How Lease Administration can help you make the right decisions and enjoy significant cost savings

 

Consistent lease administration can help you stay on top of your lease portfolio and make the right business decisions. This is especially true at the time of renewals. Lease administration helps you stay up-to-date in terms of key lease terms and dates. If you don’t have a consistent lease administration process in place, you may be caught off guard as your lease becomes due for renewal and you will have no choice but to renew your lease on the Landlord’s terms and conditions, in the interest of time. 

On the other hand, if you have a solid lease administration process, you will be alerted to critical dates and clauses consistently and that will give you ample time to weigh your options and make the right business decisions. For example, you can plan a few months or even years ahead of lease expiration and enter into negotiations or amendments with your landlord. Being aware of your lease expiration dates well in advance also allows you to scope the real estate market for better options. Apart from helping you make the right renewal decisions, consistent lease administration also helps you stay on top of things when it comes to expansions. It draws your attention to the various rights you have in the event property in your premises becomes vacant. For example, the right of first refusal or the right of the first offer, etc. 

Lease administration also helps you avoid penalties and other charges by keeping tabs on upcoming rental obligations. Similarly, it also ensures any other invoices raised by the landlord are accurate and paid off on time. From the CAM and operating expense perspective, a lease administration process that involves reconciliation of account payables and receivables and auditing, thus ensuring you are not being overcharged. When you have a lease portfolio that runs into hundreds of leases or more, these figures can translate into significant cost savings.

Here’s a case study that discusses how America’s leading mid-sized retailers of the largest communication brands save more than $140,000 annually with effective and efficient Lease Administration services.

Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, and accounting services. Headquartered in Pittsburgh, PA, we are a global boutique firm, providing high-quality services to top-tier clients across industry verticals, covering every type of lease and on any lease platform. We are proud to be a trusted partner, for 15+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking strategic advantage. All client projects are performed in-house. Please contact us today to learn more.

Building a solid foundation for your lease portfolio management process

 

Your lease portfolio management process has many moving parts. While it is complicated, it is also one of the most important business processes. In our blog this week, we discuss a few items that form the foundation of your lease portfolio management process.

Lease abstracts

Your lease abstracts are of course the most important aspect of your lease portfolio. Saying that leases contain a lot of information is an understatement. Lease abstracts summarize the key financial and non-financial terms of your leases so you have easy access to actionable data. So, the first thing to do, when solidifying your lease portfolio management process is to ensure you have accurate abstracts of all the leases in your portfolio.

Lease audits 

If you already have lease abstracts, the next step is to audit them all. A lease audit involves verifying the information in your lease abstracts against the original lease documents to ensure that the abstracts are accurate. A lease audit helps you identify any discrepancies and ensures your abstracts are up-to-date and no critical information or updates in the form of amendments or addendums are missed out.

Lease abstract templates

Sometimes, you may already have lease abstracts that are accurate and up-to-date, but they may fail to capture some critical information. Hence, as a part of your lease portfolio management process audit it makes sense to look at your existing lease abstract template to determine if you are capturing the right information. While some core fields such as rent, options, key dates, etc., are needed irrespective of what industry you belong to, there may be fields that are important for your business or industry in particular. Apart from such fields, there may be certain, less common clauses in some leases that must be captured. So, you need to identify what data matters to you and ensure that your lease abstract template caters to your needs by capturing that information. Our blog post, Is your lease abstraction set up accurate, offers more information on this. 

Ongoing lease administration

Once your lease abstracts are accurate, concise, up-to-date, and reflect all the information you require, the next step is to engage in ongoing lease administration. This helps in maintaining your ROI on the lease by ensuring that you don’t miss any critical timeline or lose out on any opportunity pertaining to your lease. Learn more about why you shouldn’t skip ongoing lease administration in this blog.

 

Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, and accounting services. Headquartered in Pittsburgh, PA, we are a global boutique firm, providing high-quality services to top-tier clients across industry verticals, covering every type of lease and on any lease platform. We are proud to be a trusted partner, for 15+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking strategic advantage. All client projects are performed in-house. Please contact us today to learn more.

Here’s why ignoring on-going lease administration is not a good idea.

 

Is your lease administration process consistent? Tenants often so caught up in their business that lease administration tends to take a back seat. Usually, it is because of one or more of the following reasons: 

The high cost of hiring, training, and retaining lease administration resources

Lease administration resources are considerably expensive. Add to that the training and retaining costs that accumulate over time, the lease administration process in itself becomes costly. 

The high rate of attrition affecting lease portfolio management and timely updates

The lease administration industry is characterized by a high rate of attrition, which adversely affects lease portfolio management. Organizations fall behind on timely updates and lease audits due to a lack of resources. 

However, ignoring on-going lease administration and timely lease audits can result in substantial financial losses due to missed opportunities. For example, you fail to identify and rectify erroneous rent calculations or CAM charges, which then get embedded in your lease, term after term. 

Tenants without a solid lease administration and audit process also end up underutilizing their assets/rights under the lease due to lack of information. This is often a result of decentralized, fragmented, and inaccurate lease data.

On-going lease administration and regular lease audits help ensure that you, as a tenant don’t miss any critical deadlines or overlook any opportunities such as the right to renew or expand. With detailed reports alerting you to critical dates, action items, and financial discrepancies such as incorrect billing or overcharges across various locations, you will be able to drive strategic business decisions accurately and on time, while saving substantial amounts of money. 

Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, and accounting services. Headquartered in Pittsburgh, PA, we are a global boutique firm, providing high-quality services to top-tier clients across industry verticals, covering every type of lease and on any lease platform. We are proud to be a trusted partner, for 15+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking strategic advantage. All client projects are performed in-house. Please contact us today to learn more.

How well do you know your rent roll?

 

Rent rolls are one of the most important aspects of your lease. It wouldn’t be incorrect to say the rent roll is a key financial data point of your lease and forms the crux of your lease contract. But, how well do you know your rent roll? Understanding your rent structure clearly is very important as it can help you negotiate renewals better, save significant amount of money by identifying inaccuracies in rent calculations and also help you drive better real estate-related business decisions. Our blog this week discusses the key aspects of the rent roll that you should be aware of. 

What is your rent structure?

All tenants know their rent structures, no doubt, but what about the details? You should be aware of escalation clauses in your lease. What is your rent escalation tied to? Is it a direct, simple escalation by a predetermined amount or percentage, is it pegged to an economic indicator like the CPI, or is it based on your revenue, such as a percentage of your sales (most common in retail leases)? Understanding the rent escalation clause helps you analyze the feasibility of your lease.

What constitutes your Common Area Maintenance (CAM) charges?

If your lease is a net lease, then CAM charges will definitely be a core component of your rent roll. The thing about CAM charges is that it includes multiple headers and complicated calculations, which leave room for errors and even interpretation. You need to be aware of the various components of your CAM charges and how they are computed for you as per your lease. For example, what happens if you moved into a fairly empty building that’s only gradually filling up? How is the CAM divided among the existing tenants including you, until the time there’s 100% occupancy? What will be the repercussions on your CAM charges as new tenants are signed up.

When it comes to rent-roll calculations, the onus is always on the tenant to identify errors, if any, and report them to the landlord. So, it is essential that as a tenant, you pay keen attention to the core rent roll components such as rent escalation calculations and CAM charges allocation. Overlooking any errors in these calculations will cause them to become a part of the base calculations for the next lease year and as a tenant, this can cost you a lot. Plus, most leases place a timeframe within which such discrepancies should be reported to the landlord. Failing to do so on time may be construed as acceptance by the tenant to make the payments. 

You can avoid such scenarios by having clear, concise and accurate abstracts of your leases that simplify complex lease terms for you without diluting their essence. Solid lease abstracts can help you understand your rent roll and related components clearly. Two other very important elements in this regard are regular lease audits and a thorough lease administration process that will help you identify the gaps and act at the right time. 

RE BackOffice is a strategic partner providing scalable, affordable and accurate lease abstraction, end-to-end lease administration, lease audit and accounting services to optimize your lease portfolio and related processes. Please contact us today to learn more.

Making your lease administration process more cost-efficient, scalable and flexible

Staying on top of your lease portfolio management should always be a priority. If your lease portfolio is not up-to-date, it will be more difficult for you to catch up with all the data later. You will be staring at a backlog of leases to manage, a lot of lease audits to be completed and there will also be delays in your recovery of dues. Staying on top of your lease portfolio will certainly be beneficial in the long run and can give you a considerable competitive advantage. But, what if your current lease administration team is already overwhelmed? Is adding a new lease administration resource advisable?

Well, it depends. If you are looking to grow your lease administration function by adding in-house resources you need to be prepared for the following:

Finding the right resource and ensuring they are ready to hit the floor will take some time

The hiring process will take time. Lease administration is a critical business function and you want to make sure the person you hire is qualified and capable enough to handle your lease administration process effectively. Even if you do find the right person there’s always a company/process-specific learning curve that has to be conquered before they are ‘floor-ready’. 

Hiring in-house lease administrators can increase your HR expenses significantly

Hiring full-time lease portfolio managers or lease administrators can add to your HR expenses significantly. Adding employees means incurring additional costs related to training, medical, 401(k), and other employee costs.  

Consider outsourcing your lease administration function to enjoy more cost-efficiency, scalability and flexibility with respect to your lease administration process

You can overcome these challenges by outsourcing your lease portfolio management to a trusted lease administration services provider that has a proven track record. Outsourcing lease administration services help you become more efficient by eliminating training and HR related expenses and save on lease agreement interpretation and translation costs.  It also gives you the flexibility to scale up or down as you wish. When you hire a lease administrator in-house to manage your lease portfolio, you are essentially stuck with them, irrespective of your lease portfolio management needs. You have to continue paying them whether you have enough work for them, or not. But, with outsourced lease administration services, you have full control and flexibility to navigate your lease administration needs. 

Outsourcing lease administration function makes sure that you don’t miss critical timelines due to resource shortages and get timely access to important lease data that helps drive key strategic decisions–even if you are short on resources.

RE BackOffice is a strategic partner providing scalable, affordable and accurate lease abstraction, end-to-end lease administration and accounting services to optimize your lease portfolio and related processes. Please contact us today to learn more.

Mixed Lease Abstraction Model: The best of both worlds

 

Lease abstraction is a critical function of the lease portfolio management process. It is the foundation upon which the entire lease portfolio management process rests. Accurate, succinct and informative lease abstracts help you make the right financial decisions regarding your real estate investments. 

Over the years, the lease abstraction function has evolved to match the  advancements in the commercial real estate portfolio management process. One huge leap in this regard has been the migration to the Cloud. The jump from creating and storing lease abstracts in spreadsheet format on local drives and servers to Cloud-based lease abstraction platforms that offer any-time access to important lease data along with meaningful reports that can be generated in a few minutes, has been so far, the biggest and most-widely adopted change in the lease abstraction industry. 

Another trend in the last few years is the automation of lease abstraction. Artificial intelligence (AI) based lease abstraction is growing in popularity. Are you considering AI-based lease abstraction too? Then here are a few pros and cons that you should know of. 

It may be faster

As AI based lease abstraction deploys technology to extract and summarize key data from the lease, the turnaround time for the lease abstracts may be lesser compared to those abstracted manually.

It may be more cost-effective

AI-based lease abstraction may be cheaper as it is automated and there is minimal involvement of human resource. Plus, as discussed above, AI reduces the turnaround time per abstract, allowing the vendor to enjoy the economies of scale that come with larger output capabilities, which may be passed on to you. 

You can expect a greater degree of standardization

AI-based lease abstraction may offer a greater degree of standardization when it comes to clauses as it is machine based vis-a-vis having your leases abstracted by a team of lease abstractors, where each of them may have a different way of summarizing them. 

But, what about accuracy?

When it comes to lease abstracts accuracy is key, leaving no margin for errors. One of the biggest challenges of automating lease abstraction is the inability of AI-based lease abstraction processes to guarantee 100% accuracy. AI based lease abstraction software programs cannot function like calculators, giving you the right output every time. This is because each lease is unique and there is great variation in the lease language. Plus, leases sometimes go back so many years that not all documents related to a single lease are of the same format and quality. There may be multiple addendums, amendments, handwritten correspondence (which even the best of AI tools may not be able to decipher), emails, notices, etc. 

Overcoming accuracy issues by choosing a mixed lease abstraction model

You can overcome the accuracy challenges by opting for a mixed lease abstraction model, where your vendor may pass the leases through an AI-based lease abstraction software and then have a team of experienced lease analysts verify the abstract against the original lease documents. This sort of a ‘quality analysis’ will ensure

  • No critical lease data is missed out
  • Any OCR errors are identified and rectified
  • The abstract stays true to the original lease language and interpretation

A mixed lease abstraction model brings you the best of both worlds. You benefit from the efficiency and cost-effectiveness of AI based lease abstraction and also from the expertise, experience and knowledge of a trained lease analyst. 

RE BackOffice is a strategic partner providing scalable, affordable and accurate lease abstraction, end-to-end lease administration and accounting services to optimize your lease portfolio and related processes. Please contact us today to learn more.