I posted this a couple of years ago, but it’s come up again. One of our buildings is a strip mall we converted into a medical center (got rid of the non-medical tenants). One of the current tenants did a large amount of improvements at his own expense to convert a rather shabby space into a class A medical space. He’s asked for a right of first refusal. I priced it as a European call option (an option only exercisable at a certain date, i.e., when I negotiate an offer with someone else). Contd

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He’s come back and wants to negotiate it. (He lost interest a few years ago, but now wants to do it again because he wants to do a significant buildout). Anyone have any thoughts on pricing these? Other than a typical options
Pricing model?

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