Estimate Landlord Property Insurance by xlm13759

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									COMMERCIAL LEASING 101

       Cheryl Hamm
     Joyner Commercial
Realistic or Unrealistic?
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NORTHWEST
QUADRANT
                    NORTHEAST
                    QUADRANT




     SOUTHWEST   SOUTHEAST
     QUADRANT    QUADRANT
  Office




Source: Thalhimer
Industrial




         Source: Thalhimer
  Retail




Source: Thalhimer
Lease Terminology
           Types of Leases

• Net Leases

• Industrial Gross Leases

• Full Service Leases
                  Single Net Lease
Who is responsible for what?

Tenant:
• Base rent
• Plus an operating expense such as janitorial, electric or property taxes
• Personal property and liability insurance which once in place must show
  the Landlord as additionally insured
• Personal property taxes
• Phone
• Internet services

Landlord:
• All other operating expenses of the property

What type of property would use this?
• Small Multi-Tenanted Office with separate utility metering
            Double Net Lease (NN)
Who is responsible for what?

Tenant:
• Base rent
• Two other operating expenses such as janitorial and electric or the
  property taxes and property insurance.
• Personal property and liability insurance which once in place must show
  the Landlord as additionally insured
• Personal property taxes
• Phone
• Internet services

Landlord:
• All other operating expenses of the property

What type of property would use this?
• Multi-Tenanted Office Buildings (usually small) with separate utility
  metering
          Triple Net Lease (NNN)
Who is responsible for what?

Tenant:
• Base rent
• Property taxes
• Property insurance
• Pro-rata share of common area maintenance (CAM) which can
  include common area landscaping, utilities, snow removal, repairs,
  etc.
• Personal property and liability insurance which once in place must
  show the Landlord as additionally insured
• Personal Property Taxes
• Janitorial services
• Utilities
• Phone
• Internet
  Triple Net Lease (NNN) (cont.)
Landlord:
• Property Management

What type of property would use this?
• Single Tenant Office Buildings
• Retail
            Industrial Gross Lease
Who is responsible for what?
Tenant:
• Base rent
• Utilities
• Janitorial
• Interior property repairs (HVAC, water heater, lights, walls, floors,
  windows)
• Pro-rata share of the common area maintenance
• Personal property and liability insurance which once in place must show
  the Landlord as additionally insured
• Personal property taxes
• Phone
• Internet services
• Pro-rata share of any increase in property taxes and building insurance
  after the 1st year of the lease
   Industrial Gross Lease (cont.)
Who is responsible for what? (cont.)
Landlord:
• Base year property taxes and building
   insurance and exterior roof and structure

What type of property would use this?
• Warehouses
• Flex/Office Space
            Full Service Lease
Who is responsible for what?
Tenant:
• Base rent
• Personal property and liability insurance which
  once in place must show the Landlord as
  additionally insured
• Personal property taxes
• Phone
• Internet services
• Could be made responsible for pro-rata share of
  any increase in base operating expenses over a
  base year or expense stop
      Full Service Lease (cont.)
Who is responsible for what? (cont.)
Landlord:
• Building taxes
• Building insurance
• Maintenance
• Utilities
What type of property would use this:
• Multi-tenanted Office Buildings
         Important Definitions:
• Pro-Rata Share
  – Calculated on a square footage basis.
  – Tenant’s SF divided by Total Building SF =
    Tenant’s pro-rata share
• Base Year
  – Calculated on a calendar year basis or the first
    12 months of tenant’s occupancy
  – The base operating expense account is the floor
    over which any increases in operating expenses
    will be passed on to the tenants
         Important Definitions:
• Expense Stop
  – Preferred method for expense calculation by a
    Landlord
  – Allows Landlord to estimate the approximate
    expenses the building will incur and the tenant is
    responsible for payment of his pro-rata share of
    actual operating expenses over the estimated
    expense stop.
  – Be careful – has led to fraudulent estimates of
    expenses in the past and unexpectedly high
    operating expense pass-throughs to tenants
         Important Definitions:
• Percentage of Sales
  – Used in retail leases
  – Landlord would receive a percent of the gross
    sales of the business after reaching an
    established dollar volume of business
  – Infrequently used in leases for smaller retail
    establishments
         Important Definitions:
• Tenant Improvements (TI)
  – Work that is required to make space inhabitable
    for your use
  – Amount covered by owner is dependent on lease
    term
  – Tenant could be made responsible for any and
    all of the cost of improvements
  – The cost can be paid two ways:
    • At time of completion of work (Cash or Business Loan)
    • Amortized over the term of the lease and added to the
      monthly rent
 Expectations of Landlord for Tenant
• Business Plan in place
• 2 years tax returns and/or Financial
  Statement prepared by accountant
• Financial wherewithal to pay the rent for at
  least 12 months
• Personal Guarantee (Guarantor of Lease)
     Tenant Expectations
•Allow plenty of time for identifying
property, negotiating, and ratifying
lease, and completion of tenant
improvements

•This could take anywhere from 3
months to 9 months, start to finish!

								
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