Commercial Real Estate Blog by Madison
Tag Archives: tenant

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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Top Five Challenges Facing Commercial Property Managers in 2015 …and How to Resolve Them

By: Aron Gottlieb, Senior Vice President, Diversified Capital

Today’s property managers juggle a myriad of responsibilities. From traditional rent collection and bill paying, to collecting renovation bids, managing staff and overseeing maintenance services. In addition, property managers and owners must stay on top of changing market conditions in order to evaluate and prepare to meet any upcoming challenges. There are numerous factors which may affect the operational systems of a particular property or a property management company overall.

The end of a fiscal year or beginning of a new year is typically a time spent reviewing and analyzing the past year’s performance, and preparing for the future. Here are some of the top challenges facing property managers in 2015, and suggested solutions. Continue reading

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Maximize Your Pre Due Diligence Success – Three Questions to Ask when Assessing a Potential Commercial Real Estate Acquisition

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

Is there a method for CRE investors to better utilize the time spent on the preliminary assessment? How can a CRE investor prioritize the process to focus resources on the most worthwhile properties?

Deal assessment includes many steps and areas of responsibility. During the beginning stages of investigation, a potential buyer is probably not interested in reviewing every single detail. He would not want to incur the expense of a comprehensive due diligence analysis and review simply to weed out the properties that do not appear to be successful.

An excellent solution is to conduct Pre Due Diligence. With a pre due diligence review, the buyer can cover key areas of consideration while incurring a limited expense. Here are three key questions to ask. Continue reading

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Confirming the Facts with Tenant Estoppel Certificates

By Elliot Zaks, Principal, Madison Commercial Real Estate Services

Each tenant estoppel certificate constitutes one or two pages within the hundreds of pages of closing documents of any commercial real estate transaction. Estoppel Certificates can easily be overlooked in the flurry of paperwork preceding a transaction. However, the tenant estoppel certificates are a valuable source of information which should be reviewed carefully by potential buyers or lenders.

Each estoppel certificate is a representation by a party signing the certificate to the addressee of the certificate. Signing the estoppel certificate establishes certain facts which the signing party may not later contradict, dispute or recant. In the landlord- tenant relationship, the tenant estoppel certificate is used to confirm the current status of the tenant and landlord’s rights and obligations under an existing lease.

A tenant estoppel certificate is generally used when a commercial property owner is seeking to sell or refinance the property. Tenant estoppel certificates are commonly used to clarify the tenant’s understanding of the lease agreement to potential lenders or buyers.

Here is why Estoppel Certificates are of value to both the buyer and the lender.
Continue reading

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Creative Lease Agreements: Original Ways Property Owners Deal with Vacancies

By: Danny Wechsler, Regional Business Director, Madison Commercial Real Estate Services

Despite signs of a recovering economy, employers are hesitant to increase office space in this job market. The current vacancy rate in commercial office space is reflecting this reality. According to a recent report released by real estate data firm Reis, Inc., the office vacancy rate for the second quarter of 2014 was at 16.8%, just a slight decrease from the post recession rate of 17.6% in 2010.

As a result, landlords and managers of commercial office space are seeking and finding creative avenues to fill vacancies. For example, current market conditions are allowing start-ups and small businesses to rent space in commercial office buildings, where they previously would not have gotten a lease. While landlords may prefer an established tenant with long-term stability, in today’s market, they often don’t have a choice and are forced to be less choosy.

But there are other steps a landlord can take to preserve his investment while filling vacancies. Continue reading

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New Private Letter Ruling Suggests a Method for Handling Certain Construction Exchanges

By Lee David Medinets, Esq., CES®, Chief Counsel, Madison Exchange, LLC

A “Construction Exchange” is a special type of tax-deferred IRC § 1031 like-kind exchange that allows a taxpayer to defer recognizing income by sheltering proceeds from the sale of relinquished property into improvements made to replacement property, not just in the cost of buying the replacement property (as in an ordinary “forward exchange”). In order for a construction exchange to work, the taxpayer cannot own the property at the time the im-provements are made. In a typical safe-harbor construction exchange [Rev. Proc. 2000-37], the replacement property is purchased from a third-party seller on behalf of the tax-payer by an exchange accommodation titleholder (“EAT”). The EAT is essentially acting as the taxpayer’s agent under a contract that allows the taxpayer to use and improve the re-placement property during the taxpayer’s 180-day exchange period. By the end of the ex-change period, the EAT transfers legal ownership of the replacement property to the tax-payer, which completes the exchange.

One common problem is that a safe-harbor construction exchange will not work if the tax-payer owned the replacement property within 180 days of the start of the exchange. [Rev. Proc. 2004-51.] What if the replacement property is owned by a related party, such as a multi-member LLC that the taxpayer controls? There has been some concern that such an exchange might fail to qualify as a safe-harbor construction exchange because ownership of the replacement property by the related party would be viewed by the IRS as the equivalent of ownership by the taxpayer himself/herself. IRS Private Letter Ruling 201408019, issued February 21, 2014, addressed this precise issue. Continue reading

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Right on the Money: It's in the Landlord and Tenant's Best Interests for CAM Calculations to be 100% Accurate.

By David I. Tesler, Esq., CEO, LeaseProbe / Real Diligence

The landlord/tenant relationship can be fraught with difficulties. As in any business relationship, it is important for both the tenant and the landlord to set clear expectations and guidelines. While real estate leases are intended to establish the rights and obligations of each side, they are often lengthy and complex documents, with unique and individual provisions as well as numerous addendums which can override previous lease language. Such complexity can lead to mistakes and misunderstandings.

One area that is fraught with errors is Common Area Maintenance (CAM) charges. Errors and mistakes between the obligations spelled out in the lease agreements and the CAM amounts billed are typical. But ultimately it is in every both the landlord and tenant’s best interests to ensure that CAM bills are 100% accurate. Here’s why. Continue reading

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Lease Renegotiations in any Economic Cycle – Knowledge is King

Economic cycles come and go. It is important for commercial real estate professionals, as a prelude to lease negotiations, to know and understand the economic picture and prospects related to the general economy. Regular contact with business leaders and corporate executives is one obvious place to start. Continue reading

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A Penny Saved Can Be Many Pennies Lost

By Moshe Becker, CPA, Madison Commercial Real Estate Services

The other day I was sitting with a long time friend who owns a number of investment properties worth ten’s of millions of dollars. As Cost Segregation is the professional world in which I live, right away my antennas went up and I asked how he is treating the fit out for accounting purposes. His response was that he is not actually performing the fit out, but rather is giving the tenant a rent abatement. I asked him the question as to whether he considered the ramifications of the trade off for the loss in rent versus the revenue that he should have received. I didn’t need a response. His facial expression said it all! Continue reading

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