|
Valuation of Airport Concessions
The economic value of each concession is
determined by the following issues:
- Lease expiration date;
- Percentage Rent;
- Concession Concept;
- MBE, DBE, or WBE status;
- Net Cash Flow; and
- Minimum Monthly Rent.
All airport concession leases decline in value
monthly. This is due to the fact that
each firm which acquires an existing concession must be able to recover its
investment (acquisition and build out cost) during the remaining term of the
existing lease. In fact, most
existing concessions with less than 24 months before they expires
has no value; if no renewal or extension is secured.
|
Sample Concession Valuation Analysis
Financial Analysis
|
|
Concession Concept
|
News
Stand
|
|
Fast
Food
|
|
Game
Room
|
|
Gift/Novelty
|
|
Bar/Rest.
|
|
|
Revenues Annually
|
$489,763
|
100.0%
|
$356,777
|
100.0%
|
$219,361
|
100.0%
|
$272,341
|
100.0%
|
$1,833,056
|
100.0%
|
|
Concession Rent (%)
|
$58,772
|
12.0%
|
$49,949
|
14.0%
|
$21,936
|
10.0%
|
$34,043
|
12.5%
|
$302,454
|
16.5%
|
|
Net Operating Profit
|
$73,464
|
15.0%
|
$50,306
|
14.1%
|
$29,394
|
13.4%
|
$23,421
|
8.6%
|
$339,115
|
18.5%
|
|
Net Cash Flow
|
$122,284
|
25.0%
|
$76,404
|
21.4%
|
$83,322
|
38.0%
|
$57,838
|
21.2%
|
$384,638
|
21.0%
|
|
Revenues PSF Annually
|
$550
|
|
$813
|
|
$146
|
|
$287
|
|
$937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Investment Analysis
|
|
Concession Concept
|
News
Stand
|
|
Fast
Food
|
|
Game
Room
|
|
Gift/Novelty
|
|
Bar/Rest.
|
|
|
Orig. Capital Invested
|
$244,098
|
|
$234,890
|
|
$215,711
|
|
$275,333
|
|
$455,222
|
|
|
Square Feet Leased
|
890
|
|
439
|
|
1500
|
|
950
|
|
1956
|
|
|
Cost PSF
|
$274
|
|
$535
|
|
$144
|
|
$290
|
|
$233
|
|
|
Orig. Term of Lease
(Years)
|
5.0
|
|
9.0
|
|
4.0
|
|
8.0
|
|
10.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scenario #1
|
|
|
|
|
|
|
|
|
|
|
|
Inv. Recovery Period*
|
4.5
|
|
7.8
|
|
3.1
|
|
5.9
|
|
8.7
|
|
|
Est. Market Value**
|
$385,195
|
|
$417,168
|
|
$180,809
|
|
$238,871
|
|
$2,342,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scenario #2
|
|
|
|
|
|
|
|
|
|
|
|
Inv. Recovery Period*
|
3.4
|
|
5.3
|
|
2
|
|
3.1
|
|
4.2
|
|
|
Est. Market Value**
|
$291,036
|
|
$283,460
|
|
$116,651
|
|
$125,508
|
|
$1,130,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scenario #3
|
|
|
|
|
|
|
|
|
|
|
|
Inv. Recovery Period*
|
2.5
|
|
3.8
|
|
1.2
|
|
2.4
|
|
2.8
|
|
|
Est. Market Value**
|
$213,997
|
|
$203,236
|
|
$69,991
|
|
$97,168
|
|
$753,890
|
|
|
* The investment recovery period is the years remaining on the original lease.
|
|
** The estimated market value assumes the
concession is an "ongoing business concern" and the concept will
not change.
|
|
Clearly, the number of
months remaining on a concession
lease is a
critical factor in determining value.
Each month you delay the process of
marketing your
concession could cost you between $5,000 to $12,000 in
value.
|
|
|
We have provided the resources,
answers, and results your Company needs since 1989.
|
