# Tenant rollover capital

Canonical: https://chicagocommercialfunding.com/tools/tenant-rollover-capital/

Budget downtime, free rent, improvements and commissions before a lease expires.

## Model inputs and hypothetical defaults

- Tenant area (SF): 10000
- New annual base rent ($/SF): 25
- Downtime months: 9
- Free-rent months after commencement: 3
- Landlord TI ($/SF): 40
- New lease term (years): 5
- Commission (% of total face rent): 6
- Other unrecovered carrying costs ($): 60000

## 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.

## Limitations

Economic exposure includes foregone revenue, which is not a cash invoice. Avoid including foregone rent again in carrying costs.

The canonical HTML page provides the interactive calculator. Inputs stay in the browser; hypothetical defaults are not current financing terms. Distinguish operating income, debt service, capital expenditures and investor distributions.

## Research and related reading

- [Source material](https://www.sec.gov/Archives/edgar/data/1319947/000095015206009917/l23543aexv10w1.htm)
- [Model the full backfill exposure](https://chicagocommercialfunding.com/guides/measuring-downtime-and-backfill-costs-before-a-tenant-leaves/)
- [Understand office leasing capital](https://chicagocommercialfunding.com/guides/office-tenant-improvements-leasing-commissions-and-downtime/)