Frontiers · Commercial Real Estate · Model specification
Follow every calculation.
ILLUSTRATIVE · USD · SQ FT · PRE-TAX
Commercial model methodology
Inspect lease rollover, recoveries, refinance sizing, exit valuation and return conventions.
Lease and operating engine
How each tenant row becomes monthly income and leasing cost.
| Item | Convention |
|---|---|
| Units | USD and square feet. Annual rent is $ per square foot. All property costs are annual whole-asset totals. |
| Current lease | Pays through remaining month count. Base rent steps annually from model inception at the contract escalation rate. Current leases have no remaining concession or break input. |
| New leases | Vacancy follows each expiry; new lease begins at today’s market rent grown to that commencement month. The vacancy/term cycle repeats. |
| Rent-free periods | Base rent is zero for the selected first months of each new lease. Occupancy, recoveries and turnover rent continue. |
| Tenant improvements | Area × TI per square foot × cost growth to commencement. Paid at each new lease start. |
| Leasing commissions | Commission percentage × sum of scheduled new-lease base rents, including annual steps and excluding free months. Paid at commencement. |
| Expense recoveries | Whole-building operating expenses × tenant area share × recovery percentage, only while occupied. No base-year stops, caps or reconciliations. |
| Turnover rent | Max(0, annual sales − annual breakpoint) × rate ÷ 12. Constant for all occupants in that row; no seasonal sales profile. |
| Collection loss | Percentage haircut applied to all billed base rent, turnover rent and recoveries. |
| NOI | Collected income − property operating expenses − management fee. Management is a percentage of all collected income, including recoveries. |
| Investor cash | NOI − TI − commissions − capex − administration − debt service + net financing, allocated by stake. |
| Growth | Fixed costs, TI, capex and administration grow smoothly at annual-equivalent cost growth. Contract base rent steps annually. New-lease market rents grow smoothly to commencement. |
Financing and exit
Initial loan = price × LTV. Initial equity includes acquisition costs, initial works and loan fee. During interest-only months no principal is paid; subsequent monthly payments use the original amortisation period. Only one refinance is modelled, after that month’s scheduled payment, and only before the disposal month if a loan balance remains.
Refinance value = next twelve months’ NOI ÷ refinance cap rate, floored at zero. Replacement borrowing is the smaller of the LTV limit and NOI ÷ minimum DSCR ÷ annual debt-service constant (the annualised fully amortising payment per dollar of new debt). The refinance fee is deducted from proceeds; any shortfall is an investor contribution.
Exit value = forward twelve-month NOI ÷ exit cap rate, less sale costs and outstanding debt, added to the final month.
Returns and funding
IRR is solved on monthly investor flows and annualised; it is reported only when a single root exists, otherwise “Multiple IRRs” or “No IRR”. NPV discounts monthly flows at the annual hurdle. Net-flow multiple = total positive flows ÷ total negative flows. All deficits are assumed funded pro rata; there are no preferred returns, promotes, taxes or currency effects.
Development engine and limits
Works plus contingency are spent evenly over the construction months; the financed share is drawn in the same month. Interest accrues on the balance and is paid in cash. Holding and administration costs run until sale. One disposal occurs after the post-build delay; sale costs and debt are deducted. Inputs are validated against fixed bounds; whole-number months are required.
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