Once the Landlord’s responses to the RFPs come in, the next step is the analysis of the landlord’s proposals. No two buildings are alike, and the proposals from each landlord will be different. Some will have lower rents, some will offer more concession, the escalations will be different, as well as the loss factor or electric, etc. The best way to analyze these deals is by creating a Net Present Value, (“NPV”) spread sheet. NPV is the value of a future stream of cash flows in today’s dollars. When comparing different buildings, the key is the comparison of the NPV of the aggregate dollars spent for each building over the term of the lease. The discount rate used is specific to each business; or the discount rate is comparable to the returns of the bond or stock market.
Once the spreadsheet is created, by using Microsoft Excel, the spreadsheet can alter the NPV or the aggregate cost each time a landlord changes a deal term. For example, if a landlord lowers the annual escalation to the base rent or another landlord gives an additional month’s concession, the economic input of these variables will alter the NPV of the aggregate dollars. This way all the proposals are compared on an apples-to-apples basis. Once the NPV spreadsheet is established, they serve as a running tabulation of each deal. This is the best way to analyze or compare the different deals throughout the negotiating process.