Colgate Real Estate Advisors LLC | Lease Restructuring, Negotiations, Brokerage and Distressed Real Estate Advisory Services
for Challenging Times"
Larry H. Haber
Licensed Real Estate Broker
Certified Public Accountant
When acquiring commercial real estate, the purchaser is essentially acquiring two (2) things, namely the physical property itself and the office, retail and/or industrial leases for such property. Colgate Real Estate Advisors prides itself on performing comprehensive underwriting of a property’s underlying leases and in working with our client’s third party vendors in analyzing the physical attributes of the real estate during the due diligence period. In short, our primary objective is to put our clients in a position to make an informed and educated decision as to the viability of a potential acquisition. Please refer to the annexed Due Diligence Checklist for a general outline to help you with your underwriting of the potential acquisition.
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Abstracts of Office, Retail and Industrial Leases
Simply put, a lease is the document defining the relationship between the landlord and a tenant. It is the ultimate road map governing the interaction between the parties 24/7/365, and consequently, a detailed analysis of the financial, legal and business terms contained in the lease-along with a thorough review of all documents ancillary thereto-is imperative!
A proper lease file should contain, at a minimum, the lease itself along with copies or originals of all amendments, legal and management correspondence between landlord and tenant, estoppels, brokerage agreements, commencement date and work letters, exhibits and if applicable, a letter of credit.
Given that commercial leases tend to be voluminous in terms of both length and content, Colgate Real Estate Advisors takes pride in it’s ability to “make a long story short” without sacrificing the detail necessary to both evaluate and someday own and manage the property. Simultaneous with our review of the lease file, a lease abstract is prepared to fully summarize the financial, business, legal and technical terms of the lease-along with any unusual provisions.
The level of detail contained in Colgate’s lease abstract not only empowers our clients to help them make an informed decision as to acquiring a property, but also allows them to have at the ready a comprehensive summary of the lease to aid them in future ownership and management. Whether used by your legal, accounting, property management, brokerage or administrative staff, Colgate REA strives to deliver a succinct and comprehensive summary of the critical provisions of the lease to better enable your team to effectively and efficiently perform their duties.
Although the level of analysis varies depending on a client’s needs, lease provisions generally abstracted include the lease term, base rent, additional rent (e.g., real estate, operating and CPI escalations), free rent concessions, improvement allowances, outside construction dates, termination rights, security deposits, subletting and assignment, electricity and utility costs, hours of operation and providing of HVAC, use restrictions, renewal options, cleaning, insurance, late charges, guarantees, expansion options, parking, roof and signage rights, incentive programs available to tenant, freight elevator usage, the granting of a SNDA and existing issues of concern impacting the lease (e.g., rental or repair defaults).
Physical due diligence pertaining to the property includes, but is not limited to, securing a third (3rd) party engineering, environmental and title report as well as zoning and other ancillary legal analysis as to the property’s historic use and condition. The engineering report will enable your team to not only analyze the structural integrity of the property but also enable them to budget for both immediate and long-term repairs and capital expenditures for the mechanical systems as well as the roof, lobby, bathrooms, elevators, landscaping and other common areas of the property. Please refer to the annexed Building Inspection Checklist for a general outline to help you with your physical underwriting of the potential acquisition.
Colgate Real Estate Advisors does not perform the above referenced third (3rd) party physical reports, however, given the background and experience of our advisory team, we are in a position to walk you through the process and if desired, make introductions to firms who potentially might be a fit for your needs.
Personnel, Management, Accounting, Legal and Leasing of Property
Whether performed by Colgate REA, in-house or in a collaborative team effort, a detailed analysis of the property’s exiting personnel, management, accounting, legal and leasing team and policies is integral to the due diligence process. Please refer to the annexed Property Takeover Checklist to assist you in gathering the knowledge necessary in determining whether the property meets your underwriting requirements.
An estoppel agreement summarizes the basic financial and business terms of a lease at a date certain, and potential problems between the parties (e.g., defaults) are often contained therein. Generally prepared in conjunction with a refinancing or a purchase, the agreement can be for the benefit of the lending institution, the owner, a prospective purchaser and/or a tenant.
Please know that our experienced team of professionals are available to prepare, negotiate and review estoppel certificates if the need arises.
Tenant and Landlord Operating Expense and Real Estate Tax Escalation Review
If desired, in conjunction with Colgate REA’s review and subsequent abstracting of a lease file, our team can review all supporting documentation pertaining to
escalation statements for real estate taxes, operating expenses, utility pass throughs, common area maintenance and CPI adjustments. It is not uncommon during our review to discover basic accounting, transposition and calculation errors, consequently resulting in an unanticipated financial windfall for our clients. Colgate is sensitive to the working relationship between a landlord and tenant, and if assigned the role of negotiating a refund or credit on your behalf, we do so keeping the big picture in mind.
Mailing Address: 6800 Jericho Turnpike,
Syosset, New York 11791 |
516.762.3117 | (fax) 516.921.3433 |
www.colgaterea.com .One Penn Plaza-Suite 3406,
New York, New York 10119 |
646-237-2563 | cell: 917.362.9413 | Email: email@example.com