Retail lease abstraction Archives - RE BackOffice

Lease abstraction
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July 13, 2023
by ADMIN

Lease abstracts & Lease abstracts: Back to the Basics

What does the term, “lease abstract”, mean?

A lease abstract refers to a condensed overview of the essential clauses within a lease agreement, both financial and non-financial. It provides leaseholders with a convenient way to access crucial lease information without the need to scrutinize lengthy lease contracts. While lease abstracts typically include a summary of the fundamental financial and non-financial terms, they offer flexibility as the specific information included can be tailored to suit the leaseholder’s needs in effectively managing their lease. The content and fields covered in lease abstracts may also vary slightly depending on the type of lease, such as corporate, retail, office, or ground leases.

Who benefits from lease abstracts?

Lease abstracts offer valuable benefits to various parties involved in property ownership, rental, management, and leasing. This encompasses:

Landlords and property owners.
Tenants.
Property managers.
Real Estate Investment Trusts (REITs).

It’s important to note that the term “property” extends beyond real estate alone and encompasses diverse assets such as office equipment, machinery, medical equipment, and more!

Are thee multiple types of lease abstracts?

There are different types of leases and likewise, different kinds of lease abstracts. Some of them are –

Retail lease abstracts:

Abstracting the essence of retail leases, which apply to properties like multi-location stores, malls, shopping complexes, grocery shops, pharmacies, eateries, etc. Key fields in retail lease abstracts include Percentage rent, Right to audit, Exclusive use, Co-tenancy, Go Dark, Use restriction, etc. Retail leases tend to be complex and encompass unique clauses not commonly found in other lease types.

Corporate lease abstracts:

Abstracting corporate leases primarily related to offices and corporate parks. Corporate lease abstraction focuses on key clauses such as Type of Lease, Maintenance Obligations, Improvements & Modifications, etc.

Warehouse lease abstracts:

Pertaining to leases of warehouses and storage areas. Important areas to consider in warehouse lease abstraction include Restricted Use, Insurance, Environmental indemnity, Parking (Trailer Parking, Fenced Yard), Surrender, etc.

Cell-tower/Telecom lease abstracts:

Involving the abstraction of leases for cell towers. Telecom companies rely on tower lease abstracts to effectively manage their tower lease portfolios. Tower lease abstraction involves specific nuances distinct from other leases, including Tower use licenses, master agreements, SLAs, Zoning permits, etc. A comprehensive understanding of cell-tower due diligence and acquisition document management is crucial for tower lease abstraction projects.

What are the key benefits of getting your leases abstracted?

Lease abstracts are essential for ongoing accounting compliance requirements, including standards like IFRS/FASB/GASB, which dictate how leases and their components should be accounted for. By having updated lease abstracts, you can expedite your compliance efforts.

Leases are intricate legal contracts that often span hundreds of pages. Not all information contained within them carries equal importance or requires frequent review. However, certain clauses demand constant monitoring to ensure compliance and seize potential opportunities. Lease abstracts enable parties involved in the lease to swiftly access and comprehend these critical clauses, facilitating compliance with the lease contract and informed strategic decision-making.

For instance, lease abstracts may include details about significant dates, such as rent payment due dates or notice periods for lease termination, as well as information about the lease renewal process.

In simpler terms, leases contain intricate details, making it easy to overlook crucial elements. However, any violation of the lease terms can be considered a breach of contract, leading to lease termination, penalties, or even lawsuits. Lease abstracts help prevent such situations by highlighting key terms and clauses, bringing them to your attention, and reducing the risk of oversight.

Some of the key data points that are included in lease abstracts are

Lease information
Tenant information
Landlord information
Property name
Addresses
Lease Currency
Lease Status
Rentable SF
Usable SF
Space Use
Recovery Type
Term Information
Rent Roll
Common Area Maintenance (CAM) if applicable
Expense Recoveries: Real estate taxes
Expense Recoveries: Insurance
Renewal Options
Termination options

It may also include other key lease clauses such as:

Tenant improvement allowances
Security deposit
Admin/Management fee
Tenants pro rata share
Alterations
Assign/Sublet
Estoppel
Go Dark/Continuous operation
Governing law
Guarantor
Holdover
Tenant Insurance
Landlord right of entry
Late fee
Parking requirements
Permitted use
Repair and maintenance by LL
Repair and maintenance by TT
Restoration/Surrender
Signage
Utilities
Condemnation
Damage/Destruction
Events of default
Hazardous materials
Notice
Rules and regulations
SNDA
Lease year
Roof right

Lease abstraction, Lease Administration
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November 7, 2022
by ADMIN

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.

Lease abstraction, Lease Administration
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September 16, 2022
by ADMIN

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.

Outsourcing lease abstraction & administration: What to consider?

Leases are critical business documents that drive key strategic decisions, and your lease abstracts help you make those decisions. While lease abstracts are the first step to staying on top of your lease portfolio management process, getting your leases abstracted and managed in-house can be challenging due to various reasons such as the high resource costs, lack of resources, tight timelines, etc. This blog discusses how signing up with a lease services vendor can help you overcome these challenges and, what are the key areas you need to focus on before you bring a lease services vendor on board.

Cost-efficiency

By working with a lease abstraction services vendor, you can save on costs that you would incur if you hired lease abstractors in-house, on your payroll. It helps you eliminate training, HR-related expenses and save on lease agreement interpretation and translation costs, as all of these are taken care of by the vendor.

Scale up or down easily

Signing up with a lease abstraction vendor helps you scale your lease abstraction resources up or down as per your needs, allowing tide-over temporary resource requirements. For example, at the time of major mergers and acquisitions, or renewals across multiple locations, bringing a lease abstraction vendor onboard is a more efficient way to handle your abstraction needs than hiring in-house.

Expertise

Vendors who provide lease abstraction services are specialized in what they do. It is their bread and butter, so they are naturally well-versed in the latest industry trends. They have more experience in handling multiple types of leases and tend to offer better accuracy, relevance, and compliance than in-house abstractors who comparatively have lesser exposure.

Improved turnaround time

Lease abstraction service vendors have a team of lease abstractors at their disposal, which means they won’t be overwhelmed by the volume of your lease abstraction project even if it runs into thousands of leases, and will be able to deliver your lease abstracts on time. Your in-house team may struggle to meet tight deadlines especially if it is a bigger project.

There are a lot of lease abstraction vendors in the market, but you want to make sure you pick one with the right amount of expertise, experience, industry knowledge, and reputation so your lease abstracts are accurate, concise, complete, and relevant to your business needs helping you make better operational and strategic decisions, consistently. Asking the following 6 questions might help you pick the right lease abstraction vendor.

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–

Data security and confidentiality: If your critical 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.
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 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 organizations prefer to outsource their 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 an acquisition, merger or new outlets opening, 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 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 lease abstraction and administration 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.

Make sure you don’t entrust your leases to a random fly-by-night start up that’s here today, gone tomorrow. Trusting such vendors with your critical lease data is not a good idea from the data security standpoint. Plus, you need a lease administration and abstraction vendor who can be a trusted partner and help you scale, as your lease support service needs grow or decline. While a newly found startup may be cheap, they usually do not have

The resources to support your lease needs as you grow
Stringent data security measures and may end exposing your critical lease data to risks of data theft and loss
The expertise and experience needed to handle complex lease data

Leases are critical business documents that are also confidential and legally binding. You don’t want your leases getting into the wrong hands! Make sure you partner with a lease support service provider with years of industry presence and experience that is trusted by your peers.

What is a lease management system?

A lease management system, also referred to as lease administration software or lease administration platform, is a software program that allows users to manage their lease portfolio efficiently.

What are lease management systems used for?

Lease management systems are used to store, retrieve and monitor key lease data. Lease management systems are widely used by businesses and entities that have lease portfolios that need to be managed. This includes, retailers, corporate, REITs, real estate brokers, property managers, owners and other similar entities. If, as a business, you have just one or two leases, you probably don’t need a lease management system. A good lease abstract summarizing the key financial and non-financial information from those few leases onto a spreadsheet is probably enough. But, on the other hand, if you are an organization with presence across multiple locations, then, along with lease abstracts, a lease management system is a must to stay on top of your lease portfolio.

What are the key benefits of a lease management system?

Lease management systems can help you

Meet the compliance requirements as per lease accounting standards such as FASB ASC 842, IFRS 16 and GASB 87
Get a 360-degree view of your lease portfolio and all the lease agreements therein. This plays a key role in helping you make the right business decisions in relation to your lease portfolio. Examples include decisions that affect lease profitability and ROI including renewals, terminations and subleasing.
Have a single, standardized repository for all lease documents, which can be accessed by all relevant departments throughout the organization.
Get better lease insights through multiple dashboard, summary and reporting modules, addressing the lease data needs of different departments effectively.
Stay on top of your lease portfolio by generating alerts and notifications for critical events such as notices, expiration dates, invoice due dates, renewals and other obligations. This helps ensure that you don’t miss any critical dates. Missing critical dates can have serious consequences, such as penalties or even lease termination.
Keep your payment schedules on-track and accurate. They allow you to effectively manage your lease-related expenses and payments such as regular rental payments, percentage rent calculations, Common Area Maintenance (CAM) charges and reconciliations.

Lease management systems are indispensable if you have a lease portfolio consisting of multiple leases. But a lease management system alone isn’t enough. You need accurate lease abstracts of all the leases in your lease portfolio and also an experienced lease administration partner who can help you optimize your lease administration software so you get the best ROI.

Learn more about the top lease management systems of 2022 here!

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.

Revolutionizing Lease Abstraction with Artificial Intelligence

Lease abstraction is one of the core administrative tasks in CRE. However, the manual process of analyzing, abstracting, and storing critical lease data makes it a very time and resource consuming activity. This is where AI can help companies save valuable time and money. AI-enabled lease abstraction automation software scans through the entire lease document, including the addendums, letters, and notices, and extracts the relevant data points. Rent roll information and important dates are abstracted quickly. This process would otherwise take considerable time and a high level of accuracy when abstracted manually. Once this is complete, the information is then ready for auditing.

In this blog, we will address some common questions companies have regarding the lease abstraction automation software.

We have a large portfolio of leases. Can we upload and abstract bulk leases?
The tool is capable of bulk upload and abstraction of large volumes of leases.

What is the accuracy of the abstracted lease data?
The accuracy rate is as good as a manual abstraction, if not better. The lease abstraction automation tool is programmed to comb through the entire lease document ensuring key data is not left out or lost. This process remains uncompromised throughout the lease abstraction cycle.

Can we review the lease data extracted before exporting it?
Absolutely. The software displays all the lease data points extracted along with the section reference. This provides the required flexibility to review and make edits. The software displays the entire lease data extracted, including their section reference. This provides the required flexibility to review and make edits.

Do we have to manually upload every lease document in the software?
Not at all. Lease documents are stored in a centralized folder, and the path to the folder is entered into the software. Technology does the rest.

Is there a limit to the number of leases we can abstract?
No. The software has no limit on the number of leases it can abstract.

In which format can we export the data?
The abstracted data can be exported in Excel, PDF or Word format.

Can we integrate the lease abstraction automation tool with our existing lease administration platform?
Yes. The lease abstraction software can be integrated with any lease administration platform so that the time spent on transferring the abstracted lease data to a centralized system is cut down.

Tag: Retail lease abstraction