Lucernex real estate finance expert Jim Duport (see Jim’s management summary here), after completing an upgrade to our core financial engine to support the new proposed FASB / GAAP rules, discusses renewal options under the new FASB.
This is the fourth in a series of Blogs by Jim describing his findings during the process of developing the architecture within the core Lucernex financial engine to handle the new proposed FASB rules.
What is a Renewal Option?
A factor in the process of assigning more likely than not to occur renewal probability is that under the proposed FASB, tenants are required to estimate the probability of exercising their renewal taking into account past practices. For instance, assume a tenant has 30 offices with similar leases and renewed 20 of them, then the past practice is to renew for 2/3rd of the portfolio of similar leases. Right?