Tenant rollover capital
Budget downtime, free rent, improvements and commissions before a lease expires.
Your scenario
Downtime and post-commencement free rent are separate periods. Commission is modeled on full face rent over the new term. Add unrecovered operating costs in carrying costs; avoid counting the same expense twice.
How the model works
Exposure = foregone base rent during downtime and free rent + TI + commission + separate carrying costs.
Worked illustration
10,000 SF at $25 has $250,000 annual base rent. Nine months downtime plus three months free creates $250,000 of foregone rent. TI is $400,000; 6% of five-year face rent is $75,000.
Separate economic exposure from cash invoices
Foregone rent during downtime and free rent is a loss of revenue, rather than a contractor bill. Improvements, commissions and actual unrecovered carrying costs are cash expenditures. This tool combines those categories to show economic exposure, but the total is not automatically the amount of a new equity contribution. A monthly sources-and-uses model must include existing property cash, required debt payments and available funded reserves.
The model applies the new rent to the lost-rent period and assumes free rent follows downtime. If an outgoing lease remains collectible during part of the period, or the suite could earn a different alternative rent, adjust the analysis. Do not put foregone rent into the separate carrying-cost input again. Use that field only for additional costs under the convention you have chosen.
Budget an executable replacement
A TI allowance is not a verified construction budget. Confirm delivery condition, base-building work, design, permits, equipment, utilities, contingency and the tenant’s contribution. Commission calculations also differ across agreements: rent steps, renewals, recoveries and payment dates can change actual cash. This model’s flat face-rent commission is a screening assumption. The historical SEC lease illustrates document-specific delivery and allowances; it does not prescribe this model’s commission percentage.
Extend downtime and increase TI together to test an expensive backfill. Then check whether the building can carry its debt and retained expenses before the tenant opens. A higher replacement rent may create value after stabilization while requiring substantial capital first. Compare that funded path with a renewal proposal on the same time horizon, including avoided downtime and reusable improvements.
What to check before relying on the result
Economic exposure includes foregone revenue, which is not a cash invoice. Avoid including foregone rent again in carrying costs.
Model an adverse scenario as well as the expected outcome. Change one assumption at a time to identify what drives the result, then test combinations that could occur together. A property can meet a modeled financial threshold and still fail diligence, legal requirements or lender approval.
Keep the cash-flow definitions consistent
Distinguish recurring property operations from tenant improvements, leasing commissions, capital expenditure, financing costs and entity-level distributions. Verify whether reserves are expenses, funding requirements or cash movements in the documents you are analyzing. A cash-flow convention must remain consistent across the model and the comparison.
Research context
Consult the source material for this topic. The model is an original educational calculation, not a reproduction of a lender’s underwriting system. The initial numbers are hypothetical inputs rather than current market terms. No scenario inputs are transmitted or saved by this calculator.