DCF Renewal Options

Wondering everyone’s thoughts on how to account for renewal options in a DCF, specifically terms/durations. My understanding is that these are typically non-weighted and based on the market terms rather than the actual term of the renewal option or a blend of the two. Assuming market terms are longer than the term of the renewal option, this seems unfair to any subsequent renewal options since it would mean applying the subsequent renewal’s rental rate at a date that is significantly further out than when it would otherwise have begun, meaning it would likely be lower than what otherwise could have been negotiated for that future start date.

submitted by /u/falcon_jabb
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Wondering everyone’s thoughts on how to account for renewal options in a DCF, specifically terms/durations. My understanding is that these are typically non-weighted and based on the market terms rather than the actual term of the renewal option or a blend of the two. Assuming market terms are longer than the term of the renewal option, this seems unfair to any subsequent renewal options since it would mean applying the subsequent renewal’s rental rate at a date that is significantly further out than when it would otherwise have begun, meaning it would likely be lower than what otherwise could have been negotiated for that future start date. submitted by /u/falcon_jabb [link] [comments]

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