The Net Leasing Spread is a key performance metric used to evaluate the difference between the economic value of a new lease and that of the prior lease for the same space. In Deal Manager (DM), this spread is calculated using a defined set of rules and formulas that consider rent components and property expenses, sourced from both Deal Manager and Voyager systems.
Lease Types and Their Calculation Formulas
The calculation approach varies based on the lease type:
1. Gross / Modified Gross Leases
Formula:
(Base Rent + Additional Rent) + CAM - Property Expenses
Explanation:
This lease type includes:
All rent components (Base Rent + Additional Rent)
Common Area Maintenance (CAM) charges
Less property expenses
This results in a net value that reflects the landlord's retained income after covering expenses.
2. Net Leases
Formula:
Base Rent + Additional Rent
Explanation:
Net leases exclude property expenses from the calculation. Only Base Rent and Additional Rent are included, offering a straightforward view of gross income potential.
Components of the Net Lease Spread Calculation
The spread compares values from the Prior Lease and the Proposal Lease using data pulled from both Voyager and Deal Manager respectively.
Prior Lease (Voyager)
Rent Components:
Base Rent: Only the last rent step is used.
Additional Rent: All types of additional rents are considered.
Free Rent: Ignored in the calculation.
Property Expenses:
Uses ending year expenses of the prior lease.
If the lease ends in the current year:
Pull expenses from DM if available on the company setup.
Else, fetch expenses from Voyager for the corresponding property.
Proposal (Deal Manager)
Rent Components:
Base Rent: Only the first rent step is used.
Additional Rent: Only those with the NER (Net Effective Rent) flag checked on company setup are considered.
Free Rent: Also ignored.
Property Expenses:
Uses start year expenses of the proposed lease.
Always considers expenses saved in Deal Manager for the property as defined in the company setup.
Summary of Considerations
Element | Prior Lease (Voyager) | Proposal Lease (Deal Manager) |
Base Rent | Last step rent | First step rent |
Additional Rent | All additional rents | Only with NER flag checked |
Free Rent | Ignored | Ignored |
Property Expenses | Ending year; source depends on setup | Start year; always from DM company setup |
This structured approach ensures consistency in how leasing spreads are measured, allowing stakeholders to make informed decisions about the profitability of leasing proposals compared to historical performance.