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IntermediateBrazilian REITs · Lesson I4.6 · Module I4

Typical and atypical leases and average term

Module I4: Analysis indicators

11 slides~5 minquiz at the end

In this lesson

  • Typical vs built-to-suit leases
  • The early-exit penalty
  • Rent reviews and WALT
See the slides
Logistics warehouse aisle with pallet racks and boxes

Brazilian REITs · Lesson I4.6

Does a 10-year lease guarantee 10 years of income?

No. It guarantees a penalty — and its size changes everything.

Two kinds of lease

Typical vs atypical

TypicalAtypical
Originstandard propertybuilt to suit the tenant
RuleTenancy Lawthe signed terms prevail
Early exitpenalty reduced by time servedpenalty up to the remaining rent
Rent reviewin court, after 3 yearscan be waived

Brazil's Tenancy Law (Lei 8.245/1991), arts. 4, 19 and 54-A (checked 09/2026).

The example

The tenant leaves at the end of year 4

  1. Year 0Warehouse leased for 10 yearsR$ 500K per month
  2. End of year 4The tenant gives notice48 of 120 months served
  3. Years 5 to 1072 months that won't comeR$ 36M in rent

The penalty

What the fund collects on exit

3 rentslease penalty×R$ 500K=R$ 1.5Mfull penalty
R$ 1.5M×72/120time left=R$ 900Ktypical
72 months×R$ 500K=R$ 36Matypical cap

A 3-rent penalty is a common example, not a legal rule.

The difference

Same warehouse, different protection

40×

more penalty in the atypical lease: up to R$ 36M vs R$ 900K in the typical one

That's why long atypical leases weigh so much in warehouse and hospital income.

Rent review

Rent can fall with no one leaving

Typical

After 3 years

  • Landlord or tenant asks a court to review it
  • Rent moves to market — including down

Atypical

Waiver

  • The parties can give up the review
  • The agreed rent holds to the end

Average lease term (WALT)

How many years of income are locked in

60%of revenue×8 yearsremaining=4.8
40%of revenue×2 yearsremaining=0.8
4.8+0.8=5.6 yearsaverage term

Weighted by revenue: the lease that pays more counts more.

Remember this

Three takeaways

  1. A lease guarantees a penaltyNot that the tenant stays.
  2. Atypical protects morePenalty up to the remaining rent, and a review that can be waived.
  3. Check the average termYears of contracted income, weighted by revenue.

Quick quiz · 1 of 2

In an atypical lease (art. 54-A), how high can the early-exit penalty go?

See answer

The sum of the remaining rent. The law sets that cap in art. 54-A, §2; the exact amount is what was signed.

Quick quiz · 2 of 2

Typical lease. When can a court review of the rent be requested?

See answer

After 3 years of the lease or of the last agreement, if the parties don't agree (Lei 8.245/1991, art. 19).

Lesson complete

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I4.7Intermediate · Lesson I4.7Paper FIIs: index, spread, collateral, ratingPaper funds lose too: when the borrower stops paying and collateral falls short.Continue
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Image credits
  • Handi Boyz LLC · Pexels · Pexels License — Pexels
  • Blogtrepreneur · Wikimedia Commons · CC BY 2.0 — Wikimedia Commons

Educational content, written for learners. Not investment advice.