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Optimizing your Lease Portfolio Savings in 2023

 

Whether you are a retailer, a corporate entity or a property owner or manager, here are a few ways in which you can maximize your lease portfolio ROI, especially with the current global financial climate in mind. 

While, we remain cautiously optimistic and don’t want to start off the new year with talks of recession, there is significant unrest in the global financial climate. Some financial experts believe it is only a matter of time before recession sets in. While we hope it doesn’t happen, it definitely makes sense to be prepared. A couple of things you can do in this regard from your lease portfolio management perspective are-

Ensuring you only pay what you owe

As a tenant, you need to ensure that you only pay to your landlord what you actually owe them. While this seems pretty straightforward and obvious, in NN or NNN leases, the CAM i.e. common area maintenance charges constitute a significant amount and its calculation is not that simple. There are chances of the landlord overcharging tenants by mistake and the onus rests on the tenants to get it corrected. 

Also, if you are a tenant, make sure you are paying your dues on time, as any delay in lease-related payments mostly attract heavy penalties as per the lease clauses. 

On the other hand, if you are a landlord, then you need to  make sure that you are billing your tenants accurately and not losing out money on CAM charges by undercharging them. 

One of the ways to do this, whether you are a tenant or landlord,  is by getting a CAM reconciliation or CAM audit done. 

Also, if you are a landlord,  look out for delayed payments or other due date misses by your tenants. If stipulated in your lease, you will be able to eligible for additional payment from your tenant in the form of penalty for the missed/delayed payment.  

Leverage technology to manage your lease portfolio efficiently

Staying on top of your lease portfolio can be challenging, but technology can make lease portfolio management easy. Deploy relevant technological solutions to manage your lease portfolio efficiently and stay on top of it. Examples include- Lease administration software programs, lease management platforms and even Ai-based lease abstraction platforms if you have leases to be abstracted. Learn more about Ai-based lease abstraction here

Make sure you have easy access to critical lease data–financial and non-financial

With the sudden onset of the COVID 19 Pandemic, we saw that a lot of businesses had to temporarily shut down. While it caused a considerable loss of income, another area where it really hurt businesses that we renting out spaces was, not being aware of any provisions in the lease that could help them in the situation. Tenants need to be aware of all protective clauses in the lease that can offer some financial respite should recession set in. Explore the options in your leases that can help. These include clauses like Go-dark, Force Majeure, Condemnation & Casualty, Construction & Delivery, Co-tenancy and even the right to negotiate and make amendments to existing leases in consultation with the Landlord.

As a landlord, having quick access to these clauses and understanding them will help you plan your cash flows better for the upcoming year and be prepared for any possible contingencies caused due to economic downturns. 

To summarize, whether you are a tenant, or a landlord, here are few things you can do to be better prepared for 2023 from your lease portfolio management perspective-

Wrapping your arms around all of the above can seem overwhelming especially when you have a business to run and customers to attend to. Even if you have an internal lease administration team, the whole process can get extremely challenging due to the sheer volume of leases in your portfolio. Consider outsourcing your lease administration process to a trusted lease services provider who can offer end-to-end lease administration services including CAM, collection calling, lease abstraction, critical date monitoring and more.(Click here to learn more about the benefits of outsourcing your lease portfolio management process.)

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.

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

How retailers can tackle the Holiday season payroll paperwork challenge successfully

 

According to a study by the National Retail Federation, almost 50% of consumers do their Holiday shopping on the weekend between Thanksgiving and Cyber Monday. The Research also indicated that a significant portion of customers preferred starting out as early as mid-October as they believed Holiday shopping is only more likely to get expensive closer to Christmas. This means, retailers have to step up their game well before the Holiday season in order to be able to meet the demands of these early-bird customers successfully.  Among other things like ensuring their inventory is stocked, outlets are decorated to reflect the Holiday spirit, the website, IT infrastructure and payment processing systems are robust enough to handle the sudden spike in transactions, there’s one more important area to look into–temporary staff. 

As a retailer, seasonal hiring to take care of your holiday shoppers is a must!  However, overworking your payroll department is optional (and not so nice!)!  Hiring staff on a seasonal basis is a great way to effectively meet the resource crunch that retailers often face this time of year. However, it also means a lot more paperwork that needs to be completed and on a tight schedule. Processing hundreds of offer letters (and even thousands if you are a large-sized retailer) can be challenging as your payroll department may not be staffed to meet this temporary spike in workload.   Consider your options this holiday season, including the use of payroll processing service providers to tackle all your seasonal hire offer letters.

Outsourcing your payroll management process during this busy season to a trusted payroll service provider can be an efficient and cost-effective solution to this challenge. However, before you proceed make sure your payroll management services vendor–

Is able to offer same-day turnaround

Temporary retail help is in high demand during the holiday season and you need to be quick in hiring and processing their offer letters. A payroll management service provider who can process your offer letters within 24 hours can make all the difference.

Has expertise in leading retail payroll management platforms

It is important that the firm you outsource your payroll management process to has expertise in the payroll management software that you are using. Whether it is ADP or any other retail payroll management software, your vendor should have a sound understanding of the platform so they can process your offer letters accurately and quickly.

Is cost-effective

While the Holiday season is likely to bring you a significant amount of revenue, it also involves significant investment. Make sure outsourcing your payroll management services is cost-effective, helping you save money and get better ROI in your temporary hiring. 

It is the season to be jolly…why let “seasonal hire“ paperwork be your folly!

RE BackOffice can help you tackle the mountain of HR/payroll paperwork with affordability and ease. 

payroll management

6 questions to ask your lease abstraction and admin vendor before you sign them up

 

This post talks about 6 questions you must ask your vendor before you trust them with your cell tower leases.

Question-1: Do you perform all your projects in-house?

Did you know that often lease abstraction and admin vendors outsource their work to other agencies? You should be aware if your vendor also engages in similar subcontracting projects as it can affect you in 2 ways–

  1. Data security and confidentiality: If your critical cell-tower lease data is being shared with someone else, it can have serious consequences. Unless you are convinced of the data security measures adopted by your vendor and the sub-contractors, you can’t rest assured that your data is safe.
  2. Possible delays: If your vendor is relying on someone else to do the actual work, any impediment on the subcontractor’s end will end up delaying your project and result in missed deadlines–something you cannot afford when dealing with critical time-bound, needs-based triggers like Due Diligence and acquisitions.  

Question-2: How big and experienced is your team?

It is important that you ask your potential cell-tower lease abstraction and administration vendor about their team strength and collective experience. These factors play a key role in the quantity and quality of output they deliver. One of the reasons why many telecom companies prefer to outsource their cell-tower lease abstraction and administration processes is because of the scalability and flexibility they get by outsourcing. If your vendor doesn’t have enough staff strength to scale up with you during times of resource shortage, or when you have an exceptionally higher load of leases due to factors such as a new merger or cell-tower acquisitions, then you fail to leverage a key benefit of outsourcing. 

At the same time, be sure to ask about the overall team experience, as this has a direct impact on the quality of output and also on its quantity. An experienced team will be able to deliver high-quality output in a relatively shorter timeframe.

Question-3: Will you collaborate with our other stakeholders?

For the cell-tower lease administration process to be effective, often, the lease administrators will have to get in touch with others in the legal or accounting functions of the landlord or tenant’s business. This is especially true in case of recurring lease administration tasks such as reconciliations, collections, etc., You may even have an in-house lease admin team with whom your vendor may have to collaborate often. Having a lease administration vendor who can do the liasioning for you will make the entire process more efficient and you will be spared the hassle of multiple emails and calls to collaborate with different stakeholders across the country or even the globe, if you have an international presence. 

Question-4: Can you give us client references?

Ask your potential tower lease abstraction and admin vendors for client references. When outsourcing a process as important as lease portfolio management, you want to make sure that your vendors truly place great emphasis on customer delight and creating positive customer experiences. One of the ways to verify that is by asking for client references and testimonials. It is even better if the clients are from your industry.

Question-5: What about client support?

Ask your vendor about their client support set up. Do they offer 24h client support? Are they available on all working days of the week? What about the point-of-contact? Will they offer you a single point-of-contact throughout the course of your project? This becomes especially crucial when you have offices operating from different parts of the world. Having a single project manager to handle your lease portfolio can make the process more fluid, transparent and efficient.

Question-6: Can you customize your service offerings?

When it comes to lease portfolio management, every client, every industry is different and the one-size-fits-all service model won’t work well.  For an outsourced lease portfolio management process to work well, it is important that your vendor caters to your industry-specific needs and customizes their service offering to meet them effectively.

Lease Administration post: The importance of ongoing lease management

 

If lease portfolio management were to be compared to anything, it wouldn’t be wrong to say it is a marathon. But, a lot of organizations tend to treat it like a sprint race. The only time leases get the attention they deserve is at the time they are signed. When a new lease is signed, organizations make the effort to get it abstracted and entered into their lease portfolio management systems and more often than not it stays put there until termination or renewal comes up. However, this can result in significant economic losses. Let’s look at why consistent, ongoing lease management is important.

You may be overpaying

One of the most important reasons as to why you should be reviewing and updating your lease portfolio is to identify any inconsistencies in CAM expense billing, rent hikes and other operating expenses that the Landlord may be imposing on you. 

You may miss out on various benefits that are not obvious

If you don’t service your leases regularly, you run the risk of overlooking important dates and options that could be beneficial to you. Examples include notice periods for termination, renewal, expansion and the right of first refusal. Keeping an eye on these dates and executing your options at the right time can help you get a good deal on your existing leases.

Repetitive errors may be causing you losses

If your initial abstract has errors, or if you don’t reconcile your operating expense, CAM charges, rent increase and other payments periodically, you run the risk of letting the errors embed into your leases. In cases where the rent/operating or CAM charges increase based on the preceding years’ value, you will erroneously end up paying a lot more than you should.  

You may be miss taking advantage of critical dates and clauses

If you don’t service your leases regularly, you run the risk of overlooking important dates and options that could be beneficial to you.

At some level organizations are aware of the importance of ongoing lease maintenance, but fall behind on their lease portfolio management due to lack of resources. In such scenarios, an experienced and trusted lease administration vendor can help. They can work independently or support your existing lease administration resources to help you stay on top of your lease portfolio management requirements. Plus, their expertise can add value to your internal lease administration process. 

 

A CAM Audit checklist for the busy lease administrator

 

Reconciliation of Common area maintenance charges or CAM expenses, as it is commonly referred to, is an important lease administration task. This blog provides a quick CAM audit checklist that lease administrators can use when reconciling CAM charges. 

Check the definition of Common Area Maintenance (CAM) charges as per the lease

One of the first places to start is the lease’s CAM clause. The items under CAM header will vary depending on the lease type and also sometimes, it may vary from lease to lease even if the leases are of the same type. Reviewing the lease’s CAM clause helps you understand and interpret the CAM charge computations accurately. It helps you understand the various components of CAM charges as per the lease and how they are computed. 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.

Check for exclusions

Be sure to check your lease for CAM exclusions. Exclusions in your leases will point out to expenses that are not a part of the CAM expenses. If your lease explicitly lists out items that the landlord cannot charge you for under the CAM header, double check to ensure they are not a part of your CAM invoice presented by the landlord. 

Look for expense caps and ensure they have been adhered to

Leases sometimes also include caps on CAM charges, i.e, a limit on how much the landlord can charge you for the CAM expenses. Check your lease to figure out if it enforces any expense caps, and if it does, then ensure they are being adhered to. Usually expense cap clauses specify the percentage by which the Landlord can increase the CAM charges annually. Make sure the calculations presented by your landlord are in line with the expense caps. 

Remember the effect of occupancy rates on your CAM charges

Depending on the lease type, occupancy also plays a key role in affecting the CAM charge amounts.  If CAM charges are shared on a pro-rate share basis among tenants, each tenant’s share of CAM expense will fluctuate with the occupancy of the leased premises. It will increase if the occupancy rate drops and decrease when a new tenant moves into an empty space in the leased premises, as they will now share the CAM expenses too. While this seems pretty straightforward, this factor is often overlooked–especially if a new tenant comes into the picture during the middle of the lease year. Make sure you check for any new tenant move-ins during the lease year and it’s impact on your CAM charges owed. 

Pro–rata share calculations

Pro-rata share calculations are a big element when it comes to determining the accuracy of the CAM charges levied upon you. Ensure your pro-rata share has been calculated accurately and you are paying only the percentage of CAM charges that you actually owe as per your pro-rata share. 

If there are amortizations factored into the CAM charges, then, are they as per the lease stipulations?

Are there any amortized expenses that the landlord is passing on to you as a part of CAM? If yes, make sure they are factored in as per the lease. While leases often allow landlords to amortize and pass on capital expenses related to improvements in the common area, you need to ensure it is done as stipulated in your lease. And remember, as discussed above, even the amortization amount will decrease if there’s an increase in the occupancy rate of the leased property.

Know your audit rights

Most leases specify audit rights that tenants have in terms of CAM expenses, that allow tenants to audit the landlord’s ledgers and peruse their invoices related to CAM expenses to ensure the CAM charges levied upon the tenant is accurate. It is important that you know you audit rights as a tenant and exercise them when the need arises. 

When it comes to CAM reconciliation you know that making even a miniscule calculation mistake can cost you thousands of dollars.  CAM Audit  is a key lease administration function that needs 100% focus and concentration–which can be challenging if your lease administrators are overworked. RE BackOffice can help you overcome this challenge through our team of virtual lease administrators. You can hire our virtual lease administrators to support your in-house lease administration team, so their focus is never diluted due to work pressure. 

Contact us at support@rebackoffice.com today to learn more!

Lease budgeting: Best Practices

 

Budgeting for lease expenses is an important process in lease portfolio management. Leases are critical agreements that include a significant amount of expenses (if you are a tenant) attached to them. Lease budgeting is the process of budgeting for those expenses in advance, so you are not caught off-guard when it is time to make the payments. While the concept seems simple, it can get a bit overwhelming when you have a large portfolio of leases spanning across multiple locations, with each lease having different dollar amounts and payment due dates. This blog discusses some of the best practices related to lease budgeting.

What are the expense items that you want to budget for?

Start by making a list of the key lease elements you want to budget for.  There are various expense items/cash flows in a lease. It all depends on the type of lease. For gross leases, you just need to budget for the lease rental as that pretty much covers everything, but for net leases, there are various items to consider. 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. 

How much do the items you identified typically cost?

The next step is to identify or estimate the cost of the expense items you have listed. You can arrive at a pretty accurate estimate based on the the last few year’s actual amounts spent in regard to those expense. If your lease has an annual increase percentage mentioned for any of those expenses, make sure you take the increase into amount when estimating the cost for the upcoming year. Looking at the actual lease portfolio expenses of last 3 or 5 years minimizes budget variances and helps you prepare a lease budget that’s as close to the actual expense as possible. 

Check old variance reports, so you can sidestep older mistakes and oversights

You can also look at the last few year’s variance reports. Variance reports tell you the difference between your budgeted and actual cash expenses. Learning about the variances over the years and understanding why they happened will help you prepare a more accurate lease budgets.

Do your market research

Spend some time researching and looking at the financial predictions for your market. Market forecasts for your lease locations can impact your budget significantly. For example, if your market is predicted to have a lower occupancy, it may drive your pro-rata common area maintenance (CAM) charges higher. Checking out market forecasts can help you factor for such unexpected variances.

Lease budgeting is a critical task, but also time consuming and labor intensive and needs to be performed accurately every year. Consider bringing a lease administration team on board during the budget season so they can offer your lease administration team additional help. Either they can take over your lease budgeting task, or your mundane lease administration tasks so your in-house lease administrators can work on creating an accurate lease budget for the year.