How it works
The cash flow is the list of money in and out by year. Write that list first.
- Put free-rent months in the year you do not pay.
- Put TI money in the year the cash actually moves.
- Do not smear a year-one check across ten years unless you say you are averaging.
- Keep the later rent path. The credit does not erase it.
Formula in words. Year cash = rent + extras − free-rent relief − TI cash in that year. Then discount.
| Input | Meaning |
|---|---|
| Free-rent months | When rent is reduced |
| TI amount | Build-out money |
| TI timing | The year the money moves |
| Later rent | The path after the gift |
Worked example
Here is a teaching sample. It is not customer data and not a result from a live client.
| Metric | Lease A | Lease B |
|---|---|---|
| Start rent | $43,000 | $39,990 |
| Year-1 extras | $8,000 | $8,560 |
| Year-1 credit | $22,000 | $12,100 |
| Sample NPV | $373,716 | $363,753 |
| Year | Rent | Extras | Credit | Cash out | Value today |
|---|---|---|---|---|---|
| Year 1 | $43,000 | $8,000 | $22,000 | $29,000 | $26,852 |
| Year 2 | $44,720 | $8,240 | $0 | $52,960 | $45,405 |
| Year 3 | $46,509 | $8,487 | $0 | $54,996 | $43,658 |
| Year 4 | $48,369 | $8,742 | $0 | $57,111 | $41,978 |
| Year 5 | $50,304 | $9,004 | $0 | $59,308 | $40,364 |
| Year 6 | $51,813 | $9,274 | $0 | $61,087 | $38,495 |
| Year 7 | $53,367 | $9,552 | $0 | $62,919 | $36,713 |
| Year 8 | $54,968 | $9,839 | $0 | $64,807 | $35,013 |
| Year 9 | $56,617 | $10,134 | $0 | $66,751 | $33,392 |
| Year 10 | $58,316 | $10,438 | $0 | $68,754 | $31,846 |
| Sample NPV | — | — | — | — | $373,716 |
How to read the sample
Sample NPV for the incentive lease is about $373,716. A second path lands near $363,753. That gap is a talking point, not a promise.
The TI check and free rent both sit here. If one path wins only because a credit sat in the wrong year, start over.
Year notes for the incentive lease
- Year 1 of the incentive lease has rent of $43,000.
- Shared building cost is $8,000.
- A credit of $22,000 lowers the cash you pay that year.
- Cash out this year is about $29,000. The TI check and free rent both sit here.
- Later cash gets a shrink for time. At 8 percent, year 1 is worth about $26,852 today.
- Next, year 2 rent is $44,720.
- CAM, which is a shared building cost, is $8,240.
- There is no credit in this year.
- You pay about $52,960 this year after extras and credits. The gift is gone. The step starts.
- Time shrinks later cash. At 8 percent, year 2 is worth about $45,405 today.
- Then year 3 rent is $46,509.
- Extras for the building come to $8,487.
- Credits skip this year.
- The net cash this year is about $54,996. This is the year a cheap first look fades.
- Waiting has a price. At 8 percent, year 3 is worth about $43,658 today.
- After that, year 4 rent is $48,369.
- The shared building cost this time is $8,742.
- No extra credit shows up this year.
- Cash out this year is about $57,111. Later rent now carries the deal.
- Later cash gets a shrink for time. At 8 percent, year 4 is worth about $41,978 today.
- In year 5 of the incentive lease, rent is $50,304.
- Shared building cost is $9,004.
- There is no credit in this year.
- You pay about $59,308 this year after extras and credits. NPV still counts this year.
- Time shrinks later cash. At 8 percent, year 5 is worth about $40,364 today.
- Year 6 of the incentive lease has rent of $51,813.
- CAM, which is a shared building cost, is $9,274.
- Credits skip this year.
- The net cash this year is about $61,087. Keep this later year in the sum for the sample.
- Waiting has a price. At 8 percent, year 6 is worth about $38,495 today.
- Next, year 7 rent is $53,367.
- Extras for the building come to $9,552.
- No extra credit shows up this year.
- Cash out this year is about $62,919. The row still belongs in the sum for the long path.
- Later cash gets a shrink for time. At 8 percent, year 7 is worth about $36,713 today.
- Then year 8 rent is $54,968.
- The shared building cost this time is $9,839.
- There is no credit in this year.
- You pay about $64,807 this year after extras and credits. Keep this later year in the sum for the long path.
- Time shrinks later cash. At 8 percent, year 8 is worth about $35,013 today.
- After that, year 9 rent is $56,617.
- Shared building cost is $10,134.
- Credits skip this year.
- The net cash this year is about $66,751. The row still belongs in the sum for the long path.
- Waiting has a price. At 8 percent, year 9 is worth about $33,392 today.
- In year 10 of the incentive lease, rent is $58,316.
- CAM, which is a shared building cost, is $10,438.
- No extra credit shows up this year.
- Cash out this year is about $68,754. Keep this later year in the sum for the long path.
- Later cash gets a shrink for time. At 8 percent, year 10 is worth about $31,846 today.
Add those year values. The sample NPV for the incentive lease is about $373,716. This is a teaching sample, not a client result.
Trusted sources
These are public references. They are not endorsements and not client results.
How to use this with OccupancyNPV
This page answers the concept. OccupancyNPV applies it inside a DealWorkspace: enter lease scenarios, review cash-flow and occupancy cost, then compare NPV and discount-rate sensitivity. OccupancyNPV NPV is not the same as a face-rent comparison. OccupancyNPV is not a CRM or lease-administration suite, and this page is not legal or investment advice.
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