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

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
Landlord’s Gross Rent
$30.00
Less: Tenant Improvement Amortization*
($6.50)
COST DRIVER #2:
Less: Base Year Operating Costs
($8.00)
Less: Base Year Real Estate Taxes
($2.50)
Rent and its Components
Less: Tenant’s Lights and Plugs
($1.50)
Landlord Profit Before Debt Service
(A.K.A “Quad Net Rent”)
$11.50
*$55.00 of 8% for 10 years.

5. “YOU’RE PAYING WHAT?!” COCKTAIL TALK: Different Ways to Quote Rent
MAKING SENSE OF QUOTED RENT
Gross
Plus Electric
NNN
Quoted Rate
$30.00
$28.50
$18.00
Plus Tenant Pays…
Operating Expenses No
$8.00
Real Estate Taxes
$2.50
Tenant Electric
$1.50
COCKTAIL TALK:
Different Ways to Quote Rent
True Cost
$30.00

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 COST DRIVER #3:
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)