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Response to Proposal

After the owner has responded to your initial proposal, it is time to analyze all the major points of the response. If you have made more than one proposal there are certain elements that need to be compared. These items might include: Rent rate calculated on the basis of rentable square feet and the rental rate calculated on the basis of useable square feet. This is arrived at by subtracting the load factor from the rentable square footage. Compare the effective rent, which is nothing more than averaging all the years of the rent and factoring in any free rent periods. This is important because your responses may use different rent structures. By reducing this to the average rent per year, per foot, you can easily see which proposal has the better economics. Different properties have differing operating expense histories and it is a good idea to ask for a 3-year history of the operating expenses. Well run buildings have very stable operating expense histories and unless there's been a spike in energy costs, janitorial contract re-negotiations, an insurance crisis, or snow removal, the expenses should be fairly even.

 

Next you will want to compare:

  • Tenant improvements offered by the owner
  • The cost of any improvements you are required to provide
  • Length of term, options to expand, extend or to cancel
  • Timing to delivery
  • Overall suitability
 
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