Property Asset Management Case Study Example | Topics and Well Written Essays - 2500 words

Property Asset Management - Case Study Example Its choice of location of the retail outlets will most likely determine the strategic location of its warehouses so that logistical support of fast and cheap delivery expenses is maximized. The choice of location of warehouses is therefore crucial and is heavily dependent on their projection of where the retail outlets are to be situated. It seems that leaseholds are long-term and for 30 years. On the other hand their strategy to expand and locate retail outlets are yet to be tested and any error in their choice will mean that they have to pre-terminate their leaseholds, if they go on leasing, or assign them. The existing leases are FRI types which mean that Dell has the annual burden of maintaining the facilities, repair and cover them with insurance. But it saves them to raise the capital cost to set up the facility. In a leasehold Dell does not need to raise the initial cost of constructing the facilities. On the other hand in a freehold Dell will have to raise the required huge funding at the start of the project. In a Leasehold the company does not end up owning the facility and thereby benefit from it increases in value. In freehold they benefit from the gain on the sale of the property at values that are higher than the acquisition cost. The impact on the net income in terms of leasehold costs as against depre ciation will be minimal. Leasehold rates include financial charges of lessor, whereas in freehold that is funded by debt the company will incur financial charges as interest and depreciation expense that is over the life of the asset. In both freehold and leasehold with FRI Dell will incur the same cost of annual maintenance and repair, and cost of capital. In Dell's decision to acquire as freehold warehouse facilities and retail outlets chains has an impact on capital investments. There are two types of properties that they need, namely: warehouse facility, and retail outlets. In either case they will also need transport delivery system, between the plant and the warehouse, and from warehouse hubs to the retail outlets. Capital asset investment. Definitely, the freehold strategy will require huge long-term funds. The location and number of square meters will determine the acquisition price of each type of facility. In the case of warehouse facilities their location will likely be outside commercial centers may not be as expensive in terms of property values compared to retail outlets which are to be located in commercial centers where property values are higher. Also, the retail outlet and location of property will likely increase in value over the years compared to warehouse locations. In terms of the size or area required the warehouse facilities could be larger on the average compared to warehouse outlets. Their current cost of acquiring could be the same with the outlets of higher price per floor area but less area, while the warehouse is with a lower price but larger area. But when the total areas of warehouses and retail outlets are compared the investment on each type that is needed to acquir e them could be significant. We do not know which one will be more expensive when the aggregates