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119 Cards in this Set
- Front
- Back
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Generally, the amount of CAM assessed to a tenant in each year is estimated in advance using the property's what? what does the LL do following the end of the year, when actual expenses and occupancy are known?
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Using the property's budget for expenses and occupancy. At the end of the year, when actual expenses and occupancy are known, the LL reconciles the estimate and the actual.
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Insurance is market driven and can be affected by factors not entirely in the landlord's control. With respect to CAM, the landlord may choose to what and why?
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Separate insurance from CAM to prevent recovery of insurance expense from being capped or otherwise limited.
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In dealing with CAM, what do you call the various expenses that may be billed to a particular group of tenants who have similar or the same CAM provisions?
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CAM pools
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What is the theory behind the reasoning that most anchors pay less than prorata share of CAM?
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The theory is that anchors pay less due to the fact that they generate most of a center's traffic.
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Exclusion of a major tenant from the leasable area used to determine prorata percentages of CAM means that (A) other tenants or (B) the Landlord pays the anchors share of expenses not paid by the anchor.
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(A) other tenants
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What are three different terms for determining prorata share which dictate who pays common area expenses for vacant space (ie the LL or tenants)?
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(1) leased area (2) occupied area or (3) leasable area
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What are some common exclusions from the gross area of the shopping center when determining CAM?
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(1) anchor tenant area (2) major tenant area, such as theaters, junior department stores, groceries (3) Outparcels, pad sites (4) Nonretail space such as office space, civic uses, community rooms (5) retail space with only outside entrances, (6) space occupied by carts and kiosks, (7) certain common areas such as stairwells within stores.
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What are two names for tenants formerly known as temporary tenants? and what do they provide?
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Specialty retailers and incubator tenants. They provide extra income and keep space from being dark and/or vacant.
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When disputes between LL and Tenant arise they invariably fall into one or more of the following three areas?
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(1) specific lease language (2) intent of the parties (3) and how implementation of the document differs from common industry practice.
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What is an analysis that a Landlord can perform which may signal that an existing Tenant is not operating profitably.
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Cost of occupancy analysis. A high cost of occupancy analysis shows that a Tenant has a rent-to-sales ratio exceeding industry standards. Generally, a Tenant in this situation is not operating profitably.
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Who takes over from the leasing agent after the lease is executed?
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Lease administrator
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What is the difference between the Lease Administrator and the Lease Administration?
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The Lease Administrator is just one member of the team which enforces policy while trying to maintain a positive relationship between LL and Tenant. The policy is set by the Lease Administration.
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What are two names for the provision in a lease which states that the written lease contains all agreements of the parties and voids everything that came before the lease?
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(1) exculpatory clause or (2) integration provision
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What does the lease abstract contain? and what document summarizes the lease abstracts of a shopping center?
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The abstract lists operation responsibilities such as the tenant's insurance requirements, operating hours, use restrictions, radius clause, advertisement frequency and promotional duties. The abstracts of a shopping center are summarized on the rent roll.
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Rent rolls general include the following?
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tenant's dba, location, sf, commencement and expiration, fixed minimum rent, and the breakpoint percentage and breakpoint sales.
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Ideally, the tenant file is contained in four or five parts?
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Correspondence, documents, financial data, construction documents, and sometimes a litigation file.
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What safeguards the management company from the preception of discriminatory practices, and provides management personnel with a road map to deal with common problems. The application of these safeguards also contributes to tenants anticipating and accepting management's actions more readily.
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The application of consistent policies and procedures
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What are the three overall goals of Lease Administration?
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(1) Financial results (2) communicating priorities (3) interpreting and negotiation
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In extreme circumstances, if a tenant is permitted to continually violate a provision of a lease and this leads to the Landlord giving up his rights through inaction this is called?
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Laches
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Management monitors tenant operations for indications of problems with a tenant's business including the following red flags?
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Slow payment of rent, slow reporting of sales, low merchandise levels, merchandise perpetually on sale, low sales volume, lack of responsiveness to contact, and high cost of occupancy analysis.
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The two areas most likely to indicate that a tenant is experiencing difficulty are the?
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(1) Tenant's accounts receivable balance - an aging balance of more than 60 days indicates the likelihood of cash flow problems and (2) Declining or low sales - tenants whose rent-to-sales ratio exceeds industry standards generally do not operate profitably.
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A shopping center business plan states:
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Who (ownership), what (property), where (centers market), when (Budget year targets of rent, occ., noi,accts receivable), why (situation driving growth btn. budget year and current year, and how (capital plan) of a property.
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Research that tries to predict what is likely to happen when a renovation or redevelopment is complete and therefore whether the project has the potential to be economically worthwhile.
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Feasibility study
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Material prepared for the tenant, showing the demised space and its relation to adjacent spaces and the center as a whole; electrical, plumbing, HVAC adn waste line entry points are identified, but existing partitions and fixtures are usually not shown.
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Lease outline drawing (LOD)
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A type of lease which includes base rent and property taxes.
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Single net lease
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A type of lease which includes base rent, property taxes, and insurance.
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Double net lease
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The erosion of net operating income due to caps and concessions. For example if a tenant has a tax cap in the event of a shopping center sale, the taxes would go up but the tenant's share would be capped which would increase the owner's share of expenses and decrease NOI and value.
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Slippage
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What is the term for minimum rent over the lease term minus concessions, tenant improvements, caps on CAM = ?
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"Real rental income" to LL
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A _________ ____ is the road map for the operation of the shopping center for the upcoming year or years. The _________ ____ sets a direction and strategy for the center and plots the tactics to get there. The preparation of the _________ ____ involves all member's of the shopping center's team which include?:
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Business plan. All member's of the shopping center's team include: property mgt., operations, leasing, marketing, tenant coordination, development, accounting, and corporate.
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Rents that are structured so that they increase at specific times during the life of the lease are called? what two ways are these rents increased?
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Step up rents are increased by fixed amounts established in the lease or by increases in indices such as CPI. Either way Step up rents increase at specific times.
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A thorough review of all facts regarding the center, the market, the customer, the competition, and the resources available to assist in the marketing of the center.
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Situational analysis
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What five elements does a marketing plan include?
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(1)Situational analysis primarily consisting of research (2) Problem and opportunity definition (3) Goals and objectives (4) Strategy development (5) Tactics planning and implementation
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A logical, discipline approach to increasing a center's sale and the center's productivity overall. It is a road map of objective strategies and tactics derived from an analysis of the market situation and the identification of problems and opportunities.
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Marketing plan
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A Merchant's association's oversight is provided by its?
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Board of Directors
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A Marketing fund's oversight is provided by its?
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Advisory board
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Ratio which is one of the most important barometers for SC marketing programs. Marketing pros use this analysis to determine the results of a particular mkting program - what it accomplished and the cost to achieve those results. The ratio should be no greater than?
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Cost to sales ratio should be no greater than 25% or .25
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Enable centers to spread the cost of producing creative materials and collaterals over several centers.
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Shared marketing programs
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Two parties exchange services or something of value in such a manner that both parties benefit. Example radio station exchanging air time for advertisement space in a center.
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Trade-outs
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Two or more parties combining forces to implement a marketing program that will benefit all parties.
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Partnership marketing
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Taking positioning of a shopping center a step further.
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Branding
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SC management has two avenues to communicate the desired message and image about the shopping center.
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(1) Paid advertising and (2) free publicity
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Construction insurance which covers the broadest categories of perils. When should caution be taken utilizing this type of construction insurance.
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Builder's risk insurance (BRI). Caution should be taken whenever BRI and Fire Insurance (FI) are used beacuse of the coverage gap. BRI begins and ends with construction, but some Fire Insurance (FI) does not begin until a certificate of occupancy (C.O.) or its equivalent has been issued.
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A type of insurance that covers virtually all risks not included in broad form FI and is also considered gap insurance. Generally, this type of insurance protects against (name 4). What additional protection should be included in New York City.
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Difference in conditions (DIC). This insurance generally protects against earthquake, landslide, flood, and other unusual accidental occurrences. In New York City don't forget to add Water main breakage to the DIC policy.
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If DIC insurance is not obtained, the insured should insist on what type of insurance?
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All-risk Fire Insurance. All-risk FI
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What are two ways an insured can protect itself from a coverage gap occurring during the phase between construction and issuance of a CO?
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(1) An insured can insist on FI and difference-in-conditions coverages commencing at the same time the builders risk insurance terminates (ie at construction completion) or (2)An insured can insist that BRI be extended until commencement of FI and DIC (ie after issuance of CO)
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Illustrate the components of a discount rate, assume a SC is valued using a discount rate of 11.5 percent. If the prevailing ten-year treasury note yields 5.5 percent, what is the risk premium and what is another term for the risk premium in this example.
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The risk premium is 6 percent. Another term for this 6% is the investor's hurdle rate. IE the investor requires a 6% risk premium over a risk free 5.5% treasury yield.
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What are the three approaches to determining value of a shopping center?
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(1) Income capitalization or income approach (2) replacement value or cost approach (3) comparable value or market approach
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What is the most common measurement of value enhancement and what is the formula? This is used to measure the time it takes to return an investment from increased cash flow resulting from the capital investment. If you renovated a shopping center for example.
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Payback period (in years) = Investment ÷ annual increased cash flow ** ie how many years does it take to payback the investment
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The investment value of real estate can be expressed as:
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The present value of an anticipated income stream adjusted for differences in perceived risks relative to alternative investments.
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What is the most common approach to determining the value of shopping centers?
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Income approach
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Expense items considered below NOI and which do not effect NOI include:
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Debt service, capitalized expenses, commissions, tenant improvements, reserves, depreciation, income tax, one time legal fees etc.
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What are the two components of value in an income-producing property?
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(1) periodic returns to the investor in the form of "income" and (2) proceeds from an assumed sale of the property, commonly referred to as the "residual"
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In estimating the investment value of a shopping center using its two components of value, what must you do to the "income" and "residual".
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You must discount the "income" and "residual" to present value.
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What is Accounting?
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Accounting is the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results.
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What is the term for "an organized list of a company's financial activity? and what are five main categories of this system.
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Chart of Accounts. Five main categories of accounts are: assets, liabilities, equity, revenues, and expenses.
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Term for what a company owns?
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Assets
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Term for what a company owes?
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Liabilities
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Term for the owner's interest in the company after all obligations are met?
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Equity
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Term for what a company pays out to make a product or deliver a services?
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Expenses
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Term for what a company receives for its products or services?
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Revenues
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The foundation of accounting is? What does this mean?
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Double entry bookkeeping means that for every addition there must be a subtraction, so that the totals remain balanced.
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An increase to an asset account is a ________?
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Debit
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An increase to a liability account is a ______?
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Credit
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An increase to an equity account is a ________?
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Credit
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An increase to a revenue account is a _________?
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Credit
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An increase to an expense account is a ________?
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Debit
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How does GAAP (Generally accepted accounting principles) requir that average annual rent be recognized?
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By straight-lining rent over the life of the lease. This results in an equal amount of rent being recognized in each year of the lease.
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What is created at the end of each accounting period to assure the correct reflection of debits and credits?
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A trial balance
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On an accrual basis, the failure to collect rent promptly may be recognized in an account called?
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Bad debt allowance or credit loss
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What are five basic additional statements for cash management in addition to statement of cash flows? Briefly describe each?
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(1) Transaction by detail statement - provides detailed income and expenses for each account code or category ie "the details" (2) Rent Roll - shows payment or lack of payment and includes the very important "aging report" (3) Cash receipts journal is a statement that accounts only for receipt of cash (4) Cash disbursements journal is a statement that accounts only for cash disbursements. (5) General ledger is a record of the project's accounts which make up its financial statement.
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Rarely does an ending balance in a bank statement agree with the cash account of the books, so what is needed? Why is there often variation between a bank statement and cash account of the books?
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A bank reconciliation is needed to adjust the book balance. This variation between a bank statement and cash account of the books exists because of bank charges, interest, and bank errors along with disbursements being made that are not reflected against the account.
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A financial statement is primarily used for determining the financial position of a project when?
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At the end of an accounting period
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A landlord's ability to achieve prompt payments of rents and other amounts reflects?
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Its effectiveness in training the tenants to comply with the leases.
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What are three very basic things that a financial statement illustrates and what are two primary financial elements of a financial statement?
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Financial statements show (1) the relationship between income and expenses (2) assets and liabilities (3) and return on equity. Two primary financial elements of a financial statement are the income statement and the balance sheet -- a third is the statement of cash flows.
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What is the most common method of looking at the relationship between income and expenses? and what two things does this ratio specify? Describe the formula?
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The most common method of looking at the relationship between income and expenses is the expense-to-income ratio which specifies the efficiency of the project and the actual profit margin. To arrive at the expense-to income ratio, subtract the operating expenses from the income, arriving at NOI. Divide NOI by the income to arrive at the expense-to-income ratio.
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What is starting point to determine the financial fitness of a project?
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The financial statement
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What are two methods of preparing financial statements?
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Cash basis accounting and accrual accounting are the two accounting systems for treating entries
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Which type of accounting is used by the majority of property management companies?
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Cash-basis accounting
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Which type of accounting method provides the more precise picture of the financial situation existing at the end of the accounting period?
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Accrual accounting
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An accounting period is either?
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a month, a quarter, or a year
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A twelve-month accounting period is called a? If the accounting period ends on December 31, then the company uses a calendar year for its?
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Fiscal year
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In addition to the two basic types of financial statements (income statement and balance sheet), what are two additional financial statements used by accountants and auditors? and what do they measure or reconcile?
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A Statement of cash flow measures the changes in cash position during the period. The Statement of retained earnings reconciles the balance of retained earnings from the beginning to the end of the year.
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What is the name for the statement showing the project's financial position at the end of an accounting period?
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The balance sheet
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The balance sheet incudes what three basic elements and define each?
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Assets (cash, accounts receivable), liabilities (loans, accounts payable - which may be short term or long term), and equity (venture capital stocks).
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What financial statement reflects the net effect of the operating statement? Hint: it shows prepaid rents and security deposits.
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The Balance sheet
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What is the formula for the balance sheet?
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Assets equals Liabilities plus equity, or Equity equals assets minus liabilities
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The most common three solvency ratios are? What are the formulas and what do they show?
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(1) Quick ratio = (cash + accounts receivable) ÷ current liabilities -- quick ratio shows liquidity to cover current debt. (2) Current ratio = current assets ÷ current liabilities -- current ratio measures safety margin to cover a reduction in current assets. (3) Liabilities to Net Worth = liabilities ÷ net worth -- measures debt to venture capital, high debt levels indicate high risk.
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The three (3) most common efficiency ratios are? and what do they show?
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(1) Inventory Turnover = Sales ÷ Inventory -- Inventory turnover shows the rate at which merchandise moves. (2) Assets to Sales = Assets ÷ Sales -- indicates the level of investment needed to generate the sales (3) Sales to Working Capital = Sales ÷ (Current Assets - Current Liabilities) -- measures the efficiency of using short-term assets and liabilities to generate sales
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The most common profitability ratios are? and what do they measure?
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(1) Profit margin = Net profit after taxes ÷ sales -- shows profit earned on a per dollar of sales, measures efficiency (2) Return on Assets = Net profit after Taxes ÷ assets -- key indicator of profitability (3) Return on Net Worth = Net profit after Taxes ÷ net worth -- analyzes whether the return on venture capital is suitable.
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What does the income statement show? and what are two other names for it? What is the formula for the income statement?
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The income statement shows the net operating income and the net cash flow income for the specified accounting period. Also called operating statement and P&L. The formula for the income statement is: Revenues - expenses = income.
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In addition to NOI, what are two other similar measurements of bottom line? and for what do the acronyms stand?
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EBITDA - earning before interest, taxes, depreciation, and amortization. FFO - funds from operations
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Whiel EBITDA approximates the total cash from operations, what is the difference between EBITDA and cash flow?
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Cash flow recognizes the timing of payments whereas EBITDA recognizes payments based on their accrual.
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What is Cash flow?
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Cash flow is the spendable income available after all payments are made, including mortgage principal and interest.
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What is the difference between Depreciation and Amortization?
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Depreciation applies to tangible assets and Amortization applies to intangible assets.
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What does "functional dimensions of collection" include?
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billing or nonbilling by landlord, tracking payments received within accounts receivable system, aging of receivables, and options available to collect pst due moneys from the tenant.
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Give two examples of non-cash charges and why are they called non-cash charges? What do these non-cash charges represent?
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Two examples of non-cash charges are depreciation and amortization,they are called this because the amounts recorded in those accounts do not represent expenditures in the current accounting period. These amounts represent the economic value received in the current year from an asset.
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What does the statement of cash flows show?
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The statement of cash flows reveals the relationship of the net income (bottom line) on the income statement to changes in cash balances during the accounting period. Cash balances can decline despite positive net income, and vice versa.
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What does FFO approximate? Which type of entity favors FFO? What is the difference between FFO and EBITDA?
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FFO approximates the cash-generating power of a company and is favored by REITs. Unlike EBITDA, FFO does not concentrate strictly on what is produced from the primary operations of the firm, but instead looks at total cash on an accrual basis.
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Rents may be contingent upon a certain event such as?
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The opening of a fourth department store may increase rents for all stores which opened prior to the fourth department store.
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When is percentage rent not subject to a breakpoint?
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When it is paid in lieu of fixed minimum rent or fixed minimum rent and add-ons.
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Leases sometimes grant a tenant the right to deduct all or a portion of some expense or investment from all or a portion percentage rent. What are two words for this right?
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(1) offset or (2) recapture
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What are the four objectives of the CSM program?
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(1) establish and advance high professional standards in SC management - a CSM must be able to manage all types and sizes of SCs in a wide range of geographical locations. (2) recognize managers who meet the professional standards. (3) seek and encourage others to train for careers in SC management. (4) establish and maintain educational standards for the profession.
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A SC budget begins with the current rent roll. Completion of the budget requires a plan for?
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Renewal or nonrenewal of every lease expiring during the course of the period the budget considers.
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The rents a shopping center commands are predicated on what two things? Define them both
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(1) The sales volume is the dollars of sales produced in a store and (2) sales productivity is a measure of the sale per square foot of store area.
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Three scenarios if a tenant has the right to recapture 50 percent of its annual real estate tax charge against any percentage (overage rent). (A) If the tenant's tax charge is $2,000 and there is no overage rent, the tenant pays how much tax and overage? (B) If the tenant's overage rent is $500, the tenant pays how much tax and overage? (C) if the tenant's overage rent is $2,000, the tenant pays how much tax and overage?
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(A) $2,000 tax and $0 overage (B) $2,000 in tax and $0 in overage because the amount of overage does not fully offset 50 percent of the tax charge. (C) $2,000 tax and $1,000 overage because of the offset.
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Exterior common areas typically include?
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project roads, landscape buffers, project entry features, storm-water management systems, project landscaping, and the like.
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What document lists all leases expiring each year in an ascending order from the current year to the expiration year of the lease with the latest expiration date?
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Lease expiration report
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The occupancy budget is completed by projecting the following?
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(1) each lease that will remain in occupancy during the budget period (2) each renewal and the replacement tenant for any non-renewing leases (3) unscheduled vacancies and the replacement for such unscheduled vacancies; and (4) tenants expected to fill currently vacant space.
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When is budgeting occupancy most essential?
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An occupancy budget for budgeting occupancy is most essential when their is co-tenancy.
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Define co-tenancy?
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A term that refers to a clause inserted into a tenant's lease stipulating that a reduced rent or no rent be paid until an agreed upon percentage of the center is occupied.
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Any occupancy budget not only calculates occupancy by month and at year end, but also?
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On average over the budget year
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Co-tenancy provisions may be tied to anchor tenants. Given the number of tenant bankruptcies in recent year, what should be avoided?
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Stating specific tenants in a co-tenancy provision should be avoided.
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A co-tenancy provision stipulates that a reduced rent or no rent is paid until an agree-upon percentage of the center is occupied or may allow a tenant to terminate the lease if a certain percentage of occupancy is not maintained. The lease dictates whether such an occupancy threshold occurs at ________, or is ________, ?
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(1) at a point in time or (2) based on an average occupancy rate over the course of the budgeted year.
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To maintain control of the merchandise mix, Landlords do what?
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(1) LL's prefer not to give renewal options (2) prefer to keep lease terms short (3) and LL's prefer to have a termination option.
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Tax or CAM Reconciliation is the process of determining the true cost of taxes and/or CAM and charging or crediting the Tenant for its overage or under payment. What are two other words for reconciliation?
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(1) True up and (2) settlement
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If a tenant is obligated to exercise an option by a certain date, but forgets, the LL should do what?
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Notify the tenant that the opportunity to exercise the option has passed.
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What are five departments which should review a shopping center's security manual for a large organization?
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(1) risk management (2) operations (3) legal (4) security (5) regional management
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List 12 steps in conducting a security audit which will consist of surveying the neighborhood and researching actual or potential security issues at the center:
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(1) Interview police precinct captain (2) drive neighborhood (3) inspect prop. (4) look for graffiti (5) visit merchants (6) ask maintenance personnel (7) review employee parking areas (8) review prior security reports (9) talk to area prop. managers (10) discuss security program with center owner (11) evaluate shopping center's needs (12) update shopping center's emergency procedures.
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What are three basic purposes of a security manual?
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(1) As a guide for security personnel on a day-to-day basis (2) as reference during an emergency (3) as reinforcement to what has been taught in the classroom and on the job.
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