As the retail environment strengthens and vacancies diminish, it is time to turn our focus to finding areas of hidden value. When was the last time you reviewed the CAM language and focused on finding holes?
CAM “slippage” can occur in a variety of areas, often leaving significant dollars on the table on a multi-tenant retail property. As leases come up for renewal, or new leases are executed, review for the following common areas of slippage:
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Retail Tenants Signed as Gross vs. Triple Net
Frequent errors occur when differentiating between Gross versus Triple Net leases, especially on recently-acquired, multi-tenant properties. Ensure that all retail tenants, including medical or office tenants signing leases on a retail property, are paying NNN and exclusions are minimized.
Unclear Cap Language
Make sure CAM Caps are only provided on controlled expenses (i.e. contracted items), and exclude non-controllable expenses (i.e. taxes, insurance, utilities, etc.). And above all else, ensure that the language is clearly defined as to what is considered controllable and non-controllable.
Administrative Fees Not Properly Allocated
Verify that Administrative Fees are passed through for all expenses on the entire property (i.e. taxes, insurance), and not limited to the common areas.
CAM Pools
Include flexible CAM/Cost Pools in your lease language to ensure you will have the greatest return on the expense of a specific building.
For 20-plus years we have taken great pride in our ability to support the financial goals of our clients by building efficient CAM models and providing thorough analysis to identify CAM slippage. If you are evaluating an acquisition, please contact us to find out how our Due Diligence Acquisition Analysis can support your efforts.