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LEASING STRATEGIES FOR FINANCIAL EXECUTIVES

LEASING STRATEGIES FOR FINANCIAL EXECUTIVES. HOW TO GET YOUR COMPANY A GREAT DEAL. September 26, 2019. PRESENTED BY: Gary Lozoff glozoff@tactix.com Trish Perevich tperevich@tactix.com. 5 KEYS TO SUCCESS. Don’t Be Seduced by the Myth of Market Quantify and Compete Cost Drivers

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LEASING STRATEGIES FOR FINANCIAL EXECUTIVES

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  1. LEASING STRATEGIES FOR FINANCIAL EXECUTIVES HOW TO GET YOUR COMPANY A GREAT DEAL September 26, 2019 PRESENTED BY: Gary Lozoff glozoff@tactix.com Trish Perevich tperevich@tactix.com

  2. 5 KEYS TO SUCCESS Don’t Be Seduced by the Myth of Market Quantify and Compete Cost Drivers Create and Maintain Viable Options Develop a Financial Model for Apples-to-Apples Comparison Understand Lease Renewal Economics

  3. QUANTIFY AND COMPETE COST DRIVERS Rentable Area • How much space is needed? Rent and its Components • How much is the rent? • Escalations Net Cash Out of Pocket • How much capital is required?

  4. RENT AND ITS COMPONENTS Less: Tenant Improvement Amortization* ($6.50) COST DRIVER #2: Less: Base Year Operating Costs ($8.00) ($2.50) Less: Base Year Real Estate Taxes Rent and its Components Less: Tenant’s Lights and Plugs ($1.50) $11.50 Landlord Profit Before Debt Service (A.K.A “Quad Net Rent”) *$55.00 of TI @ 8% for 10 years.

  5. “YOU’RE PAYING WHAT?!” MAKING SENSE OF QUOTED RENT COCKTAIL TALK: Different Ways to Quote Rent

  6. THE IMPACT OF RENT ESCALATIONS Philadelphia leases have traditionally escalated at $.50 per year. Recently, Landlords have been testing the market for 2-3% compounded annual escalations. RENTAL ESCALATIONS Annual Escalations Have a Significant Impact of the Overall Lease Value For a theoretical 20,000 SF tenant, the total rent difference over a 10-year term is $428,328 (in gross dollars)!

  7. CAPITAL IMPROVEMENTS Scope of Project • Re-use of Existing Improvements Project Budget • Definition of Base Building or Delivery Condition • Management Fees Sources of Funding Project Budget • Tenant Improvement Allowance • Allowable Uses • Rent Abatement • Out-of-Pocket Capital COST DRIVER #3: Capital Improvements (Net Out-of-Pocket Cost)

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