Eye Spy Management - CTS 

7/12/2009
The lease type is determined by how the rents are calculated.  It is important that the tenant know and understand how its rent is determined.  Listed below are the common lease types used in commercial real estate:

GROSS Lease - the tenant pays rent (only), one lump sum amount.  The landlord pays all the operating expenses.  Gross leases are rare and usually used with government agencies.  Under the gross lease, we have the modified gross lease in which the tenant  pays specific operating expenses per their lease over a predetermined amount.

NET Lease - the tenant pays one, some or all of the operating expenses.  Under the net lease we have the single net in which the tenant pays one of the operating expenses.  Then we have the double net where the tenant pays two or more of the operating expenses.  Last but not least there is the triple net lease in which the tenant pays all operating expenses and some of the capital expenditures.  The operating expenses the tenant is liable for in a single net and double net varies from state to state and region to region.

PERCENTAGE Lease - the tenant pays a minium rent, plus a percentage of their income.

GROUND Lease - the tenant rent the land only and may pay operating expenses. 

7/12/09

Believe it or not there is a storm in the commercial real estate industry. And this storm is not close to being over. It hits close to home, thus affecting not only commercial landlords, but the small to midsize commercial tenants. It has been predicted that it will last another few years. If, you have been following the news and newspaper headlines regarding commercial real estate you know what I am talking about. Perhaps some tenants are wondering, what can I do at a time like this to help or reposition my business.

News flash, there are answers to your questions in the midst of the storm.  It is not the storm, but how the commercial tenant respond to the storm.  This is no time for the commercial tenant to put thier heads in the ground like ostriches.  But to dig their heels in the ground and find out how the commercial tenant can benefit from this storm.  What internal and external information is available to help the commercial tenant better themselves in the storm?

Question the tenant should ask at this time:

1. Do I fully understand my lease clauses?

2. Where are the savings in my lease (internal information)?

3. What savings are there outside of my lease (external information)?

4. Should I renegotiate my lease, now or ever?

5. Should I go into a new lease?

These are just a few of the many questions the commercial tenant should ask.

No landlord or property management company can contain the commercial tenant if they truly understand the commercial leasing game ... this comes through knowledge.  It may be crazy all around you, but are doing what you suppose to do as a commercial tenant to rise above the storm, thus educating yourself and applying the concepts learned.  Through education and application you will come out in a better position or repositioned to overcome after the storm.

What are you doing as a commercial tenant during this storm? 

6/22/2009

Okay … before you sign the lease, remeber to take it home, read over a few times and sleep on it. If you don’t fully understand something … make sure you understand before you sign. Leases are complex - a bunch of legal jargon and should be taken seriously.

If after reading the lease, you find there are a few things you just don’t agree with … the landlord or you can reprint the lease with those changes. On the other hand if there are simple changes, you can simply cross out the wording and each party initial where the change is made to establish consentment to said change.

Another way, is have an addendum (exhibit, attachment, etc) added to the lease noting the change, explanation or promise made.

Remember a verbal agreement don’t hold well in court. Make sure everything is in writing and signed by both parties.

4/4/09

The 2008 Economic Stimulus Package may help you reduce your tax bill in two important ways!

First,  expense up to $250,000 in property purchased in your 2008 tax year (the 179 Deduction) and save on your taxes

• For your 2008 tax year, you may be able to expense up to $250,000 for property.  This almost doubles the previous limit of $128,000, but is only available for your 2008 tax year!

• Property that often qualifies includes: machinery, refrigerators, grocery store counters, office equipment, printing presses, computers, off-the-shelf computer software, signs, gasoline storage tanks and pumps at retail service stations, a single purpose agricultural or horticultural structure, and livestock (horses, cattle, hogs, sheep, goats, and other furbearing animals).   Most passenger automobiles and other property used for transportation are also eligible for 179 deductions.  Also, the section 179 deduction for the cost of any sport utility vehicle with a gross vehicle weight of over 6,000 pounds and not more than 14,000 pounds is limited to $25,000.

For example, if your tax year begins July 1, 2008, you can expense any qualifying property purchased, and placed and kept in service during your July 1, 2008, to June 30, 2009, tax year, up to $250,000.  Land, buildings, and land improvements, such as swimming pools and paved parking areas at retail stores, are not eligible.  Please note that there is a taxable income limitation on 179 expenses.  You cannot expense an item used in a business more than the taxable income from that business.

Second, write it off faster with two deductions and save on your taxes

• First Deduction:  For property acquired, placed and kept in service in calendar year 2008, you may be able to write-off 50% of what you paid for it (a special depreciation allowance).

• Second Deduction:  In addition to the 50% write-off, you can take a write-off of the normal first year depreciation on the remaining 50% of what you paid for the property.

• Examples of eligible property include: off-the-shelf computer software, qualified leasehold improvement property, and tangible property with a recovery period of 20 years or less  (which includes cell phones, tractor units for over-the-road use, computers, computer peripheral equipment, office furniture and fixtures, and farm buildings).

• For passenger automobiles, vans and trucks depreciation limits are increased by $8,000 as follows:
  • Depreciation limits for passenger automobiles go from $2,960 to $10,960.
  • Depreciation limits for vans and trucks (with a gross vehicle weight of 6,000 pounds or less) go from $3,160 to $11,160.

• The original use of the property must begin with the taxpayer after December 31, 2007.  In other words, the property must be “new” property.

For example, if you acquire, and place and keep in service property during the current calendar year that costs $350,000, you can deduct 50 percent of its cost, or $175,000, in 2008 as a special depreciation deduction.  In addition, you can use the remaining $175,000 to figure your regular depreciation deduction. 

Below is a table showing the net depreciation increase resulting from the special depreciation included in the Economic Stimulus Act of 2008:

This new legislation will not only benefit small businesses in a variety of ways, but it will also provide an economic boost to the entire nation.  Because there are exceptions and additional requirements, please contact your tax advisor to determine exactly how the provisions of the Economic Stimulus Package of 2008 apply to your business.  Also, you may refer to the Internal Revenue Service website (www.irs.gov) for additional information regarding the tax changes resulting from the Economic Stimulus Package of 2008. 

Finally, the following IRS Press Release may prove useful: 

• Business Provisions of the Economic Stimulus Act of 2008  http://www.irs.gov/newsroom/article/0,,id=183867,00.html
• IRS To Issue Guidance on Special 50-Percent Depreciation Allowance http://www.irs.gov/newsroom/article/0,,id=181364,00.html
• 2008 Economic Stimulus Act Provides Tax Benefits to Businesses http://www.irs.gov/newsroom/article/0,,id=179227,00.html

3/15/2009

As the commercial tenant face the trying times ahead, tightening thier belts and searching for ways to cut costs, the commercial tenant should focus on in-house savings.  What exactly is meant by 'in-house' savings?  These are potential savings right under the tenant's nose.  The fact of the matter is only 10% of small to midsize commercial tenants know how to tap into these savings or know they exist.  If the tenant knew of their options, I am quite sure they would be exhausting them to their fullest benefit. 

• What rights do the commercial tenant have?
• When do the tenant exerise their rights?
• Where can the tenant exerices these rights?
• Why should the tenant exercise these rights?
• How should the tenant exercise these rights?

In the months ahead, the commercial tenant should explore, know and exercise their options.  Whether the tenant is going into a lease, currently in a lease or coming out of a lease.  It is way past time, for the small to midsize commercial tenant take advantage of in-house savings. 

2/19/2009
I wonder if the small to midsize commercial tenant don’t care, don’t understand or just don’t realize the options that are available to them. In my 9+ years in the commercial real estate property management, lease administration and leasing I can count the number of small to midsize commercial tenants that have come into the office for various important issues on one hand. I am glad they dropped in even though they didn’t have a clue what they were looking for or what to ask for.
There is talk about the economy and cut backs. Although, this is true, but what about the savings right under the commercial tenant’s nose? That they give away every year. In my experience majority of small to midsize tenants do not ask questions, research and follow-up on various issues. I can count the small commercial tenants on one hand that I have come to the office in my 9+ years. Big department stores and corporations have legal or special departments to take care of issues for them. And believe me they are on it. I have seen thousands they have put back in their pocket and not in the landlord’s account. Exercising their options, reviewing documents and asking questions are their top priority when it comes to finding savings to keep their cost to a minimum. Why are the small to midsize tenants not concerned or implementing the same protocol to save on their bottom line? Maybe, the cost to hire someone is expensive or the assumption the landlord knows what they are doing.
Like I said I can count on one hand the number of small to mid size commercial tenants that review the landlord records for accuracy, that question repairs that are passed on to them, that question the budget, repair expenses or the landlord’s processes and procedures. Sad, because the large companies question everything I mean everything and they review and compare…thus saving them thousands of dollars every year.
It is time for the small to midsize commercial tenant to awake, know their options and identify their savings. No longer should they be identified as ‘Oh, them, I can count them on one hand’.
I have held my peace and now I must speak, help has arrived for the small to midsize commercial tenant. At a fraction of the cost you would pay someone. $24.99 Check out my book ’10 Commandments for Dealing w/Landlords – What U the Commercial Tenant May Not Know?’. The book is based on real situations and give tenants a foundation for interacting with the landlord before, during and after tenancy.