For some entities’ fiscal years beginning after December 15, 2018, we can expect to see the appearance of new property lease standards as enforced by the Financial Accounting Standards Board. Commercial real estate industry lease agreements will be subject to a new accounting standard intended to force the recognition of leases that run longer than twelve months as assets or liabilities on the books.
Got questions abut the recent big changes in lease accounting standards? Mark the date: March 29, 2016, the Financial Accounting Standards Board (FASB) will host IN FOCUS: FASB Accounting Standards Update on Leases, a live webcast taking place from 1:00 to 2:00 p.m. EDT.
Brokers and landlord reps use of the escalation clause in a commercial space lease is a common one. These clauses provide for increases in rent over a specified period of time. Often, these increases are determined not by actual increases in the landlord’s operating costs, but are instead keyed to an index, such as the consumer price index (CPI) or the London Interbank Offered Rate (LIBOR).
It’s not possible to patrol the commercial RE beat online without finding Coy Davidson. A Senior VP at Colliers with twenty years in the business, Coy writes The Tenant Advisor, one of the better blogs dedicated to commercial property markets with a focus on corporate real estate and tenant representation and office solutions.
His recent post is titled Know Your Numbers. And when he says “know”, he’s not kidding. His advice to agents is to embrace the math in the financial analysis spreadsheets by learning it away from spreadsheets — old-school — to the benefit of everybody at the table. He writes:
Time to indulge in a little blatant localism. Just a short trip along the river from NAR’s downtown Chicago headquarters downtown is the Merchandise Mart, that massive 1930 monument to merchandising and architecture of the early 20th century. Its four million square feet see 20,000 visitors and tenants passing through its art deco doors every day, most in the retail and wholesale business. But a recent 15-year, 600,000 sq. ft. deal involving a technology giant creates a lot of upheaval, changing the mix significantly while it projects the Mart well into the 21st century.
From the raw land, development and investment side of things: CCIM Institute’s newest podcast is a discussion with Philip “Fred” Himovitz, CCIM, all about the ins and outs of the ground lease. The advantages and considerations of ground leases over fee simple ownership are explored, as well as seniority, management, financing and tenant issues. Even though the podcast is under nine minutes, a solid summation of ground lease structures and purposes is covered.
Yesterday’s presentation from Bob McComb on getting your start in commercial real estate had plenty of great ideas, but one that stuck out to me this morning was about commercial leases.
Bob noted that a major barrier to entry to commercial dealmaking is the dreaded lease form. The legalese on a boilerplate form can make your eyes cross, and customizations from companies or owners or tenant reps only make it harder to display the expertise that you need to in order to give your client the feeling of certainty that they will get what they want by working with you.