The value of any commercial real estate asset is typically found in its retail, office or industrial leases. A thorough understanding of these leases is essential for a profitable acquisition and successful property management. That’s why real estate investors need and should accept nothing less than having meticulous and up-to-date lease abstracts before making any acquisition of a shopping center, office building, warehouse, industrial facility, etc.

In addition to the investor’s standard focus on cash flow and revenue generating potential, a savvy investor will also analyze the leases for the tenant improvement clauses to determine whether any of the improvements are legally owned by the landlord. The question of TI ownership is crucial as the owner of the improvements may be able to benefit from a cost segregation study, where eligible assets can be identified and reclassified for accelerated depreciation. Continue reading →