Capping above market rents

[Anonymous]

6 years, 9 months ago #2724

Spencer,

Great model, really enjoying using it so far. Have a few questions.

1. I have tenants that have amortized rent, above market rent. The amortized amounts are over their entire term, 10 years. When calculating the building value, and refinance value, the model is capping the above market rents, as if they were residual and would continue indefinitely. Is there a way in the model to only cap the market rent, and take the net present value of the remaining amortized amounts, and add that to the capped value? Right now, the returns and stabilized values are being over inflated.

2. Is there a feature showing equity returns to investors after refinancing of a development, then ongoing returns based on percentage of promote for each equity investor after the refinance?

3. Is there a way in the rent roll to have certain tenants pay 100% of operating expenses while not having other tenants pay anything? So not on a Square footage pro rata basis, but on a percentage of overall expenses basis.

[Spencer Burton]

6 years, 8 months ago #3266

Hi Ryan,

I apologize for the late response – I’ve spent much of August traveling with family and now getting to questions! To your questions:

1) Excellent point and yes, the model allows you to account for these types of situations. You’ll notice the residual pro forma (column U of the MF-OpSt and ORI-OpSt tabs) cells are blue. That is so you can customize the residual (sale) pro forma to accommodate above/market income and expense items and adjust the residual value according. So for instance in the case of above market rents, you would adjust the Gross Potential Rent value in cell U12 to more reflect market rent. Or, as another example, you may adjust for below market real estate taxes (this occurs in California as an example), where reassessment only occurs at sale.

2) The All-in-One model does not have the ability to handle this sort of situation – I refer to this sort of situation as crystallization or equity reset. With that said, if you were to first run the analysis to refinance, you could then use that first workbook to fairly easily calculate the new equity split, and then run a second analysis with the new equity split after the refinance.

3) Unfortunately no, but I will add this to our feature request list. The value needed to accomplish this is calculated in the backend (see column BCY of the ORI-Calc tab), so adding it as an optional input is a fairly simple thing to do.