How to calculate asking rental rate for a build-to-suit lease (STNL)
My thoughts were

Market ground rent + (cost to construct*discount rate) = BTS asking rental rate. 

Is this the jist or am I overlooking something?
[{"id": "g4jkqyq", "text": "Um. Profit??", "replies": [], "depth": 1}, {"id": "g4jw2vs", "text": "Yield on cost. From what I've seen for investment grade tenants, this is usually around 7%. A crappier tenant should warrant a higher return.", "replies": [{"id": "g4kepeq", "text": "So assuming a 15 year deal at $100,000 market rent and a $1M cost\n\n$1,000,000 * .07 = $1,070,000\n\n$1,070,000/15 = ~$77,333 \n\nTotal rent = $177,333", "replies": [{"id": "g4kfknv", "text": "Your yield on cost is just rent divided by total development cost. I looked at a recent transaction with a quality national tenant. Construction cost was $2.66MM all in with land, hard and soft. Year 1 rents were $199,000. So $199,000 / $2.6MM = 7.5%. This loan closed about 9 months ago. With a strong tenant, you just have construction risk, then what is effectively a corporate bond. A deal with a strong tenant and low likelihood of defaulting on the lease will also warrant lower returns for the safe investment.\n\nBy your example if the project will cost $1MM to build (all in), a national tenant would generally be willing to pay $75,000/yr. If there are rent bumps and other things you can bake that into the calc. You can then back into your investment profitability depending on equity etc.", "replies": [{"id": "g4kjhzg", "text": "This was incredibly helpful. Thank you very much", "replies": [], "depth": 4}, {"id": "g66g0c1", "text": "Quick question for you. You have described the yield on cost as the method by which you would value a BTS rental rate. So if it costs $1M to build, a national tenant would likely pay roughly $75,000 for building. But shouldn\u2019t we also be seeking yield on the underlying land? If so, how do we calculate that into our desired BTS asking rate? Thanks.", "replies": [{"id": "g66ilrw", "text": "Yield on cost is your NOI divided by total development cost. Total development cost would include land, soft costs, hard costs, everything.\n\nIf the numbers aren't working then you may need to look at a higher YoC. This  is where a broker can help to look at comps and determine what's market.\n\nedit - also, if your client has held the land for a long time, their cash basis will be super low. On assets held more than 3 years, we use the appraised land value as equity. I would structure my rent assuming a new acquisitions cost basis on the land.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]