Lease Assumption Premium Calculator

Assuming an in-place lease carries premium or discount vs market. This calculator sizes it.

Remaining months

In-place rent

$/sf

Market rent

$/sf

Leased sqft

Discount rate

Assumption premium (liability)

$821,974

Monthly spread

$16,667

Spread %

22.22%

How the math works

Premium = PV of monthly rent spread over remaining term at buyer discount rate.

Below-market leases are a real economic hit that discounted-cash-flow pro formas often bury. Model the spread explicitly so it lands in purchase price allocation or underwriting adjustments rather than hiding inside a blended rent assumption.

How to Use

Enter remaining lease term months.
Enter in-place rent per square foot.
Enter market rent per square foot.
Enter leased square feet.
Enter discount rate %.
Read assumption premium or discount.

Frequently Asked Questions

What is a lease assumption premium?

When a buyer takes over a property with existing leases, the PV of the spread between contract rent and market rent shows up as a premium (below-market tenant = buyer liability) or discount (above-market = buyer asset). It drives allocation of purchase price under ASC 805 and similar accounting rules.

How is market rent determined?

Broker surveys, comps, CoStar/Yardi data, and recent leases of similar space within the submarket. Adjust for floor level, configuration, views, TI packages, and free rent so comps reflect true market economics rather than headline rates.

Why does discount rate matter?

Higher discount rates compress PV of future rent spread; premium/discount shrinks. 7-9% typical for stable multifamily, 8-11% for office, 9-13% for retail. Use the asset-class unlevered required return as a starting point.

When does this matter most?

Mid-lease acquisitions where 3-7 years remain and rents drifted significantly. A 20% below-market lease with 5 years left can easily create $40-90/sf of buyer liability, affecting pricing and allocation.