rpcon masterclass s204-fundamentals-desk_audit - jerry king

Lease Administration Masterclass Friday, 23rd March 2012

Fundamentals of the Desk Audit

Presented by: Jerry King

Lease Administration Masterclass Friday, 23rd March 2012Lease Administration Masterclass Friday, 23rd March 2012

Session Objectives

• Overview Elements of a CAM Reconciliation • Identifying Key Issues • Spotting the errors• Collecting Over Payments

Lease Administration Masterclass Friday, 23rd March 2012Lease Administration Masterclass Friday, 23rd March 2012

Getting Organized

• Legal on board? • Lease review: abstracts, caps, fixed…etc. • Did you receive back-up? Request it! • Prior years reconciliations. • Collecting your findings – Letter Writing • Tracking your savings.

Lease Administration Masterclass Friday, 23rd March 2012Lease Administration Masterclass Friday, 23rd March 2012

Our Basic Rules

• Lease determines what can or cannot be charged back by the Landlord.

• Landlord is responsible for providing reasonable documentation supporting expenses charged on reconciliations.

• Expenses must be necessary and relate directly to common area operations.

Lease Administration Masterclass Friday, 23rd March 2012Lease Administration Masterclass Friday, 23rd March 2012

What we need to Check

• Pro-Rata Share• Administration and Management Fees• Expenses• Capital Items?• Overhead Expenses• Offsite Expense

Lease Administration Masterclass Friday, 23rd March 2012

Tools of the TradeLeases, Invoices and Documents

Reconciliation and supporting documentsItemized CAM Expense Listing

Depreciation schedules

GLA SchedulesExcluded Tenants sq.ft / sqm (Anchors/Majors, Outparcels, etc)

Real Estate Tax and Municipal Rates ChargesInsurance Charges

NRTA | Focus 08-Solutions for Success

Lease Administration Masterclass Friday, 23rd March 2012Lease Administration Masterclass Friday, 23rd March 2012

Typical Questionable Expenses

• Repairs/Maintenance • Off-site Labor • Security • Snow Removal (US)• Landscaping • Utilities • Trash / Grease Trap• Insurance

Lease Administration Masterclass Friday, 23rd March 2012Lease Administration Masterclass Friday, 23rd March 2012

Pro-Rata Share

• Most critical element of the CAM invoice. • All leasable space, including major

department stores and outparcels, are included in the pro-rata share unless specifically excluded in the Lease.

Lease Administration Masterclass Friday, 23rd March 2012Lease Administration Masterclass Friday, 23rd March 2012

Pro-Rata Share

• Formula: Premises/GLA=Pro-rata share• GLA (area) vs. GLA (average) • Area based on actual square footage of all

buildings regardless of occupancy • Average based on occupancy rates of all

square footage of buildings • Kiosk – Storage Trailers - Other income

Lease Administration Masterclass Friday, 23rd March 2012Lease Administration Masterclass Friday, 23rd March 2012

Lease Caps

• Prior to beginning audit, perform test on Lease Caps to determine if complete Reconciliation is necessary.

• Are there any exclusions from the Lease Cap calculation?

• Is Cap based on prior year PAID or Cumulative Cap?

Lease Administration Masterclass Friday, 23rd March 2012Lease Administration Masterclass Friday, 23rd March 2012

Administrative Fee

• Charged by Landlords as compensation for off-site management & other non-direct expenses.

• Generally based on a % of expenses, but can be based on actual expenses or a flat fee.

• If the Lease is silent with respect to an admin fee, an admin fee cannot be charged!

Lease Administration Masterclass Friday, 23rd March 2012Lease Administration Masterclass Friday, 23rd March 2012

CAM or NOT?

• Promo / Advertising Fees • Pylon Signs • Bank Fees • Employee Incentives • Christmas Decorations• Vacant Land

Lease Administration Masterclass Friday, 23rd March 2012Lease Administration Masterclass Friday, 23rd March 2012

CAM or NOT?

• Off Site Expense• Property Manager’s Car • Maintenance Vehicle / Golf Carts • Seasonal Flowers • Promotional Events / Advertising • Security for Special Events • Muzak

Lease Administration Masterclass Friday, 23rd March 2012Lease Administration Masterclass Friday, 23rd March 2012

Contact InformationJerry King

• jking@rent-research.com• www.rent-research.com• Rent Research Consultants, Inc.

PO Box 372 Swansea, MA 02777, USA

• Phone 1-866-635-5762• FAX 1-888-473-1121