Straight-Line Reporting for Leasehold Improvements and Non-Stepped Rent
Real Property / Costs / Cost Administrator
Straight-Line Reporting for Leasehold Improvements and Non-Stepped Rent
If a tenant renovates space that they are about to move into with project construction costs of $81,000 USD, these costs can be designated as leasehold improvements (LI) costs. The following example shows how straight-line reporting accounts for the leasehold improvements when the rent is not stepped.
| Year 1 | Year 2 | Year 3 | Cumulative Total | Description | ||
|---|---|---|---|---|---|---|
| A | Base Rent by Year | $20,000. | $20,000. | $20,000. | ||
| A1 | No. of Payments | 12 | 12 | 12 | 36 | |
| A2 | Base rent cumulative value | $240,000 | $240,000 | $240,000. | $720,000. | (A x A1) |
| B1 | LI Cost | ($81,000) | Total Leasehold Improvement project cost | |||
| B | LI Credit | ($2,250) | ($2,250) | ($2,250) |
B1 / (A1 -cumulative) monthly credit |
|
| C | Tenant -Actual amount paid (monthly) | $17,750. | $17,750. | $17,750. |
(A + B) Base Rent + LI credit |
|
| D | Straight-Line Rent (monthly value) | $20,000. | $20,000. | $20,000. |
= A for non-stepped rent |
|
| E | Differential | ($2,250.) | ($2,250.) | ($2,250.) |
(C - D) monthly = (Tenant Actual Amount Paid monthly - Straight-Line Rent monthly value) |
|
| F | Cumulative Differential | ($27,000.) | ($27,000.) | ($27,000.) |
($81,000) |
(E x A1) = Differential x No. of Payments for that year |