Purpose
The purpose of this post is to outline the key functions of the Rent Roll in CREModels commercial development models. These features should be universal across all commercial development models unless noted otherwise.
Rent Roll
A rent roll is a list of all the rental revenue owed by tenants to a property owner for a set period. The rent roll in the Commercial Development model allows users to model tenants and the terms of their leases or projected leases.
A) “Tenant/Tenant Category” Column
Tenant names are inputted in this column.
B) “SF” Column
The square footage of each individual tenant are inputted in this column.
C) “$/SF/Yr” Column
This column is for inputting the rent of each individual tenant. Rent are inputted in dollar per square footage per year. If rent is provided in annual amounts, they can be converted to $/SF/Yr by dividing the annual operating expense by the SF provided in column “SF”. If rent is provided in monthly amount, they can be converted to $/SF by multiplying the month operating expenses by 12 and then dividing by the SF provided in column “SF”.
D) “Start Month” Column
The “Start Month” column allows users to select when each individual tenant’s lease begins in the model. If start month is set to 1 then they will begin occupying the space in month 1 of the project. If start month are set to 13 then they begin occupying the space in month 13 or year 2 of the model.
E) “Free Rent” Column
The “Free Rent” column allows users to input the number of months of free rent for each individual tenant. Free rent or rent abatements represents concessions made by the property to attract tenants to the space. An example would be providing tenant with a free 3 months of rent if they lease up in month 1. In this example the user would input a start month of 1 and a free rent of 3. The model will then zero out the rent for that tenant for months 1-3 and begin the normal rent amounts in month 4 of the term. This allows the user to model concessions and rent abatements in the model.
F) “Lease Term” Column
The “Lease Term” column allows users to input the length of the term for each tenants’ individual lease. This column is formatted in months, therefore a 5 year lease should be inputted as 60 months.
G) “TI-Tenant” Column
The “TI-Tenant” column allows users to input the any tenant improvement allowances for each individual tenant. A tenant improvement allowance is money given from a landlord to a tenant to help pay for the improvements to an space, or sometimes other expenses associated with moving into a new space. This column is formatted in $/SF amounts. If TI allowance is provided in annual amounts, they can be converted to $/SF by dividing the annual TI allowance by the SF provided in column “SF”. If TI allowance is provided in monthly amount, it can be converted to $/SF by multiplying the month operating expenses by 12 and then dividing by the SF provided in column “SF”.
H) “TI-Total” Column
This column will automatically calculate based on the inputs in the “SF” and “TI-Tenant” columns of this table. The model with multiply the square footage by the TI allowance per SF to achieve an annual TI allowance amount. It is important to understand that the model treats TI allowances as a soft cost included in the development costs. Therefore, when utilizing TI allowances, the user will need to input a start month and duration in cells H155 and I155. Cell H155 should be inputted with the month you want the TI allowance to begin and cell I55 should be inputted with how many months you want the TI allowance spread over. For example, if you input a start month of 1 and a duration of 3 then the TI allowances will start month 1 of the analysis and be spread over months 1-3. Another important thing to note is TI allowance is considered a soft cost in the development budget. As TI allowance is added to the model, the total soft costs in the development budget also increase which in turn increase the total development budget. As total development costs increase so will Developer Fee as this is a percentage of hard and soft costs. As total soft costs increase so with Soft Cost Contingency which is a percentage of total soft costs. This in turn increases the Total Construction and Development Costs as the total debt amount increases as a result of the increase in Soft Costs, Developer Fee, and Soft Cost Contingency. It is an important to note that the increase in Total Construction and Development Cost will be greater than the TI allowance amount. Based on the images provided below, an annual TI allowance of $62,200 added to the model results in an increase in Total Acquisition and Construction cost of $67,052. This is due increases to the accounts listed above.
