Lease Appraisal
Example of a Business Plan for a Building versus Proposed Deals
NPV PV Date Discount
1 Jan 07 7.00%
Capitalisation at end of cash flow Cap Date 1 Jan 47 Cap Rate 6.00%
Review Behaviour Discount To Mkt Review Every
10.00% 60 months
Relets Void Rent Free Term
12 months 6 months 10 years
Difference
Business Plan
sw NIA Rent Start Breaks (if any) and Expiry 10,000 sf 1 Feb 07 1 Feb 21 10,000 sf 1 Nov 07 1 Nov 21 10,000 sf 1 Aug 08 1 Aug 22
12,261
Building Area
£409 /sf
30,000 sf
versus Proposed Deals
25,000 sf 1 Jul 07 1 Jul 27 4,000 sf 1 Jan 09 1 Jan 23 None 1 Feb 07 1 Feb 21
12,359
Building Area
£426 /sf
29,000 sf
99
(1,000 sf)
Break at Break No Rents
1 first break Rate psf £20.00 /sf Reviews 1 Feb 11 Indexed?
1 first break Rate psf £20.00 /sf Reviews 1 Nov 11 Indexed?
1 first break Rate psf £20.00 /sf Reviews 1 Aug 12 Indexed?
1 first break Rate psf £24.00 /sf Reviews 1 Jul 11 Indexed?
1 first break Rate psf £20.00 /sf Reviews 1 Jan 13 Indexed? 1
1 first break Rate psf £20.00 /sf Reviews 1 Feb 11 Indexed?
Market Rent Forecast
Std
Std
Std
Std
Std
Std
TI's/Payments Initial TI
Amount £20.00 /sf
Date 1 Jan 07
Amount £20.00 /sf
Date 1 Jan 07
Amount £20.00 /sf
Date 1 Jan 07
Amount £40.00 /sf
Date 1 Jan 07
Amount £20.00 /sf
Date 1 Jan 07
Amount £20.00 /sf
Date 1 Jan 07
Reletting (before inflation) First Relet Cash Flow 1 Jan 07 1 Jan 08 1 Jan 09 1 Jan 10 1 Jan 11 1 Jan 12 1 Jan 13 1 Jan 14 1 Jan 15 1 Jan 16 1 Jan 17 1 Jan 18 1 Jan 19 1 Jan 20 1 Jan 21 1 Jan 22 1 Jan 23 1 Jan 24 1 Jan 25 1 Jan 26 1 Jan 27 1 Jan 28 1 Jan 29 1 Jan 30 1 Jan 31 1 Jan 32 1 Jan 33 1 Jan 34 1 Jan 35 1 Jan 36 1 Jan 37 1 Jan 38 1 Jan 39 1 Jan 40 1 Jan 41 1 Jan 42 1 Jan 43 1 Jan 44 1 Jan 45 1 Jan 46 1 Jan 47
£20.00 /sf 1 Feb 21 Rent 228 200 200 213 292 292 292 292 297 323 323 323 323 276 240 363 363 363 368 401 401 401 401 343 (329) 299 452 452 452 457 499 499 499 499 426 (409) 372 562 562 9,936 TI's (200)
£20.00 /sf 1 Nov 21 Rent 80 202 204 204 239 292 292 292 292 303 323 323 323 323 191 326 363 363 363 374 401 401 401 401 237 406 452 452 452 465 499 499 499 499 295 504 562 9,936 TI's (200)
£20.00 /sf 1 Aug 22 Rent 132 203 204 204 267 298 298 298 298 320 329 329 329 329 117 54 371 371 371 371 402 409 409 409 409 145 66 461 461 461 461 500 509 509 509 509 180 82 573 9,936 TI's (200) Total (292) 534 607 621 735 851 883 883 887 924 966 974 974 927 (13) 85 744 1,097 1,097 1,102 1,146 1,204 1,212 1,212 1,153 (16) 105 923 1,365 1,365 1,370 1,425 1,498 1,507 1,507 1,434 (20) 131 1,148 1,697 29,809
£20.00 /sf 1 Jul 27 Rent 448 600 600 600 696 731 731 731 731 787 807 807 807 807 869 891 891 891 891 960 265 233 1,023 1,023 1,023 1,023 1,119 1,130 1,130 1,130 1,130 304 293 1,272 1,272 1,272 1,272 1,391 1,404 1,404 24,840 TI's (1,000)
£20.00 /sf 1 Jan 23 Rent TI's (80)
£20.00 /sf 1 Feb 21 Rent TI's Total (632) 600 699 682 780 824 852 852 852 909 931 941 941 941 1,003 994 781 1,004 1,042 1,111 (334) 387 1,190 1,190 1,190 1,190 1,247 993 1,270 1,318 1,318 (441) 485 1,480 1,480 1,480 1,480 1,551 1,235 1,579 28,815
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Cap Value
22.85 20.00 20.00 21.30 29.23 29.23 29.23 29.23 29.66 32.27 32.27 32.27 32.27 27.56 24.04 36.34 36.34 36.34 36.75 40.12 40.12 40.12 40.12 34.27 29.89 45.18 45.18 45.18 45.70 49.88 49.88 49.88 49.88 42.61 37.17 56.18 56.18
(264)
(268)
(272)
99 82 84 93 122 122 122 122 125 134 134 134 134 103 (110) 113 151 151 151 154 167 167 167 167 128 (137) 140 188 188 188 192 208 208 208 208 160 (170) 175 3,974
(750)
(334)
(339)
(933)
(415)
(421)
Difference Proposal Less Plan (340) 66 92 61 45 (27) (30) (30) (35) (15) (34) (34) (34) 14 1,016 909 37 (94) (56) 9 (1,481) (817) (22) (22) 37 1,206 1,142 70 (95) (47) (52) (1,866) (1,012) (27) (27) 46 1,500 1,420 87 (118) (994)
DCF Valuation: NPV including Cap Value NPV/sf
4,668 £467 /sf
(386) (£39 /sf)
4,445 £445 /sf
(389) (£39 /sf)
4,300 £430 /sf
(378) (£38 /sf)
12,261 £409 /sf 12,261 6.94% £12,261 /sf 4.89%
12,074 £483 /sf
(1,265) (£51 /sf)
1,697 £424 /sf
(147) (£37 /sf)
12,359 £426 /sf 12,359 Equivalent Yield Valuation at the Equivalent Yield Initial Yield 6.91% £12,359 /sf 5.50%
163
Notes: This Lease Appraisal works by comparing the discounted cashflow of the Plan with that of the actual deals. It can cope with 5 year reviews, annual indexation, discount at review, stepped rents etc It only uses NPV as a valuation method, because yield based methods don't work very well, if at all, with multiple leases and tenant inducements.
Equivalent Yield Valuation at the Equivalent Yield Initial Yield
Settings
Timebase Start Periods 1 Jan 07 1 pa adv
DayCount Periods Units ProjMode ROpts
6.03 13 1,000 1
Absolute Start Absolute Finish Inflation
01 Jan 2007 01 Jan 2100 Rate pa 2% From 1 Jan 07
Forecasts Name Start Forecast Forecast Base Forecast Values 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 1 Std 1 Jan 07 12 months 30.00 30.60 31.21 31.84 32.47 33.12 33.78 34.46 35.15 35.85 36.57 37.30 38.05 38.81 39.58 40.38 41.18 42.01 42.85 43.70 44.58 45.47 46.38 47.31 48.25 49.22 50.20 51.21 52.23 2 StdIdx 1 Jan 07 12 months 1000.00 1020.00 1040.40 1061.21 1082.43 1104.08 1126.16 1148.69 1171.66 1195.09 1218.99 1243.37 1268.24 1293.61 1319.48 1345.87 1372.79 1400.24 1428.25 1456.81 1485.95 1515.67 1545.98 1576.90 1608.44 1640.61 1673.42 1706.89 1741.02 3 1 Jan 07 12 months 4 1 Jan 07 12 months
30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89
53.28 54.34 55.43 56.54 57.67 58.82 60.00 61.20 62.42 63.67 64.94 66.24 67.57 68.92 70.30 71.70 73.14 74.60 76.09 77.61 79.16 80.75 82.36 84.01 85.69 87.40 89.15 90.93 92.75 94.61 96.50 98.43 100.40 102.41 104.46 106.54 108.68 110.85 113.07 115.33 117.63 119.99 122.39 124.83 127.33 129.88 132.48 135.12 137.83 140.58 143.40 146.26 149.19 152.17 155.22 158.32 161.49 164.72 168.01 171.37
1775.84 1811.36 1847.59 1884.54 1922.23 1960.68 1999.89 2039.89 2080.69 2122.30 2164.74 2208.04 2252.20 2297.24 2343.19 2390.05 2437.85 2486.61 2536.34 2587.07 2638.81 2691.59 2745.42 2800.33 2856.33 2913.46 2971.73 3031.17 3091.79 3153.62 3216.70 3281.03 3346.65 3413.58 3481.86 3551.49 3622.52 3694.97 3768.87 3844.25 3921.14 3999.56 4079.55 4161.14 4244.36 4329.25 4415.84 4504.15 4594.24 4686.12 4779.84 4875.44 4972.95 5072.41 5173.86 5277.33 5382.88 5490.54 5600.35 5712.35
90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149
174.80 178.29 181.86 185.50 189.21 192.99 196.85 200.79 204.80 208.90 213.08 217.34 221.69 226.12 230.64 235.26 239.96 244.76 249.65 254.65 259.74 264.94 270.23 275.64 281.15 286.77 292.51 298.36 304.33 310.41 316.62 322.95 329.41 336.00 342.72 349.58 356.57 363.70 370.97 378.39 385.96 393.68 401.55 409.58 417.78 426.13 434.65 443.35 452.21 461.26 470.48 479.89 489.49 499.28 509.27 519.45 529.84 540.44 551.25 562.27
5826.60 5943.13 6062.00 6183.24 6306.90 6433.04 6561.70 6692.93 6826.79 6963.33 7102.59 7244.65 7389.54 7537.33 7688.08 7841.84 7998.67 8158.65 8321.82 8488.26 8658.02 8831.18 9007.81 9187.96 9371.72 9559.16 9750.34 9945.35 10144.25 10347.14 10554.08 10765.16 10980.47 11200.08 11424.08 11652.56 11885.61 12123.32 12365.79 12613.10 12865.37 13122.67 13385.13 13652.83 13925.89 14204.40 14488.49 14778.26 15073.83 15375.30 15682.81 15996.47 16316.40 16642.72 16975.58 17315.09 17661.39 18014.62 18374.91 18742.41
150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182
573.52 584.99 596.69 608.62 620.79 633.21 645.87 658.79 671.97 685.41 699.11 713.10 727.36 741.91 756.74 771.88 787.32 803.06 819.12 835.51 852.22 869.26 886.65 904.38 922.47 940.92 959.73 978.93 998.51 1018.48 1038.85 1059.62 1080.82
19117.26 19499.60 19889.59 20287.39 20693.13 21107.00 21529.14 21959.72 22398.91 22846.89 23303.83 23769.91 24245.31 24730.21 25224.82 25729.31 26243.90 26768.78 27304.15 27850.23 28407.24 28975.38 29554.89 30145.99 30748.91 31363.89 31991.17 32630.99 33283.61 33949.28 34628.27 35320.83 36027.25