Develops an approach to estimating effective rents based on the assumption that the net present value of incentives should be zero. Investors should not be able to profit from lease incentive packages if they are valued correctly because they should have no influence on capital values. If ad hoc methods of valuation are used in practice then there may be opportunities to identify mispriced properties. Presents a model which recognizes that different aspects of the cashflows can carry different risk and should be valued accordingly. Suggests that although the resulting model is more complex than generally found in practice it can nevertheless easily be solved with a spreadsheet. Develops the economic and financial principles involved rather than focusing on rule of thumb procedures.
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