Leases as cash flows: effective rent

Finance reads a lease as a cash-flow schedule. Effective rent nets the headline: face rent minus free months, minus amortized tenant improvements and leasing commissions, over the term. A $32/SF, 5-year deal with 6 free months and $80/SF TI nets far less than face — run it before celebrating.

Structure shifts risk: NNN moves expense inflation to tenants (landlord income is bond-like); gross leases keep it with the landlord (an expense-stop hybrid caps exposure). Escalations (fixed % vs CPI-linked) decide who wins against inflation. Credit and term decide the discount rate a buyer applies to the stream.

Portfolio-level lease analytics — below-market flags (in-place vs market), rollover concentration, weighted average lease term (WALT) — are how a rent roll becomes strategy: where the embedded upside sits, and where the cliff is.