Demand Rates
Summer rates: X = $17
Y = $4 180 Peak hours/mo * x ($17.00) = $3060.00 w
540 Offpeak hours/mo * y ($4.00) = $2160.00 v Demand rates per month = w + v = $5220.00
Z = 4($5220) = $20880 Winter Rates
X = $10
Y = $4 180 Peak hours/mo * x ($10.00) = $1800.00 w
540 Offpeak hours/mo * y ($4.00) = $2160.00 v Demand rates per month = w + v = $3960.00
Z = 4($3960) = $15840

Transition Rate
Y = $4
720 Off peak hours/mo * y ($4.00) = $2880.00
Z = 4($2880) = $11520.00 Total Demand = sum of each z = $20880 + $15840 + $11520 = $48240.00 Usage Charges:
Summer Usage Rates:
X = $0.07 Per kWh
Y = $0.03 per kWh There are 300,000 kWh/Period 75000 Peak kWh * $0.07 = $5250.00
225000 Offpeak kWh * $0.03 = $6750.00 Z = Peak kWh + Offpeak kWh = $12000.00

Winter Usage Rates:
X = $0.04
Y = $0.03 There are 300,000 kWh/Period 75000 Peak kWh * $0.04 = $3000.00
225000 Offpeak kWh * $0.03 = $6750.00 Z = Peak kWh + Offpeak kWh = $9750.00 Transition Usage Rates:
Y = $0.03 Z = 300000 Offpeak kWh * $0.03 = $9000.00 Total Usage Rates = Sum of all z's = $12000.00 + $9750.00 + $9000.00 = $21750.00 TOTAL DEMAND = $48240.00
TOTAL USAGE = $21750.00
TOTAL ELECTRICAL COSTS = $69990.00 Per Year

Ashley Rogers’ Site

Choice of location State: California Building Information:
Location- Roseville, CA
Address- 111-113 Ash Street, Roseville, CA, 95678 - Available for Lease
Property Type- Industrial/Warehouse
Total Space- 4000 Sq Ft
Rental Rate- $7.20/Sq/Yr
Can be divided
Minimal Divisible- 1800 Sq Ft, $0.60/Sq ft/mth
Max Contiguous- 2200 Sq Ft, $0.60/Sq ft/mth
Features- Electricity/Power, Office, Handicap Bathroom Facilities URL Link- http://www.loopnet.com/Listing/17910940/111-113-Ash-Street-Roseville-CA/ Summary
Chose 2200 Sq Ft
Total Cost per mth- $0.60 x 2200= $1,320 per mth
Annual Cost per Yr- $1320 x 12= $15,840 annual cost
Initialization Cost- $15,840/12= $1320 Electricity Company: Pacific Gas & Energy (PG&E) URL Link- www.pge.com California Electricity Time of Use Schedule SUMMER (Service from May 1 through October 31):
Peak: 12:00 noon to 6:00 p.m. Monday through Friday (except holidays)
Partial-peak: 8:30 a.m. to 12:00 noon Monday through Friday (except holidays) and 6:00 p.m. to 9:30 p.m.
Off-peak: 9:30 p.m. to 8:30 a.m. Monday through Friday
All day Saturday, Sunday, and holidays WINTER (Service from November 1 through April 30):
Partial-Peak: 8:30 a.m. to 9:30 p.m. Monday through Friday (except holidays)
Off-Peak: 9:30 p.m. to 8:30 a.m. Monday through Friday (except holidays)
All day Saturday, Sunday, and holidays
Holidays: "Holidays" for the purposes of this rate schedule are New Year's Day,
President's Day, Memorial Day, Independence Day, Labor Day, Veterans
Day, Thanksgiving Day, and Christmas Day. The dates will be those on which the holidays are legally observed.

TOTAL RATES
Total Energy Rates ($ per kWh) 24 hrs x 360 days = 8,640
Average Kilo-watt hours per day=10,000
Average Kwh per hour = 10,000/24= 417 kwh Peak Summer $0.44432
Part-Peak Summer $0.22500
Off-Peak Summer $0.13661
Part-Peak Winter $0.15166
Off-Peak Winter $0.12661

24 hrs per day x 360= 8,640 hours per yr 417 kWh x 24 hrs= 10,008- 10,000 rounded to the nearest thousandth per day
10,000 kWh x 30days = 300,000 kWh per mth
300,000 kWh x 12mths= 3,600,000 kWh per yr Rates: Total Cost per kilowatt hr
Peak Summer $0.44432 x 417kwh = $185.28
Part-Peak Summer $0.22500 x 417kWh=$98.32
Off-Peak Summer $0.13661 x 417kWh=$59.96
Part-Peak Winter $0.15166 x 417kWh= $63.24
Off-Peak Winter $0.12661 x 417kWh= $52.79 Variables # of peak hrs for summer= 6
# of part peak hrs for summer= 7
#of off peak hrs for summer = 11
# of part peak hrs for winter= 12
# of off peak hrs for winter = 12 A=Peak Summer Per Year
B=Part Peak Summer Per Year
C= Off-Peak Summer
D= Part Peak Winter
E=Off Peak Winter
F= Total Cost for electrical cost per Year
G=Total annual cost for electricity plus annual rental fee A= $185.28 (6) x 12
A=$13,340.16 Per Yr B=$98.32 (7) x 12
B=$8,258.88 Per Yr C=$59.96 (11) x 12
C= $7,914.72.24 Per Yr D= $63.24 (12) x 12
D= $9,106.56 Per Yr E= $52.79 (12) x 12
E=$7,601.76 Per Yr F= A + B + C + D + E
F =$42,222.08 Total Cost for Rental + Electricity+ Deposit
G=$15,840 + $42,222.08 + $1320
G=$59,382
Taxes= 7% ($4,157)
$59,382 x .07= $4157
$59,382 + $4,157 =$63,539 Total Cost Per Yr= $63,539

Warehouse Utility-Cost Research Comparison

| cost/sq Ft | Electricity | Deposit/Setup | Taxes | Total Expenses | Simon | $10 | $13,032 | $210 | $1,149.92 | $16,427.48 | Taryn | $2.40 | $128,502.00 | $732 | $96,675.00 | $234,108 | Mark | $5 | $69,990.00 | $1,625 | $6,379.80 | $97,519.80 | Tammy | $21-$33 | $126,353.00 | None listed | $34,450.09 | $324,353.00 | Ashley | $7.20 | $42,222.08 | $1,320 | $4,157 | $63,539 |

Recommendation The rental property selected is located in a rural area of Mississippi, located off of Highway 84, with quick access to Highway 84 E/W, Interstate Highway 59 to Highway Jones County and surrounding areas. Easy access to major highways is of great convenience. There are four spaces for this lot that are of immediate availability to the leaser as soon as this month, November 2012. So even if you are just currently looking for a small space as of now, you can select that amount of space, but if additional space is needed and other spaces are vacant, arrangements can be made for an additional leased property increase. If you are looking for immediately space to run an industrial firm for just a small amount of time this is the location for you. This is great space for commercial and industrial use. The location also includes all of the utilities that are needed which means less work for you to do as the leaser; in which this includes gas, electricity, water, sewers and phones. The owner is okay with subdividing the property to house the leaser and its constituents. The entire space can accommodate an office building, a distribution center, commercial land use, and additional land for add-ons. For a rural area with great square footage and price motivation this annualized Mississippi warehouse space cost the leaser $16,427.48. At a great price and easy access location, this place is definitely what you are looking for. If you find yourself with a great interested in the available rental property, M.A.T.T.S. Real Estate Consulting Group is here and at your service.

References
111 N Higgins Avenue - Florence Building, Missoula, MT 59802. Retrieved from http://www.showcase.com/property/111-N-Higgins- Avenue/Missoula/Montana/6987220
6355 S Pecos Road - Airport Business Park. (2012). Retrieved from http://www.showcase.com/?src=ppcg_State_NEVADA_IndNV&mkwid=s20SLsV36_pc rid_12794765569#&&/wEXAQURV29ya2Zsb3dIaXN0b3J5SUQFJDIyNWQzZDU3LT U0ZDktNDJiYi1iM2I2LTdhNGIwNzAwMmI1MutqSeLHvFsmy1n1rmJkQ2j93AEm
Cityfeet.com. (2012). 4295 Cromwell Rd Chattanooga, TN 37421. Retrieved from

http://www.cityfeet.com/Commercial/ForLease/4295-Cromwell-Road-Chattanooga-TN-

37421-17470943L17470943L0.aspx

Dixie Power Association. 2012, November 17. Retrieved from http://www.dixieepa.com/myBusiness/paymentInformation/feesAndCharges.aspx
Dixie Power Association. 2012, November 17. Rate Schedule. Retrieved from http://www.dixieepa.com/myBusiness/rateSchedule.aspx
Electric Power Board. (2011). GSB Rate Schedule Summary. Retrieved

from https://www.epb.net/downloads/power/business/GSB.pdf

Loopnet.com. 2012, November 17. Retail/Distribution/Office Space. Retrieved from: http://www.loopnet.com/xNet/MainSite/Listing/Profile/Profile.aspx?LID=17912529&SR ID=2966237846&StepID=101
LoopNet. 2012. Industrial Property for lease. Retrieved on November 18, 2012

from http://www.loopnet.com/Listing/17910940/111-113-Ash-Street-Roseville-CA/

NorthWestern Energy. (2012). Fuel Heating Cost Comparison (MT). Retrieved from http://www.northwesternenergy.com/Documents/FuelHeatingCostComparison/Fuel_ ComparisonMT.pdf
NorthWestern Energy. (2012). Rate Comparison Tool. Retrieved from

http://www.northwesternenergy.com/ourcustomers/shared/Ratecompare.aspx

Pacific Gas & Electric Company. 2012. Electric Schedule. Retrieved on November 18, 2012

from http://www.pge.com/tariffs/tm2/pdf/ELEC_SCHEDS_A-6.pdf and

http://www.pge.com/

Rate Schedules. (2012). Retrieved from

https://www.nvenergy.com/brochures_arch/rate_schedules/spp_nv_commrates.pdf

Rate Schedules. (2012). Retrieved from

https://www.nvenergy.com/brochures_arch/rate_schedules/np_com_rate.pdf

Understand Your BIll. (2012). Retrieved from

https://www.nvenergy.com/business/productsservices/understandyourbillS.cfm

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