Lease Abstraction

Article Written By: patrickoconnor

Lease abstraction is an essential component of due diligence for a multi-tenant commercial property. Lease terms often vary from tenant to tenant. Lease terms and options impact both the quantity and quality of rental income. Lease terms affect the quantity of rental income by adjustments made for factors such as rental rates and escalations. Lease terms affect the quality of rental income based upon factors such as the tenants rights to lease additional space at a predetermined price or to give backspace if they no longer need it.

Lease abstraction is a tedious and time-consuming process, particularly for properties with numerous tenants. Each lease is often 20 to 100 pages in length. In many cases, the lease form varies from tenant to tenant depending on whether the tenant or the landlord originated the lease form and which of a series of owners executed the original lease. Multiple special terms can be included in various portions of the lease. These modifications can substantially impact cash flow and the value of the property. Following are some of the lease terms which should be considered when conducting a lease abstraction:

Renewal rights;

First right of refusal;

Co-tenancy clauses (tenant A can terminate lease if tenant B leaves the center);

Right to terminate if the building does not have adequate space to meet the tenants requirements or if other factors occur;

Escalation clauses;

Pricing for after-hours electric;

Parking rights and pricing;

Signage rights;

First right of refusal to purchase the building;

Right to reduce rent if certain conditions are met to;

Write to give back space which is no longer needed;

Right to take additional space at a predetermined price.

A complete lease abstraction must be prepared before it is possible to perform financial modeling for an acquisition. The lease terms will dramatically affect current and future cash flows. The combination of lease abstraction and financial modeling (performed using a program such as Excel or Argus) provides the investor meaningful insights into the probable cash flow for the investment.

On-time delivery, fast delivery, quality appraisals and reasonable pricing are the cornerstones of O Connor s appraisal practice. We understand what clients seek and have developed our practice to meet these needs.

Integrity includes meeting deadlines serving the best interests of the client and straight-forward valuations. O Connor appraisers work diligently to consistently exhibit these qualities.

Collateral valuation estate tax planning, regulatory compliance, pre-sale valuation, federal tax issues, property tax appeals and divorce are some of the most frequent reasons clients seek appraisals. O Connor appraisers are familiar with each of these issues.

Rental data and comparable sales data are the building blocks of real estate appraisal. Oconnorcomps.com is the comprehensive comparable sales database in Texas. Oconnordata.com provides our appraisers access to the most comprehensive database of rental comparables.

About the Author

The appraisal division of O’Connor & Associates is a national provider of commercial real estate appraisal services including real estate consulting, casualty loss appraisals, cost segregation studies, due diligence, insurance valuations, feasibility studies, financial modeling, gift tax valuations, highest and best use analyses, casualty loss valuations and HUD map market studies.

You Can Link Directly to "Lease Abstraction" by using the url:
http://www.allbestarticles.com//finance/real-estate/lease-abstraction.html

This Article Has Been Published on Wed, 3 Nov 2010 and Read 104 Times

Find All Best Articles at http://www.allbestarticles.com

Rating: Not yet rated

Comments

No comments posted.

Add Comment

You do not have permission to comment. If you log in, you may be able to comment.

Related information on Real Estate

Why do I need a conveyancing solicitor when buying or selling real estate?
London Living: The Best in the World
Real Estate Toronto Neighborhoods and Property Hunting for Leases
The Affordable Secret of Mayfair Office Space
10 Ideas To Follow When Selling Your House
Property in Belgravia - London's Centre of Architectural Splendour
Is Abu Dhabi facing Dubai-like property slump?
Chesire England Serviced Offices.
Find out About Relevant Ideas To Choose Horse Stables
Pros and Cons of locating an office in Mayfair
Things to keep in mind when choosing where to locate an office in London
Guide To Buying A 2 To 5 Million Dollar Home In The Dell In Hollywood
When Selling A Home On Sunset Plaza, Point Out The Exclusiveness For The Fastest Sell
An In-Depth Look At The Toronto Home Market
What a Phoenix Real Estate Listing Will not Show That A Neighbor May
Which are the prime areas for office space in London?
Tips to make the most of your office space
How have commercial property prices in London been affected by the recession?
Benefits of working in Covent Garden
Investment opportunities in Pakistan Real Estate sector
Quit Claim Deed Basics
Dubai The Place To Be In Terms Of Property
Buy House in Philippines
Best way to write professional advertisement for Dubai properties
Things to consider while getting a house on rent