Set escalation clauses are very simple and easy to underwrite. Set escalation clauses usually calculate rent increases by (i) taking an agreed upon percentage and then multiplying it by the then current rent or (ii) agreeing that the rent will increase to a set number (e.x. from $1 million to $2 million). This method allows both parties to know the exact rent amount at any given point during the course of the lease.
RFR Realty struggled to refinance their mortgage on 390 Park Ave. due to a set escalation clause in which the ground lease rent was set to increase to $20 million in 2023 relative to the current $6 milllion. Another example, the Abu Dhabi Investment Council and Tishman Speyer were forced to put up the Chrysler Tower for sale this past January due to their rent-bill ballooning as a result of a rent reset. After paying $7.75 million in 2017, the rent in 2018 after the rent reset was $32.5million, an increase of more than 400%.