IREM publishes one of (if not the only) helpful income and expense analysis reports covering office, retail and apartment buildings in major metropolitan areas. While primarily used by property owners and managers, tenants and tenant rep brokers can leverage this resource to help verify a landlord’s expense projections are inline as well as audit the efficiency of a building over the course of a lease.
Here’s a couple examples:
1. A landlord issues you a proposal provides for an Expense Stop of $10.00. You’d ask for last year’s expense report, but the building is under construction, so they can’t provide them, even if the owner would agree to do so. How do you validate that $10.00 is a realistic figure without spending hours making a bunch of calls to similar property owners, who will most likely blown you off, or give you a bogus number?
IREM’s Income/Expense Analysis Report can provide you with this information.
2. Fast forward two years later – you agreed to that $10.00 Expense Stop after validating that this estimate was inline with market. But, you just got an expense reimbursement invoice from the landlord. It’s for $2.00 PSF, which means the building’s operating expenses are running $12.00/RSF/year. This means expenses grew 20% over the last 2 years! What do you do?
You could use IREM’s Income/Expense Analysis Reports to compare your building to the average expense categories within your market to see if and where your properties expenses are out of control. Because there is an Expense Stop in your lease, the landlord has a reduced incentive to control expenses, than if there was not. (Learn why here.)
These are two reasons why IREMs Income/Expense Analysis Report can be a valuable resource, not just for landlords to use as a benchmark, but for tenants and their advisors, too.