Lease Administration & Finance Flashcards

What is a 'CAM reconciliation' in commercial lease administration?

Answer: Annual true-up comparing estimated CAM payments to actual expenses incurred

CAM reconciliation is an annual process where actual common area maintenance expenses are compared to the estimates paid monthly, with tenants paying or receiving credits for the difference.

What does 'percentage rent' mean in a retail lease?

Answer: Additional rent paid when tenant's sales exceed a specified breakpoint

Percentage rent requires the tenant to pay additional rent equal to a percentage of their gross sales above a natural or artificial breakpoint.

Which financial metric is most commonly used to value commercial income-producing properties?

Answer: Capitalization rate (Cap Rate) applied to Net Operating Income

The Cap Rate method, dividing Net Operating Income by the cap rate to arrive at value, is the most widely used method for valuing commercial income properties.

What is 'Net Operating Income' (NOI) in commercial real estate?

Answer: Effective gross income minus all operating expenses, before debt service

NOI is calculated as effective gross income (actual collections) minus all operating expenses, but before deducting debt service (mortgage payments) or capital expenditures.

What does a 'co-tenancy clause' in a retail lease protect the tenant against?

Answer: The loss of an anchor tenant or a specified number of co-tenants in a shopping center

A co-tenancy clause allows a tenant to pay reduced rent or terminate the lease if a key anchor tenant or minimum occupancy level is not maintained.

In lease administration, what is the purpose of a 'lease abstract'?

Answer: A summary document extracting key lease terms for quick reference and administration

A lease abstract summarizes all critical lease terms (dates, rent, options, restrictions) in a standardized format for efficient lease administration and portfolio management.