lease audit services 8.15 - cbre.fi · cbre and the cbre logo are service marks of cbre, inc....

CBRE Portfolio Services

LEASE AUDIT OVERVIEW

2019

2 CBRE PORTFOLIO SERVICES | LEASE AUDIT OVERVIEWCBRE

OPEX REVIEW FULL SCOPE AUDIT

Cost Control reconciliation review conducted prior to payment of rent and operating expenses *

A comprehensive review of all financial considerations under the lease, including, but not

limited to: base rent, operating expenses, real estate taxes, allowances and utilities

§ Mathematical accuracy ü ü§ Pro rata share ü ü§ Base year & amount and increase vs prior year ü ü§ Confirm LL estimates/escrows match payment history ü ü§ Term – period covered by the charges ü ü§ Verify correct base year or expense stop ü§ Confirm receipt of TI and allowances ü§ Verify letter of credit and security deposit draw downs ü§ Comparison of lease review findings with actual payments ü§ Contact LL to advise of audit, detailing requested information ü§ Negotiation of recovery ü§ Arrange field visit to review landlord’s accounting records and site visit of

leased property (where applicable) ü

§ Conduct review of landlord’s accounting records (general ledger, invoices, payroll records, etc.) ü

§ Perform forensic site inspection of the premises (where applicable) üNo cost

Included in the standard Portfolio Services pricing model

Contingency Fee and/or Hourly (Travel costs and other

reimbursements may apply)

LEASE AUDIT PRODUCT SUITE

* Reconciliations that raise a red flag will be queried with the LL. Reconciliations that cannot be explained by the LL are escalated and CBRE will review for potential full scope audit.


Customized Plan

§ Prioritize locations with most impactful recovery potential, e.g. annual CAM spends and significant size

§ Review lease clauses to prioritize restrictive/ limiting expenses e.g. Base Year, Expense Caps, Management Fee Caps, Capital Improvement Restrictions, etc

Receipt/Prioritization

§ Reserve audit rights

§ Review lease terms

§ Confirm expenses are allowable

§ Confirm expense allocations

§ Request backup for significant items, e.g. RET, INS, Capital Improvement, etc

§ Prioritize reviews by audit window deadlines

Review/Recovery

§ Verify application and calculation methodology for limiting clauses, e.g. Exp. Caps/Stops, Mgmt. fee, Amortization, etc

§ Ensure CAM escrows paid by Client correctly applied to CAM recon

§ Analyze/question significant increases over prior year

§ Negotiate with Landlords

§ Track refunds / credits

Escalation/Completion

§ Finalize reviews

§ Save/upload final reviews per Client requirements

§ Monthly reporting on status of audits & settlement negotiations

§ Participate in quarterly/annual business reviews

PHASE 4PHASE 3

FULL SCOPE AUDIT REVIEW PROCESS CHART

PHASE 2PHASE 1


LEASE AUDIT CALENDAR

Feb - Sep Receive and review

reconciliations

Request backupConduct audits

Oct - DecFinalize audits

Request missing reconciliations

OngoingNegotiate settlements

Collect savingsClose files

Jan - FebPre-audit season:

planning & preparation

While there is a definitive Lease Audit season,

the Lease Audit process for a client portfolio

is a year-round operation.


Cost Avoidance & Savings of $27.3 Million over 5 Years

REVIEW SAVINGS BY INDUSTRY

$673,168

$674,043

$542,551

$366,808

$186,649

$2,712,964

$217,366

$202,772 $243,519$510,469

$568,655

$511,665

$1,755,104

$270,728

$631,885

$449,540 $396,183

$557,228

$243,167

$506,284

$351,356

$222,630

$295,793

$876,610$2,373,905

$151,794 $392,023

$574,375

$245,046

$1,040,071

$274,624

$204,172

$859,575

$677,971

$490,914$199,919 $306,275

$1,534,554

$837,382 $636,596

$1,441,289

$316,691 $-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

$4,500,000

$5,000,000

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2013 2014 2015 2016 2017


All Financial Considerations under the Lease:

WHAT

Full Scope Lease Audit includes both reactive and proactive

approaches to mitigating real estate occupancy costs

What does a full scope audit include?

Base rentCAM, tax, insurance

Percent rent for retailers

Tenant improvement

recapture

Income lease reviews

Lease language reviews


§ We are tenant advocates

§ Materiality of real estate expenditure

§ Time is always of the essence

§ Commitment to tenant advocacy

§ Access to information

§ Proactive approach – language reviews

§ Leadership proven track record

WHYWhy should your clients & prospects consider our full scope lease audit?

Low risk to client Add to bottom line with no additional investment purely by identifying hidden savings


Time is of the essence always§ Binding statements

§ Audit windows

§ Statutes of limitation

§ Estoppels

WHENWhen should we be approaching the market?

8 CBRE PORTFOLIO SERVICES | LEASE AUDIT OVERVIEW


WHOTo what type of client profile is a full scope audit best suited?

Commercial office

Retail

Industrial

One-off audits

Portfolio assignments

US & Canada

CCLLIIEENNTT


Credit

Escalate and resolve

Confirm receivable

Create receivable

Check

Monthly reporting package

Close audit on Tracking

Report

Lease auditor resolve and

negotiate with LL

LL in agreement on discrepancy?

Deliver audit report to LL

Client approval?

Prepare audit report for

client approval

Audit findings?

Auditor performs audit on

unrestricted

HOWAudit process

Auditor performs audit on restricted component

Perform analysis and recommend

to proceed with restricted

component audit

Contingency fee restriction?

YESYES

NO YES

NO

YES

YES

YES

YES

YESNO

NO

NO

NO

DOCUMENTS FROM LL

AND CLIENT


HOWHow do we charge?

Preferred method

Market rate:§ 35% of savings and realized value

Full scope audit audit locations are to be mutually agreed. Contingency fee includes only locations above 20k square feet. Audits that fall outside of this range can be added upon client’s request and may be charged at the hourly rate.

CONTINGENCY HOURLY RATES

Hourly rates for audit support:§ $175/hr (lease auditors & coordinators)§ $225/hr (lease audit managers)§ $350 (MBA/CPA resources)

Contingency restrictions typically only applicable to CAM

Thank youCBRE © 2019 All Rights Reserved. All information included in this proposal pertaining to CBRE—including but not limited to its operations, employees, technology and clients—are proprietary and confidential, and are supplied with the understanding that they will be held in confidence and not disclosed to third parties without the prior written consent of CBRE. This letter/proposal is intended solely as a preliminary expression of general intentions and is to be used for discussion purposes only. The parties intend that neither shall have any contractual obligations to the other with respect to the matters referred herein unless and until a definitive agreement has been fully executed and delivered by the parties. The parties agree that this letter/proposal is not intended to create any agreement or obligation by either party to negotiate a definitive lease/purchase and sale agreement and imposes no duty whatsoever on either party to continue negotiations, including without limitation any obligation to negotiate in good faith or in any way other than at arm’s length. Prior to delivery of a definitive executed agreement, and without any liability to the other party, either party may (1) propose different terms from those summarized herein, (2) enter into negotiations with other parties and/or (3) unilaterally terminate all negotiations with the other party hereto. CBRE and the CBRE logo are service marks of CBRE, Inc. and/or its affiliated or related companies in the United States and other countries. All other marks displayed on this document are the property of their respective owners.

lease audit services 8.15 - cbre.fi · cbre and the cbre logo are service marks of cbre, inc....

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