Happy New Year! Well, its that time of year again. The ball has dropped and I don’t know to many people that haven’t made their new years resolutions, maybe some they have already broken… Mine usually revolve around challenging myself to have better habits, and quitting some bad ones. Of course we also use this time of year to tweak the business plan and to set new goals for our businesses. To that end I have a few practical real estate resolutions for my friends and clients to add to their list:
Put Important Lease Dates in Your Calendar: If you don’t have a real estate department or lease management software program it is important to make sure you are on top of your critical lease dates. Most leases contain rights that must be exercised, or not, by certain dates. Options to Renew, although rarely exercised, must be exercised by a predetermined date in the lease. More importantly, a lease extension should be fully negotiated prior to this date lapsing. Sometimes the date is based on the amount of time left on the lease term (i.e.: “180 days prior to…”). Make sure you have an accurate and documented lease expiration date to correctly calculate this and other important dates (early termination dates, rights of expansion, etc.).
Vow to Carefully Review your Operating Expense and Tax Pass Throughs. This is one area I think most tenants overlook and is the lowest hanging fruit to take advantage of each year. Many tenants are uncomfortable challenging a landlord in this area, but you would be surprised how many times an incorrect, and costly, operating expense pass through is just an honest mistake by the landlord. Don’t let this one get away in 2014.
Track your Tenant Improvements Depreciable Life: Many tenant improvements have a different time frame for depreciation. Are you taking advantage of these accelerated depreciations? Did you move, remodel or give back space before fully depreciating an improvement? Time to make sure you have identified these opportunities and save some taxes in 2014.
Benchmark Your Lease Rate to Market: How does your lease compare to market? If you analyze this each year you are less likely to miss opportunities to restructure the lease early and maximize potential savings. Ask your broker to give you a quick assessment.
Review your Insurance Policies: Leases require insurance. Make sure your policies are in line with lease requirements and bid out your policy annually.
Update your Agreements: Have you made any changes to you lease arrangement with your property manager? No matter how slight, it can pay dividends to memorialize these changes. Did you get more reserved parking? Is it in the same location. Are you using storage space? If some of these changes are intended to add permanent revenue to the landlord, can you leverage some incentives?
I hope these ideas can save you some money in the new year. And I wish you, your companies, and your families the best in 2014.
Now, I must go to the gym!