Modeling Tool Instructions

Enter the name of your agency. If you have more than one agency within a city, please use a numbering system to differentiate between each separate lease.

Enter the code for the city where the leased facility is located:
A1 = Buhl, Payette
B1 = Burley, Grangeville, Moscow, Rexburg, Salmon, Lewiston
C1 = Caldwell, Nampa
D1 = Idaho Falls, McCall, Mountain Home, Pocatello, Twin Falls, Jerome
E1 = Downtown Boise
F1 = Boise, Coeur d’Alene, Meridian
G1 = Hailey, Kethcum

Different areas of the state have varying market conditions which need addressed in the analysis. These city rates will be further refined at a later date to adjust for changing market conditions.

Enter the net rentable square feet that your agency is leasing. This should be found in paragraph 3 of your lease. If your agency expanded, you need to locate the new net rentable square feet in the lease amendment. If you are in a multi-tenanted office building and if the lease states “subject to measurement using the BOMA standard,” enter the square feet shown in paragraph 3. If not, you need to keep in mind that some leases will be based upon “usable” square feet and some upon “gross” square feet. If the lease does not specify whether your space is net rentable, usable, or gross square feet, call your lessor and ask what the net rentable square feet of your space is (sometimes the lessor won’t know). If the lessor does not know, here are some general guidelines:

Net Rentable Space = Usable Space Plus Lobbies, Restrooms, Hallways

• Usable square feet is the space within your own facility, from the middle of the outside wall to the inside finished surface of the wall of your adjoining neighbor. It is the space that you use on a day-to-day basis and includes your offices, conference rooms, and reception areas.
• Net rentable square feet is the your usable space plus restrooms, lobbies, hallways, and so forth that you share with other tenants in the building.
• Gross square feet is the outside dimension of the building.

If you lease a completely separate building or if you have your own restrooms and lobby within your own space, enter the square feet shown on paragraph 3 of the lease.

Enter the base rent that your agency is currently paying. This should be expressed as dollars per square foot per year. The base rent can be found in paragraph 3 of the lease and usually states: “computed at a rate of $ x per square foot, per year.”

Monthly Rent × 12 ÷ sqft = $ per sqft per year
Compare the most-recent rent invoice from the lessor to the amount shown in paragraph 3 of the lease. If they are not the same and you do not know why, you should determine if the lease contains any increases in rent under paragraph 7 “Special Provisions.” The rent may be increased by the Consumer Price Index, a certain percentage amount per year, or a pre-determined amount per year.

List the expiration year of the lease. If the lease has been renewed, put the expiration year of the renewed lease here. If the lease contains an option to purchase the leased facility at a predetermined period of time, enter the year the facility may be acquired minus two years. The model allows two years for construction of a new facility and one year for legislative approval.

Your agency’s lease may contain one or more options to renew the lease. Generally, options to renew the lease are located in paragraph 7 of the lease, under Special Conditions. If all renewal options have already been exercised, leave this line blank. If there are remaining options to renew the lease, insert the year the last renewal option would expire.

If the lease contains an option to purchase the leased facility at a predetermined period of time, enter the year that the facility may be acquired minus two years. For example, if the year the agency may purchase the facility is 2008, enter 2006. The model allows two years for construction of a new facility and one year for legislative approval.

Enter P if this lease is an office or retail facility. Enter W if this lease is a storage or warehouse facility.

Insert the current calendar year.

If there are no predetermined rent increases in the lease, go to cell B-17. Otherwise, enter rent increases shown in the lease, directly opposite the applicable year. These generally are located in paragraph 7 of the lease under Special Provisions. These increases need to be in rent per square foot per year. Show the total rent paid not just the total increase. For example, if the rent is to increase to $12.00 per square foot per year from $10.00 per square foot per year, you would insert $12.00 in the cell directly opposite the applicable year. Please note that the model will automatically set up a six year period of time to allow you to increase your rents according to your current lease.

If you have increases in your lease agreement based on the Consumer Price Index (CPI), complete these seven cells. These increases are generally located in paragraph 7 of the lease under Special Provisions.

B-17
Use this cell only if the Consumer Price Index cannot exceed a certain percentage amount per year (ror example, the increase shall not exceed 3% per year).

B-18
This cell is a little more difficult to determine. Sometimes the increase is based upon the initial lease rate and adjusted annually. For example, a lease could have an initial lease rate of $11.00 per square foot with an annual Consumer Price Index and a cap on the increase of 2%. In this scenario, cell B-17 would be 2% and cell B-18 would be $11.00.

However, sometimes the increase is based upon a lease rate that was raised during previous years of the lease. For example, the lease could have an initial lease rate of $11.00 per square foot, increasing to $12.00 per square foot on the third year of the lease. On the fourth year, the lease calls for a Consumer Price Index increase on the $12.00 per square foot rate. In this scenario, cell B-18 would be $12.00. If you have any questions, please call.

B-20 to B-24
This model allows you to adjust rents according to any increases in the Consumer Price Index over five years. In cells B-20 to B-24, enter Yes or No for any specific year that a CPI increase would be effective.

The list of your leases from DPW will provide you with basic information regarding the pass-through of building expenses. If the Comments section contains items such as “base year,” “$2.75 expense stop,” or “pass-thru of taxes, insurance, and/or cam,” your agency is being billed for building expenses. Copies of the bills received from your lessor for any building expenses should be reviewed at this time. These billings are generally described in paragraph 7 of the lease under Special Provisions. The most widely used method is the operating expense escalation clause with which any increases in building expenses are passed onto tenants based upon the square feet they lease. The key word here is increase. You can generally tell if your agency is being billed for an increase in operating expenses if the language in paragraph 7 refers to items such as “Base Year,” “Expense Stop,” or “any increase over $x per square foot.” If your agency is only billed for an increase in building expenses, skip cells B-26 to B-30, and then go to B-33.

Building expenses could include real estate taxes, building insurance, lobby/hall maintenance, utilities, snow removal, landscaping, and cleaning service. Another way a lease can be structured with regard to building expenses would be for the lessor to pass through the costs directly to your agency. Building expenses could include such items as real estate taxes, building insurance, common area maintenance, utilities, management fees, snow removal, landscaping, and janitorial services which the Lessor supplies on your behalf. If the Comments section in the listing of your leases from DPW contains words such as “pass-thru of taxes,” “pass thru of insur,” or “pass-thru of taxes, insurance, and/or cam,” these expenses are being passed directly through to your agency.

EXAMPLE: Property Taxes
$75,000 per yr ÷ 150,000 sqft = $0.50 per sqft per yr
If the annual property taxes on a 150,000 square foot building were $75,000, then the cost per square foot per year would be $0.50. The lessor would send your agency a bill for $0.50 times the amount of square feet leased by your agency. On a 2,500 square foot facility, your agency’s bill for the property taxes would be $1,250. The lessor is thus passing through the entire expense of the property taxes directly to your agency and cell B-26 would be $0.50 (per square foot per year). Again, all costs must be expressed as dollars per square foot per year.

If the building expenses are not separated by the lessor into tax, insurance, utility, and so forth expense categories, simply put the total expense billed to your agency on cell B-32 (Miscellaneous). Again, do not list any expenses here that are billed to your agency for any increases in operating expenses from one year to the next. Increases are addressed later in cell E-19. Since this can get confusing, please call if you have any questions!

You can make yourself notes about any of these building expenses in cells C-26 to C-30.

List items that your agency is paying to the lessor over and above its standard lease rate. Examples would be payments reimbursing the lessor for construction done to the facility (also known as amortization of tenant finish), conference room use, or parking space rents. Again, these costs must be expressed in costs per square foot per year. Generally, these other costs would be noted under paragraph 7 of the lease or in a lease amendment. There is an area for you to detail these charges in cell C-32 as well.

Two kinds of bills can be listed here. If the agency pays any bills directly to a company other than the lessor, enter Yes in D-17. The actual costs will be entered later in cells E-7 to E-17. Examples of some of these bills could be electricity, additional parking spaces, or janitorial services.

If you previously entered any costs in cells B-26 to B-32 when you completed the section on building expenses billed to you by the lessor, a Yes or No was automatically entered for you in this section.

If you pay any amounts to the lessor other than those detailed in section B-26 to B-30, please enter Yes in this section. Paragraph 6 of the lease has a section called Services which details which costs are the lessor’s and which are the agency’s. The listing of your leases from DPW can also provide assistance here. If the EXC column has any details in it, the agency is paying for some services for its own behalf. See below for additional information.

U = Utilities
AS = All Services
J = Janitorial
NNN = Triple Net Lease (agency pays for all costs on the property)

Please note that if you used Miscellaneous in cell B-32, it cannot be used again in this section as the information in cell B-32 has automatically transferred over to cells D-17 and E-17.

Enter in this section the cost per square foot per year of any increase in operating expenses the lessor billed you for during the last year. Again, if you have any questions on these escalations, please call.

If this facility is an office/warehouse facility, please enter the percent of finished office area. Finished office area would typically also include retail or show room space.

If the agency is paying for all costs on the property, the lease for the facility is a Triple Net Lease (also knows as a Net, Net, or Net Lease). All costs would include property taxes, insurance, maintenance, landscaping, snow removal, utilities, trash service, and so forth. If the lease is a triple net lease, please enter Yes in cell D-25.

If known, show the cost per sqft per year. Since the analysis is designed to convert all leases to a triple net lease, it is important to obtain cost information on the operating expenses of the leased facility. Information for this section can be obtained from four different sources:

• Any information entered in cells B-26 to B-32 will automatically transfer over to this section and will override DPW’s estimated costs.
• If your agency pays for any services directly, such as utilities or janitorial, enter the annual cost per square foot here.
• If you receive bills for any increases in operating expenses of the building, all or some of the information could be noted on the bill from the lessor. In addition, the lessor may be willing to share his or her operating expenses with you.
• DPW has estimated some of the costs of operating a building. These are located in cells F-10 to F-21.

On most occasions, this information will be provided to you automatically. If you do not agree with the number provided, your suggestions would be of great assistance to this office.

On most occasions, this information will be provided to you automatically. If you do not agree with the numbers provided, your suggestions would be helpful.

On most occasions, this information will be pre-established for your benefit.

Enter the number of full time employees who work in this facility.

Generally, this is found in paragraph 2 of the lease.

Historically, the trend is prices increase. These inflation assumptions have been preset. If you do not agree with the numbers provided, your suggestions would be helpful and will further refine the model.