LEASING: FUNDEMENTALS ANALYSIS and NEGOTIATION FALL 2023Python

Java Python COURSE SYLLABUS

LEASING: FUNDEMENTALS, ANALYSIS, and NEGOTIATION

FALL 2023

1.5 CREDITS

Tuesday 6:30 to 8:30 pm except Class 1 (Tuesday 9/3 from 4pm to 6pm) and Class 2 which will be Friday Sept. 13th from 2pm to 4pm

Please note Class Day/Times and Location All Classes are in 113 Avery (Wood)

Class One	Tuesday 9/3 4pm to 6pm	Lease Analysis
Class Two	Friday 9/13 2 to 4pm	Alexander Plaza Case
Class Three	Tuesday 9/17 6:30 to 8:30pm	A Leasing Primer
Class Four	Tuesday 9/24 6:30 to 8:30pm	Walnut Tree Case: Early Renewal Part One
Class Five	Tuesday 10/1 6:30 to 8:30pm	Walnut Tree Case: Early Renewal Part Two Review
Class Six	Tuesday 10/8 6:30 to 8:30pm	Tarrach Air
Final	WEDNESDAY 10/9 at 2pm	Exam (timed)

*please note time and day

I. COURSE DESCRIPTION

LEASING: FUNDEMENTALS, ANALYSIS, and NEGOTIATION will study issues that are critical to leasing and driving income from real estate assets. The class will begin with an overview of leasing terms and structures, along with basic lease analysis. Students will also read a lease and work backwards to write a letter of intent. Following the introductory classes, students will work/compete against each other on mock lease negotiations focusing on office leases.

The course is structured primarily as lecture-based for the early classes and then a series of negotiation exercises for the later classes.  The final exam will bean individual mock lease exercise.

II. COURSE REQUIREMENTS AND ASSIGNMENTS

Students are expected to be active participants in the class - taking notes, asking/posting questions, being active in the small group discussions, and serving as the “reporter” for your group at least once.   Each week following the class,a short class participation quiz will be sent via the internet that students will be expected to complete. During the lease negotiation exercises, students may need to conduct their lease negotiations prior to class or at least the initial round (with the final round being conducted in the first 20 minutes of class). Exercises will be individual assignments, unless specifically noted.

Major Deliverables for this class include:

• Lease Analysis Problem Set – following explanation of how to calculate/analyze a lease, a problem set will be distributed focusing on Net Effective Rent calculations.

• Alexander Plaza Case – Students will be expected to read the Alexander Plaza case (Harvard Business School case) and be prepared to discuss. Prior to class students will have to submit a ranking of issues and come prepared to negotiate on key deal points.

• Lease Letter of Intent – students will be provided a major tenant office lease and have to reverse-engineer the last letter of intent that would have generated the lease (3 to 4 pages); assignment will require students to read commercial lease, determine  key points and submit LOI. This assignment can be challenging for students, which is why you have multiple weeks to complete - if you wait until just before this is due to work on this, it will be very difficult to finish along with your case study for that week.

• Weekly Lease Negotiations – Students will receive a case study (along with a position assignment – Landlord, Tenant, etc.). Students will need to negotiate before class so we can discuss the outcomes and how the students analyzed the lease metrics. Some assignments may be conducted in a team format.

• Final Exam – Building off the weekly lease negotiations, students will be given a case study and need to prepare a “Best and Final” lease proposal.

III. COURSE GRADING CRITERIA

•   Attendance and in-class participation (including after class quizzes): 20%

•   Alexander Plaza Case 10%

• Lease Letter of Intent 20%

•    Lease Analysis Problem Set 10%

•   Weekly Lease Negotiations 20% (10% each)

•    Final Exam: 20% (Will be given via Canvas with a time limit – it is an individual exam)

Only exceptional performers will receive a High Pass. Those who fallshorton more than one major assignment will receive a Low Pass.

IV. READINGS

Students will be expected to read and analyze all lease materials distributed. Additionally, If outside readings are assigned, Students will be expected to complete readings in advance of class. There is no required textbook but students are required to purchase HBS Case Alexander Plaza.

The lease document that is critical to Class Three is available via canvas. It is atypical complicated lease for a large tenant, and as such is of significant length (80+ pages). It is posted now to facilitate plenty of time to read the lease before the assignment.

LEASING: FUNDEMENTALS, ANALYSIS, and NEGOTIATION FALL 2023Python

V. COURSE OUTLINE

Before the First Class:

Class 1:   Sept 3rd Lease Analysis (i.e. an Introduction to Leasing, Part One)

•    Why Leasing is important

•    Leasing Process

•    LOIs, Term Sheets

•    Lease Financial Analysis

• In Class Exercises

Assignments due before next class:

Lease Problem Set (Due by noon on Sept 10th) Read Alexander Plaza Case

Submit Alexander Plaza Rankings (due by 9am on Sept 11th)

**Begin work on Lease Letter of Intent (due after third class) - three questions will be due on Sunday 9/15

Class 2: Sept 13th (NOTE DAY AND TIME 2pm) Alexander Plaza Case (Leasing Overview)

•    Discuss Alexander Plaza

o Review Case

o Discuss Priorities (ie Class Ranking of Issues)

o Strategize Solutions

•    Negotiation Tactics

Assignments due before next class:

Read Lease Posted on Canvas, submit three questions related to the lease (due by 3pm, Sun. 9/15)

**Begin to work on Lease Letter of Intent assignment (due after third class)

Class 3: Sept 17th A Leasing Primer (i.e. an introduction to Leasing, Part Two)

•    Reviewing a Lease

•    Important Lease Terms

•    Review Problem Set

• In Class Exercises

•    Prep for next week’s Case

Assignments due before next class: Lease Letter of Intent (DUE 8pm on Sept 22nd)

Prep Walnut Tree Case 1A (4th Class)

Class 4: Sept 24th Weekly Lease Negotiations 1: Walnut Tree Case: Early Renewal

• Review case 1A

•    Financial Review

•    Prep for Negotiation

•   Takeaways

Assignments due before next class:

• Conclude Walnut Tree Case

• Prep/Negotiate for Walnut Tree Case (5th Class)

Class 5: Oct   1st Walnut Tree Case 1B: Early Renewal  and Review

•    Negotiation Exercise

•    Review Outcomes

•   Takeaways

•    Key Lessons

•    Prep for Next Week

Assignments due before next class:

• Prep for Tarrach Air Case; conduct initial negotiations

Class 6:  Oct 8th Weekly Lease Negotiations 3: TarrachAir: Tenant deciding between Renewal and New HQ

•    Negotiation Exercise

•    Review Outcomes

•   Takeaways

FINAL

VI. WEEKLY LEASE NEGOTIATIONS (Class 4 - 6)

Students will be given a case study specific to their roles (Landlord or Tenant). Students will then need to read and analyze the cast to prepare an offer (or response). An initial round of negotiations will be conducted prior to class, this will ensure students are prepared for the quick turnaround time of the in- class negotiations. A typical class will generally follow the outline below:

Prior to Class:

•   Case distributed (Tuesday following class)

•   The two sides can adjust the suggested timing as necessary for their schedules (and issues let the TA or myself know) but the below is a good guide:

•   Side 1 will need to send in proposal to Side 2 before Friday Morning

•   Side 2 will need to respond to Side 1 by Sunday Morning

•    Both sides need to be prepared to negotiate as soon as class starts  (or finalize negotiations on Sun/Monday depending on case)

In-Class:

•   6:30 pm introduction/questions

•   6:35 Negotiations Begin

•   6:55 Any last-minute negotiations to reach agreement

•   7:00 pm Negotiations conclude and submit key metrics and NERs for review/discussion

•   7:10 Wrap Up

For example, for the initial weekly negotiation class, the case centers on a tenant reaching out to its existing landlord to strike anearly renewal (if the tenant cannot reach anearly deal, then it will conduct a wide marketing effort and will consider new construction as well). The case will include market data, information on the tenant, the building. and the Landlord. Additionally, students will be given aproposed term sheet from the Tenant’s side. The Tennant will need to understand the financial implications of the proposal, to use as a baseline. The Landlord side will then have to submit a counter offer back to the Tenant prior to class.

In-class discussions will review the metrics of the deals submitted, for example:

•   Of the deals that were agreed to, which had the highest NER? Lowest NER? Were the deals the highest and lowest rent the same as the NERs?

•    For deals where terms were not agreed to, who had the smallest spread between NERs? What teams had the largest spread?

•    Beyond the financials, what were the hardest deal points to reach agreement?

• How did the 2 sides resolve the areas of conflict?

FINAL EXAM

The Final Exam will be a similar lease exercise to the weekly lease negotiations, with the students provided a case and are tasked with submitting a “Best and Final” offer to entice a tenant, along with financial analysis   supporting deal. The final will bean individual effort.

KEY DATES
September 1st:	Pre-Class Survey
September 9th :	Alexander Plaza Rankings
September 10th	Lease Problem Set
September 15th	Initial Three Questions related to the lease
September 22nd	Lease Letter of Intent
September 24th	Model for Walnut Tree 1A

In CLASS NEGOTIATIONS - October 1st and 8th YOU MUST BE PRESENT - If there is an issue, you need to inform BOTH the TA and myself by Sept