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Unlocking Real Estate Cost Savings: How Tenants Can Benefit from CAM Audits

As commercial real estate tenants, it’s crucial to optimize cost savings wherever possible. One often overlooked opportunity lies in conducting Common Area Maintenance (CAM) audits. By thoroughly examining various aspects of lease expenses, tenants can uncover potential cost savings in several key areas. Let’s explore how CAM audits can help tenants unlock significant savings across annual expense reconciliations, capital improvements, escalation caps, gross-ups, tenant improvement allowances, real estate taxes, pro rata share discrepancies, base year calculations, landlord billing issues, and even security deposits.

Annual Expense Reconciliations:

CAM audits scrutinize annual operating expense and reconcile them to ensure that tenants are only charged for their fair share of operating expenses. By reviewing invoices, contracts, and lease agreements, tenants can identify billing errors, duplicate charges, or incorrect calculations that may result in overpayment.

Capital Improvements:

CAM audits assess whether the capital improvement costs charged by the landlord align with lease agreements. Tenants can verify the appropriateness of expenses, negotiate the allocation of costs, and ensure compliance with lease provisions, potentially reducing their financial burden.

Escalation Caps:

CAM audits confirm whether escalation caps on expenses are accurately applied. Tenants can ensure that their lease terms are being adhered to, preventing costs from exceeding predetermined limits and maintaining budget predictability.

Gross-Ups:

CAM audits evaluate whether gross-up calculations for shared common area expenses are performed correctly. Identifying any discrepancies can lead to fairer allocation among tenants, potentially reducing individual cost burdens.

Tenant Improvement Allowances:

CAM audits review tenant improvement costs to ensure they align with the lease agreement. By validating that charges are within the agreed-upon allowance, tenants can avoid unexpected expenses and effectively manage their financial resources.

Real Estate Taxes:

CAM audits verify the accuracy of real estate tax assessments. Tenants can identify potential errors or discrepancies, ensuring that they are not overpaying on their share of property taxes.

Pro Rata Share Discrepancies:

CAM audits analyze pro rata share calculations to ensure accurate distribution of common area expenses among tenants. This scrutiny helps tenants identify any imbalances or errors in cost allocation, leading to fairer financial responsibility.

Base Year:

CAM audits assess base year calculations to confirm their accuracy. By verifying that the base year is appropriately established, tenants can ensure that future expense increases are calculated correctly, avoiding unnecessary financial strain.

Landlord Billing Issues:

CAM audits scrutinize billing practices to identify any discrepancies or inaccuracies in charges. This thorough examination empowers tenants to rectify billing errors promptly and negotiate fair resolutions.

Security Deposits:

CAM audits review security deposit accounts to ensure compliance with lease terms. Tenants can identify any discrepancies or mishandling of funds, ensuring the appropriate return of their security deposit upon lease termination.

CAM audits offer tenants an excellent opportunity to uncover cost savings and ensure fair and accurate expense allocations. By engaging in these audits, tenants can proactively manage their lease expenses, identify potential errors or overcharges, and negotiate favorable outcomes. Embracing CAM audits allows tenants to maximize their cost savings, enhance financial predictability, and optimize their overall leasing experience. Take control of your lease expenses through CAM audits and reap the benefits of significant cost reductions and improved financial performance.

Learn More about RE BackOffice’s CAM Audit Services:

Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, audit 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 17+ years, to leading retailers, REITs, property owners/managers, and corporate accounts seeking a strategic advantage. All client projects are performed in-house.

 

Lease Abstraction Essentials: Key Questions and Answers

Lease abstraction is a critical element of lease portfolio management. This blog discusses some of the basic questions related to lease abstraction and their answers.

What does lease abstraction mean?

The term, lease abstraction, refers to the process of extracting the key financial and non-financial data from a lease and summarizing it so it is meaningful and easy to understand. Lease information thus extracted is known as a lease abstract, since it provides an abstract version of the original lease.

Why have leases abstracted?

Leases have a lot of information and run into hundreds of pages. As a result, some critical information may be overlooked, which can result in a breach of contract of the lease and attract penalties, fines, premature lease termination and sometimes, even legal action. A lease abstract captures the essence of the lease and highlights the key financial and non-financial obligations ensuring they are not overlooked. Examples  include:

  • Rent amount due
  • Date when rent is due
  • Notice period for termination
  • Notice period for lease renewals
  • Rent increase dates, rent increase percentage, etc.
  • Having abstracts of your leases allows you to stay on top of your lease portfolio and prevents any accidental oversight of lease obligations.

How to get leases abstracted?

If the next question on your mind is who prepares the lease abstracts or who typically abstracts leases, the answer is, a lease abstractor. A lease abstractor, also often referred to as a lease analyst usually does the lease abstraction. A lease analyst has a strong hold over the lease language and terms therein. Leases use a lot of legal terminology and not everyone is well versed in it to be able to decipher the actual meaning of the lengthy lease clauses. A lease analyst is also someone with a lot of experience in working with different lease administration software platforms.

What does a lease analyst do?

A lease analyst or a lease abstractor’s job can be split into 3 steps. The first is to read the leases, related amendments, addendums, side letters and any other document connected with the lease agreement thoroughly. The second step is to identify the key financial and non-financial elements of the lease and the third step is to capture them in a lease abstraction template or a lease administration platform, as requested by the client.

While the lease analyst will capture the key fields that are generally included in all lease abstracts as a norm, such as rent, commencement date and others, they may also include information about other clauses if the client requests them to do so.

Does everyone with a lease portfolio have a lease analyst for lease abstracting their leases?

Lease abstracts are a must if you want to stay on top of your lease portfolio. Retailers, corporate clients, REITs, property managers and property owners often require the services of not just one lease analyst but a whole team! This is because, their lease portfolio tends to be large with hundreds and sometimes thousands of leases spanning across different geographical locations. But, having a lease abstraction team in-house poses its own challenges, which is why a lot of them choose to outsource their lease abstraction and administration tasks to a trusted lease abstraction and administration vendor. This post tells you more about these challenges and how outsourcing lease abstraction is a viable solution.

Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, audit 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 a strategic advantage. All client projects are performed in-house.

 

 

 

Managing Complex Retail Lease Portfolios: Why Retailers Need Help with Lease Administration

 

For those retailers who choose to handle their lease portfolio management in-house, the challenges are many. In this blog, we discuss the complexities that make retail lease management a daunting task and explore some solutions.

1. Thousands of Locations, Countless Challenges

One of the primary reasons retail lease administration is a complex and time-consuming task is the sheer scale of it. Retailers often have multiple locations,  sometimes hundreds and at times, even thousands, each with its own unique lease agreement. This means that managing and tracking all those leases can become overwhelming without the right tools and expertise.

2. Retail Leases Are Unique

Retail leases differ significantly from other lease types, such as office or other commercial leases. They come with specific clauses, provisions, and obligations that are unique to the retail industry. These include considerations for common area maintenance (CAM) charges, rent escalations, tenant improvement allowances, and co-tenancy clauses. Retailers must stay on top of these details to ensure compliance and profitability.

3. Profitability Assessment

Every lease in a retailer’s portfolio must be carefully assessed to determine its profitability. This involves analyzing sales performance, foot traffic, and the store’s overall contribution to the company’s revenue. Identifying underperforming stores and making decisions regarding their renewal, termination, or expiration is a vital part of managing the lease portfolio. This process can be extremely time-consuming and challenging to carry out effectively.

4. Overloaded In-House Lease Teams

In-house lease teams are often stretched to their limits. Managing thousands of leases, ensuring compliance with intricate lease terms, and evaluating each location’s profitability is a daunting task. This overload can lead to inefficiencies, errors, and missed opportunities. Lease administrators may find themselves bogged down with routine tasks, leaving little time for strategic planning.

5. The Role of Lease Administration Service Providers

This is where experienced lease administration service providers like RE BackOffice come into play. These specialists offer a range of services that can alleviate the burden on in-house lease teams. Here’s how they can help:

CAM Reconciliation:  CAM charges can be a significant challenge for retailers. Lease administration service providers can efficiently reconcile these charges, ensuring accuracy and cost savings.

Regular Lease Administration: Routine lease administration tasks, such as rent payments, lease abstracts, and document management, are essential but time-consuming. Service providers can handle these duties, allowing in-house teams to focus on more strategic aspects of lease management.

Expertise: Lease administration service providers are well-versed in the complexities of retail leases. Their expertise ensures that retailers remain compliant with lease terms, identify cost-saving opportunities, and make informed decisions about lease renewals and terminations.

Managing a retail lease portfolio is a multifaceted initiative with thousands of locations, unique lease terms, and the need to assess profitability. In-house lease teams often find themselves stretched to their limits, struggling with routine administrative tasks that take time away from strategic planning. Lease administration service providers like RE BackOffice can help by streamlining processes, reducing costs, and providing expert lease administration support.

To learn more about how RE BackOffice can help streamline your retail lease portfolio management, visit www.rebolease.com. Don’t let the complexities of retail leases overwhelm your in-house team – seek the support you need to make your retail lease management efficient and profitable.

The Essential Features of a Lease Administration Platform

 

Lease administration involves managing a multitude of leases, tracking financial performance, and ensuring compliance with lease terms. To accomplish these tasks efficiently and effectively, a robust lease administration platform is indispensable. In this blog, we will explore the must-have features of a top-notch lease administration platform that can simplify your real estate management tasks.

1. User-Centric Dashboard

A user-centric dashboard is the window into your lease portfolio. It should offer a clear, intuitive interface that allows users to access vital information at a glance. A well-designed dashboard provides real-time insights, such as lease expirations, critical dates, and financial data, making it easier for users to make informed decisions and act promptly.

2. Monitoring Key Lease KPIs

Key Performance Indicators (KPIs) are essential for evaluating the health of your lease portfolio. A comprehensive lease administration platform should allow you to monitor important KPIs, such as occupancy rates, rent collection, lease expirations, and more. The ability to customize these KPIs to align with your specific business goals is a significant advantage.

3. 360-Degree View of All Leases

A bird’s-eye view of all leases in your portfolio is crucial for effective lease management. This feature provides a centralized repository for all lease information, enabling you to access lease documents, payment history, and critical dates from a single location. A complete overview of your lease portfolio empowers you to make data-driven decisions and reduces the risk of overlooking critical details.

4. Data Modification Trail

Data integrity and transparency are paramount in lease administration. A reliable platform should offer a comprehensive data modification trail, which allows you to track all changes made to lease data. This audit trail ensures accountability and compliance, making it easier to trace back and understand any modifications to lease information.

5. Automatic Rent Roll Generation

Managing rent rolls manually can be a time-consuming and error-prone task. An advanced lease administration platform should automate this process. With the ability to automatically generate rent rolls, you can save time, reduce errors, and have up-to-date financial data readily available for analysis and reporting.

6. Converting raw lease data into knowledge for decision making

One of the most powerful features of a lease administration platform is its ability to transform raw lease data into actionable insights. Utilizing data analytics and reporting tools, you can gain valuable insights into your lease portfolio’s performance. This empowers you to identify opportunities for optimization, cost-saving strategies, and risk mitigation.

A comprehensive lease administration platform should encompass all the features mentioned above, enabling efficient, accurate, and proactive management of your real estate portfolio. These features not only streamline day-to-day operations but also provide the tools needed to make strategic decisions that impact the bottom line positively.

If you’re interested in delving deeper into the world of lease administration and financial excellence, consider joining us at the Tango Connect event. Harbinder Khera, CEO, RE BackOffice, will be discussing the topic “Achieving Financial Excellence: Fine-tuning Lease Financial Processes in Tango Lease.” It’s an excellent opportunity to learn from industry experts and gain insights into the future of lease administration.

 

Here’s a great way to scale up your lease administration process

 

Staying on top of your lease portfolio management should always be a priority. If your lease portfolio is not up-to-date, you will be suddenly looking at an exhausting backlog which will mean delays in dues and payments. 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 resources and ensuring they are ready to hit the ground running will take 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 ready to handle your lease administration process effectively. Even if you do find the right person will always be a company/process-specific learning curve

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, healthcare 401(k), and other overhead expenses.

Consider outsourcing your lease administration function: you add cost-efficiency, scalability and flexibility to your lease administration process

You can overcome the challenges discussed above 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 saving on lease agreement interpretation and translation costs. It also gives you the flexibility to scale up or down as needed.

When you hire a lease administrator in-house to manage your lease portfolio, it is a long-term commitment, irrespective of your fluctuating needs. You have to continue paying them whether you have enough work for them or not. With outsourced lease administration services, you have full control and flexibility to navigate your lease administration needs.

Outsourcing the 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 help drive key strategic decisions–even if you are short on resources.

Rebolease.com, powered by RE BackOffice, Inc., is a premier provider of lease abstraction, administration, audit 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 a strategic advantage. All client projects are performed in-house.

Whether it is one clause, one amendment or a whole lease agreement, we can do it for you.

 

Lease Budgeting Process: What to Consider

 

Why is budgeting and forecasting important?

Budgeting and forecasting is important because it helps organizations plan their finances effectively. Budgeting helps businesses estimate their expenses fairly accurately and thus, make the right business decisions related to finance, new hiring and other critical business areas. It also helps them in planning how, when and where their funds will be invested and offers some protection against unforeseen business emergencies. From the real estate perspective, lease forecasting and budgeting for lease expenses play a crucial role in helping both–landlords and tenants factor for the expenses related to the lease. Lease budgeting and forecasting is a small part of the overall budgeting process for an organization, but, when dealing with a large lease portfolio consisting of hundreds or thousands of leases, lease budgeting assumes a very significant role.

Lease budgeting tools: More than just spreadsheets

Talk about budgeting and the first thing that comes to mind is, spreadsheets: Complex cash flow predictions, ROI computations and assumptions all crammed into a spreadsheet. However that is fast changing, especially in case of lease budgeting, thanks to advanced lease management and lease accounting software platforms. These lease accounting and lease budgeting software allow you to-

-Get a 360-degree view of your leases and their key financial components

-Compute cash inflows and outflows in a few click

-Generate models and forecast lease-related income and expenses for a longer period of time

-Understand and make sense of complex lease data easily through visual means such as pie charts and bar graphs

What to consider when budgeting for your leases?

When preparing your lease budget, make sure you take the following items into account-

  • The key lease elements you want to budget for. There are various expense items/cash flows in a lease. You need to identify which ones you want to budget for. Usually, CAM or common area maintenance charge is a big element, but there are others like real estate taxes, snow removal services, etc, which may have to be budgeted for as well.
  • Rely on the last few year’s actual amounts to prepare a budget with minimal variance. Looking at the actual lease portfolio expenses of last 3 or 5 years will help you prepare a lease budget that’s as close to the actual expense as possible
  • As with any other lease administration and accounting function, attention to detail is key when preparing your lease budget. Include forecasts for every single expense that you can account for.
  • Look at the last few year’s variance reports. Variance reports tell you the difference between your budgeted and actual cash flows. Learning about the variances over the years and understanding why they happened will help you prepare a more accurate lease budget.
  • Don’t forget to factor market forecasts and predictions. While it makes sense to rely on historical cash flow trends, also take into account market predictions for your lease locations. Market predictions can have significant impact on lease cash flows.

Resource planning for the budgeting process

Lease budgeting is time-consuming and labor intensive, even if you have the best lease accounting software at your disposal. Though it is not a continuous process, it needs to be done every year, in a timely manner. So, one thing for you to think through is, whether you have enough resources to devote to this process. Do you have an in-house lease administration or that can take care of your lease budgeting? Or are you relying on your accounting team? There are very specific lease elements to consider where you would need staff with lease analysis experience to weigh in. On the other hand, if you are relying on your lease administrators, you may end up diluting their focus from their regular lease administration tasks during the budget season. As a result, you may fall behind on maintaining your lease portfolio and keeping it up-to-date.  You could consider enlisting the support of an experienced lease accounting and administration services provider. Especially when you have a large lease portfolio with hundreds or thousands of leases spread across the country. A lease administration vendor who specializes lease budgeting will add a lot of value to your budgeting process through their expertise, industry knowledge and experience. Alternatively, you can outsource your day-to-day lease administration activities to them during the budget season and have your in-house lease administration or lease accounting team focus on lease budgeting while your lease administration vendor’s team of experienced lease administrators ensure you are always on top of your lease portfolio.