How Lease Abstraction Simplifies Commercial Real Estate Lease Management?
When buying or selling commercial real estate; having the essential information at your fingertips can save you time and money when making a decision.
Commercial real estate leases can be very long. Often covering every clause that the property owner or management company has had to deal with while owning the property.
A commercial lease is often full of legal speak. Real estate investors often have to page through hundreds of pages before coming to the leasing, financial, and management information they need to make an informed decision.
Because there is no standard format for a commercial lease, no two are the same, causing more time wasted when comparing properties. Lease abstractions simplify this process.
What is a lease abstract?
A commercial real estate lease abstract is a summary of information found within the lease regarding the property, landlord, tenant, and guarantor’s information along with lease dates and legal descriptions.
Good lease abstracts will also include unit square footage, current rent amounts along with future rents, including option rents, abatement or any reductions; security deposits, rent provisions for recovery, maintenance, taxes.
Abstracts may also include areas that could improve cap rate and increase revenue such as parking, retail opportunities, or coin laundry.
Abstracts often summarize:
-Lease renewal options
-Exclusive use or termination clauses
-Real estate taxes
-Tenant refusal options
-Expenses the tenants owe the landlord
In writing a lease abstraction, the information will be pulled together in a simplified document. Citing data or linking it back to the original location in the lease if a more substantial explanation is needed.
The lease abstraction process for commercial real estate can vary due to the wide variety of commercial leasing documents. However, by utilizing a system to pull together crucial information, the process simplifies commercial real estate management and investing.
By analyzing the lease or leasing information entered into a financial model like Excel or Argus, the abstract summarizes over 70 data points into a concise document. The abstract has a set layout, giving investors and property managers an easy way to compare properties across data points.
There are many benefits to having a lease abstraction in commercial real estate.
The time savings alone is tremendous by being able to reference frequently analyzed items without reading through the entire document.
Lease abstracts can also mitigate risk.
They lay out the rights and responsibilities of all parties in the leasing agreements, helping managers and investors avoid lost opportunity.
Lease abstracts save money.
Since most commercial real estate works with financial modeling, it's easy to create and update abstracts, once the system is in place. Working together, owners and managers can set reminders of important tasks like renewals, tax payments, collecting late fees, interest, rent, taxes, maintenance costs, or increased renewal rates.
Lease abstracts allow for the strategic use of data.
You've already taken the time to enter the information now you can use it to review data for one property or an entire portfolio.
The review allows owners to see where they can diversify a portfolio, capitalize on opportunities, or improve processes.
Lease abstracts can add value.
By knowing the current rent provisions, commercial real estate managers and owners can see areas where a little improvement can add to bottom line profits.
Pulling together an abstract can be a monumental task. By having access to an on-demand team of real estate analysts, who understands financial modeling, and lease abstraction can be the key to efficiently managing your property or analyzing your next purchase. Contact the Services Hub for your lease abstract. For more info visit our website https://clik.ai/