How it works
The cash flow is the list of money in and out by year. Write that list first.
- Collect rent, extras, credits, term, and start.
- Line up commencement so year one means the first occupied year.
- Place free rent and TI money in the year they happen.
- Discount with one visible rate. Share a short summary.
Formula in words. Same cash rules + same rate + same occupancy window = a comparable NPV pair.
| Input | Meaning |
|---|---|
| Rent path | Start rent and steps |
| Extras | CAM, tax, insurance |
| Credits | Free rent and TI |
| Window | Term and start |
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 | $36,000 | $33,480 |
| Year-1 extras | $11,000 | $11,770 |
| Year-1 credit | $12,000 | $6,600 |
| Sample NPV | $347,504 | $339,029 |
| Year | Rent | Extras | Credit | Cash out | Value today |
|---|---|---|---|---|---|
| Year 1 | $36,000 | $11,000 | $12,000 | $35,000 | $32,407 |
| Year 2 | $37,260 | $11,330 | $0 | $48,590 | $41,658 |
| Year 3 | $38,564 | $11,670 | $0 | $50,234 | $39,877 |
| Year 4 | $39,914 | $12,020 | $0 | $51,934 | $38,173 |
| Year 5 | $41,311 | $12,381 | $0 | $53,692 | $36,542 |
| Year 6 | $42,550 | $12,752 | $0 | $55,302 | $34,850 |
| Year 7 | $43,827 | $13,135 | $0 | $56,962 | $33,237 |
| Year 8 | $45,142 | $13,529 | $0 | $58,671 | $31,698 |
| Year 9 | $46,496 | $13,935 | $0 | $60,431 | $30,231 |
| Year 10 | $47,891 | $14,353 | $0 | $62,244 | $28,831 |
| Sample NPV | — | — | — | — | $347,504 |
How to read the sample
Sample NPV for Option One is about $347,504. A second path lands near $339,029. That gap is a talking point, not a promise.
Credits make year one look kind. If one path wins only because a credit sat in the wrong year, start over.
Year notes for Option One
- Year 1 of Option One has rent of $36,000.
- Shared building cost is $11,000.
- A credit of $12,000 lowers the cash you pay that year.
- Cash out this year is about $35,000. Credits make year one look kind.
- Later cash gets a shrink for time. At 8 percent, year 1 is worth about $32,407 today.
- Next, year 2 rent is $37,260.
- CAM, which is a shared building cost, is $11,330.
- There is no credit in this year.
- You pay about $48,590 this year after extras and credits. The real bill shows up when credits end.
- Time shrinks later cash. At 8 percent, year 2 is worth about $41,658 today.
- Then year 3 rent is $38,564.
- Extras for the building come to $11,670.
- Credits skip this year.
- The net cash this year is about $50,234. Steps keep lifting the later years.
- Waiting has a price. At 8 percent, year 3 is worth about $39,877 today.
- After that, year 4 rent is $39,914.
- The shared building cost this time is $12,020.
- No extra credit shows up this year.
- Cash out this year is about $51,934. A second option may look worse now and better later.
- Later cash gets a shrink for time. At 8 percent, year 4 is worth about $38,173 today.
- In year 5 of Option One, rent is $41,311.
- Shared building cost is $12,381.
- There is no credit in this year.
- You pay about $53,692 this year after extras and credits. The compare is about the whole path.
- Time shrinks later cash. At 8 percent, year 5 is worth about $36,542 today.
- Year 6 of Option One has rent of $42,550.
- CAM, which is a shared building cost, is $12,752.
- Credits skip this year.
- The net cash this year is about $55,302. Keep this later year in the sum for the sample.
- Waiting has a price. At 8 percent, year 6 is worth about $34,850 today.
- Next, year 7 rent is $43,827.
- Extras for the building come to $13,135.
- No extra credit shows up this year.
- Cash out this year is about $56,962. 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 $33,237 today.
- Then year 8 rent is $45,142.
- The shared building cost this time is $13,529.
- There is no credit in this year.
- You pay about $58,671 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 $31,698 today.
- After that, year 9 rent is $46,496.
- Shared building cost is $13,935.
- Credits skip this year.
- The net cash this year is about $60,431. The row still belongs in the sum for the long path.
- Waiting has a price. At 8 percent, year 9 is worth about $30,231 today.
- In year 10 of Option One, rent is $47,891.
- CAM, which is a shared building cost, is $14,353.
- No extra credit shows up this year.
- Cash out this year is about $62,244. 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 $28,831 today.
Add those year values. The sample NPV for Option One is about $347,504. This is a teaching sample, not a client result.
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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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