A rent roll summary tab shows a total, an average rent per square foot, and an occupancy percentage. It does not show whether that occupancy is three tenants or thirty, or whether the escalation dates everyone assumes are annual actually skip a year buried in the lease language. For industrial buildings near I-40 and I-55, that gap is where the real risk sits.
The Summary Tab Versus The Lease-By-Lease Detail
We rebuild every rent roll from the individual leases rather than trusting the seller's spreadsheet, because spreadsheets get copied forward year after year and errors compound. A distribution building near the FedEx superhub with a single logistics tenant on a ten-year lease reads very differently once you confirm the escalation is two percent annually rather than the three percent the summary implied, or that the tenant has an early termination right tied to a volume threshold nobody mentioned on the call.
Tenant Concentration Along The I-40 And I-55 Corridors
Warehouse and distribution buildings along Memphis's interstate corridors often carry one or two dominant tenants rather than a diversified roll. That concentration is not automatically bad, since a single strong logistics tenant on a long lease can be more stable than a fragmented retail roll, but it changes what questions matter. We check whether the tenant's business depends on rail access from the area's Class I railroads or on proximity to the airport superhub, because losing that locational advantage would change the tenant's reason for staying.
We also check whether the tenant's lease includes a co-terminus clause tied to a related facility elsewhere in the tenant's network, which shows up more often than expected in logistics leases serving companies that operate multiple Memphis-area buildings under one master agreement. A rent roll that treats each building as fully independent can miss that vacating one facility might trigger early termination rights at another, which changes how durable the income really is across a multi-building purchase.
TI Reimbursement Lines That Inflate The Rent Number
Some rent rolls fold a tenant improvement reimbursement schedule into the base rent line, which makes the income look higher than the durable cash flow actually is once the reimbursement period ends. We separate true base rent from any amortized TI or moving allowance still being repaid, so the exchange investor is underwriting the number that survives past the reimbursement schedule, not the temporarily inflated one.
The same separation applies to any moving allowance or free-rent period built into the early months of a new lease. A tenant who signed twelve months ago and received three months free rent up front will show a blended average in some rent roll formats that overstates the going-forward rent once that concession period has already passed. We recalculate using the actual contractual rate in place today, not a trailing average still reflecting a concession period that is already behind the property.
Collections Versus Billings, And Why The Difference Matters
A rent roll shows what was billed. It rarely shows what was actually collected, or how much sits in a delinquency bucket that the seller has quietly excluded from the trailing twelve months. Before treating a rent roll number as reliable, we ask for the collections history separately, because a tenant thirty days behind every quarter is a different risk than a tenant who has never missed a payment, even if both show up as current on the summary date the seller chose to run the report.
What The Rebuilt Rent Roll Has To Show
A rent roll earns a place in the exchange file once it documents, lease by lease:
- Actual escalation percentages and dates, confirmed against the lease rather than a summary assumption
- Tenant concentration and whether the roll depends on one or two dominant leases
- TI or moving allowance amortization separated from durable base rent
- Collections history against billings for the trailing twelve months, not only a snapshot date
- Any early termination or co-tenancy rights that could shorten the effective lease term
Common 1031 Exchange Questions
Why rebuild the rent roll instead of trusting the seller's spreadsheet?
Spreadsheets get copied forward and errors compound over time. Rebuilding from the individual leases catches escalation dates, termination rights, and TI amortization that a summary tab can misstate or omit entirely.
Is tenant concentration always a problem for industrial rent rolls?
Not automatically. A single strong logistics tenant on a long lease near the FedEx superhub or the interstate corridors can be more stable than a fragmented roll, but the concentration changes which questions matter most, including what happens if that one tenant's business needs change.
How does TI reimbursement distort a rent roll?
If a tenant improvement allowance is amortized into the rent line, the headline rent can look higher than the durable cash flow that remains once the reimbursement period ends. We separate the two so the exchange investor underwrites the real number.
What is the difference between billed rent and collected rent?
Billed rent is what the lease calls for. Collected rent is what actually came in, and a rent roll snapshot can hide a chronic late-paying tenant if the report is pulled on a date when that tenant happens to be current.
Does this analysis replace the lender's own underwriting?
No. Lenders will run their own rent roll review. This work gives the investor and their advisors an accurate picture before identification, so there are fewer surprises when the lender's underwriting starts.
