Introduction
The K. O. analysis is also a very important instrument in Switzerland.
The K. O. analysis is an important instrument for depicting particularly negative characteristics. It comprises:
- Analytical value (= TARGET value)
- Those values that satisfy the respective criteria of the specific property for purchase applied as analytical values.
- K. O. value (= ACTUAL value)
- K. O. threshold values state the minimum values that make the analysed real estate acceptable to potential buyers.
- The factor 100 is applied to the so-called “compulsory” values.
Types of K. O. Analyses
The following K.O. analyses must be conducted
- K. O. analysis of the market and use
- K. O. analysis of the law
- K. O. analysis of the category of buyers for the subsequent sale (e.g. exit).
The K.O. analysis is usually the stage that precedes the labour-intensive and costly due diligence.
Further Information
K.O. analysis of Real Estate from a Physical Perspective
The K. O. analysis of a physical property is conducted by juxtaposing factor-based ACTUAL and TARGET values.
The following table – which is not intended to be exhaustive – shows the structure of a hypothetical analysis of weak points.
K. O. Analysis physicalProperty
|
||
K.O. criteria |
Analytical Value % (ACTUAL) |
>
K.O. Value % (TARGET) |
Floor space (size of property) |
|
|
Floor plans (multiple-use property) |
|
|
Vacancy rate |
|
|
Yield trend |
|
|
Competing properties in the vicinity (at the planning stage / nearing completion) |
|
|
Transport connections |
|
|
Suitability for use |
|
|
Technological suitability |
|
|
Long-term appreciation |
|
|
Development potential |
|
|
Tenant’s creditworthiness |
|
|
Contract management |
|
|
Operating costs |
|
|
Maintenance costs |
|
|
Specifics |
|
|
K. O. Analysis of Real Estate from a Legal Perspective
The K.O. analysis from a legal perspective comprises:
- asset deal or share deal decision
- hard and soft facts that speak for or against the acquisition of real estate
K.O. Analysis legalProperty
|
||
K.O. criteria |
Analytical Value % (ACTUAL) |
K. O. Value % (TARGET) |
ASSET DEAL |
|
|
Type of property
|
|
|
Type of use
|
|
|
Land Tax Planning
|
|
|
VAT
|
|
|
SHARE DEAL |
|
|
Taxes
|
|
|
Anyone who buys a property which investment funds and investment trusts are not permitted to purchase or is subject to purchase restrictions must expect to be faced with a (much) reduced category of potential buyers in the event of a resale. – Well-known examples are minority holdings in attractive and valuable residential superstructures, shopping centres and the like, which required a great deal of effort to sell and then only with price reductions. There are also various modern mixed use (commercial/residential) areas of real estate, which pension funds are not permitted to buy due to their commercial and residential share structure.
A manifestly negative degree of individual factors usually results in the buyer withdrawing from the purchase, unless he has the expertise to enable him to turn the negative analytical value into a positive one or his business case is about the change. The valuation of the real estate naturally takes the negative analytical value into consideration with a price reduction.
The buyer of real estate in Switzerland or a stake in a company with real estate in Switzerland would be well advised to make sure that both K. O. analyses are conducted. – The K. O. analyses also provide an essential basis for the EXIT strategy of the professional real estate investor.