Category: Lease abstraction

Lease Abstracts: Know where you really stand

 

Lease abstracts are critical to effective lease portfolio management. Lease abstracts offer a summary of the key financial and non-financial elements of a lease thus allowing the landlord or tenant to have timely access to important lease data without having to pore through the entire lease and related documents. However, for lease abstracts to be really useful and serve their purpose, it is important that they are 

Accurate

The data in the lease abstracts should be 100% accurate and convey exactly what is stated in the lease document. There’s no room for interpretation or errors in this regard.

Comprehensive

Your lease abstract is a summary of important lease clauses–both financial and non-financial. It is essential that your lease abstract is comprehensive in the sense that it covers all the key terms and captures their essence completely. While there are a few clauses that always find their way into lease abstracts such as rent, renewal options, etc, there may be other clauses that may have to be captured depending on your needs or circumstances. For example, recently, when the COVID-19 pandemic struck, clauses such as Go-Dark, Co-tenancy, Anchor Tenant, Rent Abatement, etc., garnered a lot of importance. 

Not missing any critical dates

While this may seem obvious, it is surprising how many lease abstracts miss capturing something as critical as the commencement date. One of the reasons is, often leases are abstracted as soon as they are executed and the commencement date may not have been filled in the original lease document. Such abstracts must be revisited and updated. 

So, if you already have lease abstracts, it is time to take a good look at them and find out where you really stand in terms of their utility. Are your lease abstracts really serving their intended purpose? A lease audit can help you determine this and also identify the data lacunae and inaccuracies.

Partnering with a trusted lease abstraction service provider ensures your lease abstracts are 100% accurate, comprehensive, and complete with no missing data!

 

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 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. 

Combating attrition and resource shortage in Lease Administration effectively with a trusted Lease Administration Service provider

 

Staying on top of lease portfolio takes time and effort–consistently. It is not a one-time process, or something that you do, when time permits. At the same time, there are some aspects of lease portfolio management that demand a lot of time initially and then, only minimal investment of time, on an ad-hoc basis. Lease abstraction is one such element. You will need accurate and comprehensive abstracts of all the leases in the lease portfolio in order to manage your lease portfolio efficiently. However, once the lease abstracts are ready and entered into your lease administration software platform, they’ll most likely only need to be updated in the event of any amendment to the original lease agreement. But, there are other elements in the lease management process that require consistent attention, and this is where most organizations fall behind. 

Organizations are often short-staffed when it comes to lease administration due to numerous reasons, one of them being the high cost associated with the lease administration process as a whole. 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. 

Secondly, the rate of attrition is extremely high in the lease administration sector which affects time-sensitive lease portfolio management tasks as a result of which organizations fall behind on tasks like invoicing, reconciliation, CAM audits, and other timely updates.,  

Outsourcing lease administration functions fully or even partly to a trusted lease administration company can help organizations stay on top of their lease portfolios and, at the same time, enjoy more cost-efficiency, scalability, and flexibility. Even organizations with in-house lease administrators can leverage the expertise and benefits that an outsourced lease administration vendor brings to the table. Some key benefits include-

  • The obvious reduction in training and HR-related expenses that are a part of a large in-house lease administration team
  • The flexibility to scale up or down their lease administration resources based on their lease administration needs

Partnering with a trusted lease administration service provider ensures you stay on track and don’t miss critical timelines due to resource constraints and have access to critical lease data that helps drive key strategic decisions in a timely manner.

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 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. Please contact us today to learn more.

Lease Administration post: Are you paying too much rent?

 

Rent is one of the key components of any lease. In fact, the rent roll is the core of any lease agreement. However, it can also be one of the most complicated elements. Sometimes, owing to its complexity, tenants may even end up paying more than what they owe. In this blog, we discuss what constitutes the key elements of the rent roll that tenants shouldn’t ignore. 

Rent per square feet

If your rent is calculated per square foot, you need to ensure that the base of this calculation is correct–which is the leased space or sometimes referred to as square footage. Sometimes, even a minute error in lease square footage calculation can make a vast difference in the final amount that is levied on the tenant. This is especially true when the base rent, CAM charges, and other operating expenses are calculated on a per-square-foot basis. Learn more in this blog post

Any rent-rise indicators 

If your rent hikes are pegged to any other economic indicators such as the Consumer Price Index (CPI), you need to ensure the data related to the indicator is accurate. Any changes resulting due to changes in the base price index need to be accounted for accurately and reflected in the rent roll. 

What about CAM?

In net leases, CAM charges constitute a considerable chunk of your rent roll. Verifying CAM charges and ensuring the amounts levied are accurate is complex due to the nature of CAM elements. CAM includes multiple headers and complicated computations that often leave room for interpretation and also increase the chances of miscalculations. 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.

As a tenant, it is very important to ensure that you have a solid understanding of your rent structure and the various elements that constitute your rent roll. It is also essential that you track them, consistently to ensure there are no errors, as errors that are embedded in the lease, year, or year can cost you dearly even impacting your key real-estate-related business decisions.

Two things that can help you in this regard are

  1. Timely CAM audits by an experienced lease services provider who will scrutinize your invoices, CAM calculations, and other related charges levied by the landlord to identify any errors and have them rectified for you.
  2. Accurate lease abstracts that simplify complex lease terms for you without diluting their essence so you understand your rent roll and related components clearly. 

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 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. Please contact us today to learn more.

CAM Reconciliation: Should you outsource it?

 

Outsourcing your CAM audit and reconciliation tasks to an expert lease administration company helps you in many ways. 

  1. It keeps your costs low: This is one of the major benefits of outsourcing your CAM audit and reconciliation. You save on HR and training costs that you would incur if you hired someone for lease accounting and lease administration in-house. 
  2. Expertise: When you outsource your CAM reconciliation to a lease administration company, you benefit from their expertise. A lease administration company has vast experience across multiple industry types which you can leverage. Your in-house lease administrator may not have that kind of exposure and expertise. 
  3. Easier negotiations: If there are any discrepancies in your CAM calculations, the lease administration company to which you have outsourced the CAM reconciliation work will be the one getting in touch with your landlord. In general, this scenario is better accepted by Landlords, as the lease administration company comes across as a more reliable, third-party than your own internal team when reaching out to your Landlord. Plus, lease administration companies specialize in this kind of communication and usually have a process or protocol which is generally well-received by the other party. 

 

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 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. Please contact us today to learn more.

Case Study: The Role of AI in a large-scale lease abstraction project

 

In our blog this week we discuss how RE BackOffice deployed its state-of-the-art Lease Abstraction Software, LeaseAI to successfully complete a large-scale lease abstraction project for its client

Who was our client?

Our client was an American fast-food corporation with a global footprint, having over 3,800 franchised or company-operated restaurants spanning across the United States and 43 foreign countries.

What were the client’s requirements?

Client required RE BackOffice to 

  • Abstract critical financial and non-financial information from their leases
  • Conduct a lease document audit which involved downloading the lease documents from the client’s document management system, renaming them as per the standard nomenclature provided by the client and notifying them of any missing or unexecuted document.  

The client used Lucernex software platform for their lease accounting and administration purposes, so Team RE BackOffice worked extensively on Lucernex during the course of this project. 

Challenges 

  • RE BackOffice had to review 20,000+ documents and classify them under specific categories as requested by the client
  • There were multiple versions of the same document that had to be spotted and eliminated accurately. 
  • Keeping track of active leases, subleases, sub-subleases, easement agreements belonging to a particular store to ensure no lease was missed out. 

The REBO approach

  • RE BackOffice deployed a team of 30 lease analysts and 20 quality analysts and 5 document reviewers to the project
  • REBO’s in-house lease abstraction software, LeaseAI was leveraged for the non-financial abstraction phase of the project, which helped REBO scale up its production and delivery to match the client’s timelines
  • RE BackOffice followed a hybrid approach, which meant that every lease abstracted by LeaseAI was further checked by an experienced lease quality analyst to ensure it was accurate and edits were made where required
  • On the document management front, Team RE BackOffice updated each lease document name to reflect its Execution Date to avoid confusion, as to whether the document in hand is the final/latest version or not
  • The documents used for abstraction were uploaded to the database for future reference
  • Weekly submissions were made to ensure the client has enough time to review the leases and suggest any modifications to the abstracts. 

The entire project spanned over 15 weeks and was successfully completed within the timeline provided by the client.

 

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 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. Please contact us today to learn more.

Lease Administration post: Lease Audit Vs. CAM Audit: What’s the difference?

 

Both, lease audit and CAM audit are important functions in the process of lease portfolio management. Though used interchangeably sometimes, they actually refer to two different lease administration services. This blog discusses the difference between the two terms. Let’s begin by defining both of them. 

Lease Audit

The term, Lease Audit refers to auditing of a lease abstract in the light of the original lease documents. Lease audits are usually performed when landlords or tenants already have the leases abstracted but wish to verify the accuracy of the lease abstracts. Some reasons for choosing to have a lease audit done could be because-

The lease abstracts are outdated. If the leases were amended or any addendums were made to them at a later date, you would want to ensure that the lease abstracts reflect the most recent information, which won’t be the case if the lease abstraction was done before the amendment/addendum was executed. In such scenarios, landlords or tenants have two choices–a) Get the Amendment/Addendum abstracted and added to their existing lease abstract or, b) Get the entire lease abstract audited and then updated to reflect the change due to the execution of the new amendment/addendum. Many opt for option b as it gives them the opportunity to confirm the accuracy of their existing lease abstracts. 

Getting an experienced and trusted lease administration services provider to audit your leases can also help by bringing to light any instances where critical lease data may have been missed out. A lease administration services vendor with enough expertise and perspective into the lease abstraction process will also be able to identify any shortcomings in your original lease abstract template. They can help you make changes to your lease abstract template so it is more comprehensive and captures the lease information that matters to you, going forward. 

CAM Audit

A CAM Audit, also known as the desktop audit is a lease administration process that involves reconciliation of account payables and receivables, mostly involving Common Area Maintenance (CAM) charges to ensure the tenant is not being undercharged or overcharged depending on who commissions the audit. Usually, CAM audits are commissioned by tenants. Here’s the reason why. 

In the case of net leases, CAM charges are a core component of the rent roll. The thing about CAM charges is that it includes multiple headers and complicated calculations, which leave room for errors and even interpretation. Tenants need to be aware of the various components of their CAM charges and how they are computed as per their lease. For example, what happens if they move into a fairly empty building that’s only gradually filling up? How is the CAM divided among the existing tenants including them, 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, tenants need to pay a lot of 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 which can prove very expensive for the tenant. 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. This is why most tenants commission regular CAM audits, usually, on an annual basis.

Whether you are a tenant or a landlord, when there is a vast lease portfolio that runs into hundreds of leases or more, CAM reconciliations figures can translate into significant cost savings. 

 

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 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. Please contact us today to learn more.