Corporate real estate directors are constantly challenged to balance the opportunities in a dynamic capital markets environment with the operational and financial goals of their companies. We encourage them to take an active role in collaborating with the senior finance and operation teams within their organization to develop a process for evaluating ownership versus leasing decisions. This presentation provides an overview of key buy-vs-lease decision-making criteria for commercial real estate. For more information, download the complete paper at: http://link.jll.com/2017-buy-vs-lease

1. Buy vs Lease
What’s the best decision for your business?
Perspective on leasing and
ownership in the US.

2. Ownership vs Leasing
Corporate real estate directors are constantly challenged to balance
the opportunities in a dynamic capital markets environment with the
operational and financial goals of their company.
Strategies such as sale-leasebacks of owned assets or acquisitions of
short term leased assets, are avenues to take advantage of the
current capital markets environment that is defined by an asymmetric
risk reward relationship between lease term and value.
How are these decisions made?
Within this article we will focus on the spectrum of decision criteria
for evaluating ownership versus lease decisions for both portfolios
and individual property transactions, and the potential benefits of
alternative leasing structures and sale-leaseback transactions.

3. Ownership vs Leasing Decision Criteria
Leasing characteristics
Lower than investment grade profile
Opposed to residual value risk
Operational/exit strategy flexibility
Staffing and production volatility
Decisions based on WACC
High opportunity cost for ownership
Dynamic growth and acquisition orientation
Potential for future obsolescence
Ownership characteristics
Significant cash reserves/liquidity
Investment grade profile
Interest in property appreciation
Favor control of property
Decisions based on borrowing costs
Low opportunity cost for ownership
Established company with stable growth
Month 00, 2014 2

4. Driving Value
3
Determinants of Corporate Real Estate Value
RentEscalations
CorporateGuarantee
Mastervs.IndividualLeases
StructuralObligation
EarlyTermination
ROFO/ROFR
Assignment/Subleasing
RentEscalations
CorporateGuarantee
Mastervs.IndividualLeases
StructuralObligation
EarlyTermination
ROFO/ROFR
Assignment/Subleasing
FixedFixedCPICPI FixedFixedCPICPI
YesYesNoNo YesYesNoNo
MasterLeaseMasterLeaseIndividualLeaseIndividualLease MasterLeaseMasterLeaseIndividualLeaseIndividualLease
BondableBondableNNNNNN BondableBondableNNNNNN
NoNoYesYes NoNoYesYes
NoneNoneYesYes NoneNoneYesYes
NoneNoneTenantControlledTenantControlled NoneNoneTenantControlledTenantControlled
MinimizesValueMinimizesValue MaximizesValueMaximizesValue
RentEscalations
CorporateGuarantee
Mastervs.IndividualLeases
StructuralObligation
EarlyTermination
ROFO/ROFR
Assignment/Subleasing
RentEscalations
CorporateGuarantee
Mastervs.IndividualLeases
StructuralObligation
EarlyTermination
ROFO/ROFR
Assignment/Subleasing
FixedFixedCPICPI FixedFixedCPICPI
YesYesNoNo YesYesNoNo
MasterLeaseMasterLeaseIndividualLeaseIndividualLease MasterLeaseMasterLeaseIndividualLeaseIndividualLease
BondableBondableNNNNNN BondableBondableNNNNNN
NoNoYesYes NoNoYesYes
NoneNoneYesYes NoneNoneYesYes
NoneNoneTenantControlledTenantControlled NoneNoneTenantControlledTenantControlled
MinimizesValueMinimizesValue MaximizesValueMaximizesValue
Lease StructureGross Bondable
Purchase OptionYes No
HIGHEST CAP RATE LOWEST CAP RATE
Location
Property Condition
Lease Term
Tenant Credit
Property Class
25 years0 years
Investment-GradeSpeculative
Class C Class A
Tertiary Market Primary Market
Poor Excellent
Value Deterrents Positive Value Drivers

5. Lower Your Occupancy Costs
The Right Tool, The Right Opportunity, The Right Investor
Tool Lease Term Lease Rent Credit
Worthiness
Balance
Sheet
Vacancy Discount
Rate
Acquisition
Long-Term Sale
Leaseback
Acquisition Sale
Leaseback
Lease Buy Down
Tenant Led Build-
to-Suit
Short-Term Sale
Leaseback
Deal Packaging
Identifying your company’s leverage points can help determine which capital markets
tools can help tap into hidden value in your real estate portfolio.
4

6. © Copyright 2016 Jones Lang LaSalle
Brian Shanfeld
Corporate Finance
Chicago, IL
+1 (312) 228-2631
Brian.shanfeld@am.jll.com
Learn more:
>> Click here to download our complete
paper on buy vs. lease decisions for CRE