Frequently Asked Questions

LeaseAlpha is a technology-based consulting and tenant advocacy platform created to ensure that all tenants have access to the tools and services necessary to negotiate optimal commercial real estate lease. We provide free access to landlord-point-of-indifference calculator, which allows tenant to mathematically determine best possible terms for lease renewal or early restructure at the current building. LeaseAlpha endeavors to educate tenants and provide transparency to strengthen tenants’ negotiating position. Finally, we share brokerage fees with tenants who engage LeaseAlpha to find the best local market expert for your next lease project and provide additional consulting services all stages of lease transaction.

LeaseAlpha calculator is a cloud-based modeling software that allows tenants to quickly and easily create sophisticated landlord point-of-indifference model, solve for the best possible lease renewal or early restructure deal terms, and calculate potential savings as compared to the current lease in-place.

Landlord point of indifference model is a methodology for mathematically determining best possible in-place lease renewal or early restructure deal for a tenant. The central premise of landlord point-of-indifference methodology is that a rational landlord would not agree to a lease renewal or early restructure deal with the current tenant that would be less profitable than the alternative outcome, where current tenant vacates the premises and landlord has to re-tenant the space in the open market. So, by that rationale, the best possible lease renewal or early restructure deal for the current tenant is the one that is equal in landlord’s profitability to the scenario where landlord must replace the current tenant. As such, LeaseAlpha calculator determines the best possible lease renewal or early restructure deal for tenant by solving for economic lease terms that would equate landlord profitability in the stay and vacate scenarios.

A tenant will need a few simple data points to effectively use LeaseAlpha calculator: i) premises size, lease expiration date, base rent schedule, lease type (net or gross), property taxes and building operating expenses per sq. ft. (LeaseAlpha system will make an educated guess on prop. taxes and building op. ex., but that info can be easily found on the monthly rent statement provided by landlord), and whether tenant still has any remaining rent abatements or a valid termination option. LeaseAlpha system will provide best estimates for additional data inputs located in the Advanced Settings of the calculator. It is always recommended to schedule a free informational meeting with a LeaseAlpha representative to go over all advanced data inputs to maximize tenant savings.

There are multiple advantages to employing landlord point-of-indifference methodology and restructuring tenant’s lease early – the top benefits are as follows:

• Restructuring the lease early may allow tenant to immediately reduce its cost of occupancy by lowering base rent and/or receiving abatements from landlord.
• Restructuring the lease early may allow tenant to receive a buildout allowance to be able to immediately start refresh of its premises, without waiting for current lease expiration.
• Restructuring the lease early may allow tenant to immediately downsize its footprint, if necessary.

Landlord point of indifference methodology can be successfully applied to office, retail, and industrial properties with certain limitations (please see white paper for details). The methodology is not suitable for multi-family assets.

Yes, landlord point of indifference methodology can utilize termination option, by pricing in the termination fee, and still produce desirable early lease restructure terms resulting in significant potential savings. LeaseAlpha calculator has an option built in to utilize tenant termination options. Please note, that in the process of early lease restructure tenant will have to give up its current termination option and will not have to pay the termination fee. A new termination option, further in the future, may be obtained as part of restructure negotiations.

Yes, landlord point of indifference methodology can accommodate downsizing on restructure and still produce desirable early lease restructure terms resulting in significant potential savings. LeaseAlpha calculator has an option built in to downsize tenant premises on restructure.

Depending on the premises size and market conditions, finding suitable relocation alternative, negotiating a lease, and building-out new space may take many months. For larger tenants, it is not unreasonable to start the process a few years ahead of lease expiration date. Smaller size tenants require less of a runway. Still, it is very important to start exploring lease restructure early enough to maintain a credible threat of relocation. If tenant does not start the process early enough, landlord would know that it would be difficult for tenant to relocate without paying significant holdover penalties. Tenant’s negotiating leverage would be lost or significantly diminished, and landlord would be highly unlikely to agree to a desirable deal. If you are unsure what the right time is for you, please schedule a free informational meeting with a LeaseAlpha representative by following the link below.

The main incentive that landlord point of indifference modeling methodology brings to landlord is that it requires lease term extension beyond current lease expiration date. Longer in-place lease term mitigates landlords market risk of re-tenanting and increases the value of the building in case landlord is planning on selling or re-financing the asset.

In most cases, in the down-trending market, where vacancies are rising and rents are falling, this modeling methodology would be very effective in generating significant potential savings for tenants. Weak market conditions increase market risk, cause re-tenanting to be more expensive, and make landlords more amenable to making an aggressive deal to keep existing tenant in-place.

In most cases, in the up-trending market, where vacancies are falling and rents are rising, this modeling methodology would be less effective in generating significant potential savings for tenants. Strong market conditions decrease market risk, cause re-tenanting to be less expensive, so landlords are less inclined to offer aggressive deal to keep existing tenant in-place. However, it would behoove the tenant to still use the methodology, because restructuring and extending the lease early would still eliminate landlord’s exposure to market risk and mitigate certain re-tenanting costs. If the methodology would not generate significant savings, it could at least help keep the existing terms and prevent significant increase in cost of occupancy on lease rollover. 

No, the methodology is designed for situations where tenant is already leasing space; it is not suited for acquiring new spaces.

Yes, lease term extension beyond current lease expiration date is required on restructure under this methodology. Landlord is induced to provide upfront concessions in exchange for additional term, so the longer the additional term the better are upfront concessions.

Theoretically, there is no limit on how small tenant premises can be – the math in the model would still work. However, in reality, landlord may be unlikely to focus on restructuring small size leases early. 

It is possible that some landlords may simply refuse to negotiate based on the rational mathematical model informed by landlord’s point of indifference methodology. This issue is more common in the non-institutional segment of the market. That is why it is imperative that tenants start the process early enough to have suitable relocation options. If landlord does not respond to negotiations attempts based on a rational mathematical model, perhaps landlord will respond to a credible relocation threat.

In most markets landlord pays brokerage fees upfront – including commissions for broker representing tenant and broker representing landlord. However, these fees are amortized into rent and as such ultimately come out of tenant’s pocket.

Please refer to the white paper that can be found in the How We Do It section of our website. Alternatively, please contact us directly by following the link below.