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Easy Profitability Break-even Analysis

Self-Storage

#Real Estate #Self-Storage
ProHub Comment

This is a straightforward break-even analysis case where the candidate must recognize that NatEx operates with high fixed costs (operating expenses + interest = $98M) against current revenue of $70M at 50% occupancy. The solution requires calculating the revenue needed at break-even and then converting that to an occupancy rate by dividing by the hypothetical revenue at 100% occupancy ($140M).

Estimated Time 15 minutes
Difficulty Easy
Source PeterK
50 / 100
Our client, NatEx, operates 200 self-storage facilities in the U.S. Recently, their operating costs have increased, leading to losses. The team believes the client should focus on boosting their occupancy rate to regain profitability. What is the break-even occupancy rate?

Clarifying Information

  1. NatEx’s revenue was $70M in 2022
  2. Operating expenses were $79M in 2022
  3. Interest expenses reached $19M in 2022
  4. Their current occupancy rate is just 50%
  5. Both operating expenses and interest expenses are fixed costs