Business Template - Lease Appraisal

NPV Capitalisation at end of cash flow Review Behaviour Relets PV Date 1 Jan 07 Cap Date 1 Jan 47 Discount To Mkt 10.00% Void 12 months Example of a Business Plan for a Building versus Proposed Deals Discount 7.00% Cap Rate 6.00% Review Every 60 months Rent Free 6 months Term 10 years Business Plan #### £409 /sf versus Proposed Deals #### £426 /sf 99 sw NIA 10,000 sf 10,000 sf 10,000 sf Building Area 30,000 sf 25,000 sf 4,000 sf None Building Area 29,000 sf (1,000 sf) Rent Start 1 Feb 07 1 Nov 07 1 Aug 08 1 Jul 07 1 Jan 09 1 Feb 07 Breaks (if any) and Expiry 1 Feb 21 1 Nov 21 1 Aug 22 1 Jul 27 1 Jan 23 1 Feb 21 Break at Break No Rents Rate psf Reviews Indexed? Rate psf Reviews Indexed? Rate psf Reviews Indexed? Rate psf Reviews Indexed? Rate psf Reviews Indexed? Rate psf Reviews Indexed? £20.00 /sf 1 Feb 11 £20.00 /sf 1 Nov 11 £20.00 /sf 1 Aug 12 £24.00 /sf 1 Jul 11 £20.00 /sf 1 Jan 13 1 £20.00 /sf 1 Feb 11 Market Rent Forecast Std Std Std Std Std Std TI's/Payments Amount Date Amount Date Amount Date Amount Date Amount Date Amount Date Initial TI £20.00 /sf 1 Jan 07 £20.00 /sf 1 Jan 07 £20.00 /sf 1 Jan 07 £40.00 /sf 1 Jan 07 £20.00 /sf 1 Jan 07 £20.00 /sf 1 Jan 07 Reletting (before inflation) £20.00 /sf £20.00 /sf £20.00 /sf £20.00 /sf £20.00 /sf £20.00 /sf Difference First Relet 1 Feb 21 1 Nov 21 1 Aug 22 1 Jul 27 1 Jan 23 1 Feb 21 Proposal Less Cash Flow Rent TI's Rent TI's Rent TI's Total Rent TI's Rent TI's Rent TI's Total Plan 1 1 Jan 07 22.85 228 (200) 80 (200) (200) (292) 448 (1,000) (80) (632) (340) 2 1 Jan 08 20.00 200 202 132 534 600 600 66 3 1 Jan 09 20.00 200 204 203 607 600 99 699 92 4 1 Jan 10 21.30 213 204 204 621 600 82 682 61 5 1 Jan 11 29.23 292 239 204 735 696 84 780 45 6 1 Jan 12 29.23 292 292 267 851 731 93 824 (27) 7 1 Jan 13 29.23 292 292 298 883 731 122 852 (30) 8 1 Jan 14 29.23 292 292 298 883 731 122 852 (30) 9 1 Jan 15 29.66 297 292 298 887 731 122 852 (35) 10 1 Jan 16 32.27 323 303 298 924 787 122 909 (15) 11 1 Jan 17 32.27 323 323 320 966 807 125 931 (34) 12 1 Jan 18 32.27 323 323 329 974 807 134 941 (34) 13 1 Jan 19 32.27 323 323 329 974 807 134 941 (34) 14 1 Jan 20 27.56 276 323 329 927 807 134 941 14 15 1 Jan 21 (264) 191 (268) 329 (13) 869 134 1,003 1,016 16 1 Jan 22 24.04 240 117 (272) 85 891 103 994 909 17 1 Jan 23 36.34 363 326 54 744 891 (110) 781 37 18 1 Jan 24 36.34 363 363 371 1,097 891 113 1,004 (94) 19 1 Jan 25 36.34 363 363 371 1,097 891 151 1,042 (56) 20 1 Jan 26 36.75 368 363 371 1,102 960 151 1,111 9 21 1 Jan 27 40.12 401 374 371 1,146 265 (750) 151 (334) (1,481) 22 1 Jan 28 40.12 401 401 402 1,204 233 154 387 (817) 23 1 Jan 29 40.12 401 401 409 1,212 1,023 167 1,190 (22) 24 1 Jan 30 40.12 401 401 409 1,212 1,023 167 1,190 (22) 25 1 Jan 31 34.27 343 401 409 1,153 1,023 167 1,190 37 26 1 Jan 32 (329) 237 (334) 409 (16) 1,023 167 1,190 1,206 27 1 Jan 33 29.89 299 145 (339) 105 1,119 128 1,247 1,142 28 1 Jan 34 45.18 452 406 66 923 1,130 (137) 993 70 29 1 Jan 35 45.18 452 452 461 1,365 1,130 140 1,270 (95) 30 1 Jan 36 45.18 452 452 461 1,365 1,130 188 1,318 (47) 31 1 Jan 37 45.70 457 452 461 1,370 1,130 188 1,318 (52) 32 1 Jan 38 49.88 499 465 461 1,425 304 (933) 188 (441) (1,866) 33 1 Jan 39 49.88 499 499 500 1,498 293 192 485 (1,012) 34 1 Jan 40 49.88 499 499 509 1,507 1,272 208 1,480 (27) 35 1 Jan 41 49.88 499 499 509 1,507 1,272 208 1,480 (27) 36 1 Jan 42 42.61 426 499 509 1,434 1,272 208 1,480 46 37 1 Jan 43 (409) 295 (415) 509 (20) 1,272 208 1,480 1,500 38 1 Jan 44 37.17 372 180 (421) 131 1,391 160 1,551 1,420 39 1 Jan 45 56.18 562 504 82 1,148 1,404 (170) 1,235 87 40 1 Jan 46 56.18 562 562 573 1,697 1,404 175 1,579 (118) Cap Value 1 Jan 47 9,936 9,936 9,936 29,809 24,840 3,974 28,815 (994) DCF Valuation: NPV including Cap Value 4,668 (386) 4,445 (389) 4,300 (378) 12,261 12,074 (1,265) 1,697 (147) 12,359 163 NPV/sf £467 /sf (£39 /sf) £445 /sf (£39 /sf) £430 /sf (£38 /sf) £409 /sf £483 /sf (£51 /sf) £424 /sf (£37 /sf) £426 /sf 12,261 12,359 Notes: This Lease Appraisal works by comparing the discounted cashflow of the Plan with that of the actual deals. Equivalent Yield 6.94% Equivalent Yield 6.91% It can cope with 5 year reviews, annual indexation, discount at review, stepped rents etc Valuation at the Equivalent Yield £12,261 /sf Valuation at the Equivalent Yield £12,359 /sf 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. Initial Yield 4.89% Initial Yield 5.50% Difference 1 first break 1 first break 1 first break 1 first break 1 first break 1 first break Lease Settings Timebase Start 1 Jan 07 Periods 1 pa adv DayCount 6.03 Periods 13 Units 1,000 ProjMode 1 ROpts Absolute Start 01 Jan 2007 Absolute Finish 01 Jan 2100 Inflation Rate pa From 2% 1 Jan 07 Forecasts 1 2 3 4 Name Std StdIdx Start Forecast 1 Jan 07 1 Jan 07 1 Jan 07 1 Jan 07 Forecast Base 12 months 12 months 12 months 12 months Forecast Values 30.00 1000.00 2 30.60 1020.00 3 31.21 1040.40 4 31.84 1061.21 5 32.47 1082.43 6 33.12 1104.08 7 33.78 1126.16 8 34.46 1148.69 9 35.15 1171.66 10 35.85 1195.09 11 36.57 1218.99 12 37.30 1243.37 13 38.05 1268.24 14 38.81 1293.61 15 39.58 1319.48 16 40.38 1345.87 17 41.18 1372.79 18 42.01 1400.24 19 42.85 1428.25 20 43.70 1456.81 21 44.58 1485.95 22 45.47 1515.67 23 46.38 1545.98 24 47.31 1576.90 25 48.25 1608.44 26 49.22 1640.61 27 50.20 1673.42 28 51.21 1706.89 29 52.23 1741.0230 53.28 1775.84 31 54.34 1811.36 32 55.43 1847.59 33 56.54 1884.54 34 57.67 1922.23 35 58.82 1960.68 36 60.00 1999.89 37 61.20 2039.89 38 62.42 2080.69 39 63.67 2122.30 40 64.94 2164.74 41 66.24 2208.04 42 67.57 2252.20 43 68.92 2297.24 44 70.30 2343.19 45 71.70 2390.05 46 73.14 2437.85 47 74.60 2486.61 48 76.09 2536.34 49 77.61 2587.07 50 79.16 2638.81 51 80.75 2691.59 52 82.36 2745.42 53 84.01 2800.33 54 85.69 2856.33 55 87.40 2913.46 56 89.15 2971.73 57 90.93 3031.17 58 92.75 3091.79 59 94.61 3153.62 60 96.50 3216.70 61 98.43 3281.03 62 100.40 3346.65 63 102.41 3413.58 64 104.46 3481.86 65 106.54 3551.49 66 108.68 3622.52 67 110.85 3694.97 68 113.07 3768.87 69 115.33 3844.25 70 117.63 3921.14 71 119.99 3999.56 72 122.39 4079.55 73 124.83 4161.14 74 127.33 4244.36 75 129.88 4329.25 76 132.48 4415.84 77 135.12 4504.15 78 137.83 4594.24 79 140.58 4686.12 80 143.40 4779.84 81 146.26 4875.44 82 149.19 4972.95 83 152.17 5072.41 84 155.22 5173.86 85 158.32 5277.33 86 161.49 5382.88 87 164.72 5490.54 88 168.01 5600.35 89 171.37 5712.3590 174.80 5826.60 91 178.29 5943.13 92 181.86 6062.00 93 185.50 6183.24 94 189.21 6306.90 95 192.99 6433.04 96 196.85 6561.70 97 200.79 6692.93 98 204.80 6826.79 99 208.90 6963.33 100 213.08 7102.59 101 217.34 7244.65 102 221.69 7389.54 103 226.12 7537.33 104 230.64 7688.08 105 235.26 7841.84 106 239.96 7998.67 107 244.76 8158.65 108 249.65 8321.82 109 254.65 8488.26 110 259.74 8658.02 111 264.94 8831.18 112 270.23 9007.81 113 275.64 9187.96 114 281.15 9371.72 115 286.77 9559.16 116 292.51 9750.34 117 298.36 9945.35 118 304.33 10144.25 119 310.41 10347.14 120 316.62 10554.08 121 322.95 10765.16 122 329.41 10980.47 123 336.00 11200.08 124 342.72 11424.08 125 349.58 11652.56 126 356.57 11885.61 127 363.70 12123.32 128 370.97 12365.79 129 378.39 12613.10 130 385.96 12865.37 131 393.68 13122.67 132 401.55 13385.13 133 409.58 13652.83 134 417.78 13925.89 135 426.13 14204.40 136 434.65 14488.49 137 443.35 14778.26 138 452.21 15073.83 139 461.26 15375.30 140 470.48 15682.81 141 479.89 15996.47 142 489.49 16316.40 143 499.28 16642.72 144 509.27 16975.58 145 519.45 17315.09 146 529.84 17661.39 147 540.44 18014.62 148 551.25 18374.91 149 562.27 18742.41150 573.52 19117.26 151 584.99 19499.60 152 596.69 19889.59 153 608.62 20287.39 154 620.79 20693.13 155 633.21 21107.00 156 645.87 21529.14 157 658.79 21959.72 158 671.97 22398.91 159 685.41 22846.89 160 699.11 23303.83 161 713.10 23769.91 162 727.36 24245.31 163 741.91 24730.21 164 756.74 25224.82 165 771.88 25729.31 166 787.32 26243.90 167 803.06 26768.78 168 819.12 27304.15 169 835.51 27850.23 170 852.22 28407.24 171 869.26 28975.38 172 886.65 29554.89 173 904.38 30145.99 174 922.47 30748.91 175 940.92 31363.89 176 959.73 31991.17 177 978.93 32630.99 178 998.51 33283.61 179 1018.48 33949.28 180 1038.85 34628.27 181 1059.62 35320.83 182 1080.82 36027.25