Commercial Real Estate Blog by Madison
Tag Archives: operating expenses

CAM Negotiations – What You Need to Know before Signing, Part 2

By: Arnon Wiener, Esq., CEO, Real Diligence and LeaseProbe

It is news to no one that CAM charges can be a contentious issue for Landlords and Tenants alike. Generally, Landlords want the CAM clause to be broad and all-encompassing, covering the Landlord’s costs of ownership, management, maintenance, repair, replacement, inspection, improvement, operation, and insurance of the property together with any costs allocated to administration and overhead. The Landlord benefits from a highly expansive CAM definition to avoid the risk that any necessary costs of operation have no corresponding revenue to cover them.

Tenants, on the other hand, generally understand that they need to compensate the Landlord for operating and maintaining the center. But they view the Landlord’s ownership costs as part of the Landlord’s cost of doing business and not a recoverable operation cost. This “maintenance versus ownership” struggle shapes many of the issues relating to inclusion in and exclusion from CAM costs

Here are some questions Landlords should consider. Continue reading

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CAM Negotiations – What You Need to Know before Signing, Part 1

By: Arnon Wiener, Esq., CEO, Real Diligence and LeaseProbe

Common Area Maintenance (CAM) charges can be a contentious issue for Landlords and Tenants alike. CAM charges are one of the net charges billed to Tenants in a commercial lease, and may be charged in addition to base rent. On one hand, Landlords may feel that their expenses are high, and this is the chance to be refunded for the outlay. On the other hand, Tenants may feel squeezed by the rent, and are resentful of any additional charges. CAM becomes the rope in a tug-of-war.

When entering CAM negotiations, there are considerations for both Tenants and Lenders. Continue reading

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The Shrinking Due Diligence Window in Commercial Real Estate Purchases

By: Arnon Wiener, Esq., CEO, Real Diligence and LeaseProbe

The revival of the real estate market is presenting new opportunities for commercial real estate owners and investors across the U.S.. Improved lending conditions and the increase of capital availability are driving market growth on its forward momentum. After hunkering down to wait out the storm of the recession, the commercial real estate market is resurging with an influx of deals.

This is good news for real estate owners and investors. However there is a consequence to the increasing demand for properties: fierce competition. While competition is beneficial to the marketplace, investors should be aware of a secondary effect which may have a negative repercussion on the decision making process; namely the shrinking due diligence window. Continue reading

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Two Most Common Mistakes to Avoid When Using Argus Models

By: Arnon Wiener, Esq., Chief Executive Officer, Real Diligence and LeaseProbe

In a financial due diligence review for a real estate acquisition, facts are king. The more detailed information the buyer can gather and analyze, the more he can be confident that he is making a value added acquisition. Argus models are powerful tools used for cash flow projection, transaction analysis and asset valuation. When used correctly, Argus models can optimize the value of your commercial real estate acquisition.

Aside from their standard use in financial due diligence, Argus models can also potentially be utilized as a business tool. A well-structured and comprehensive Argus model can be invaluable to investors considering a potential transaction. There are some potential uses for Argus models which are commonly overlooked by real estate investors. If modeled properly, these uses can provide deep insight into the potential NOI of a commercial property.

In this regard, there are two common mistakes made in using Argus models which should be avoided. Continue reading

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