Monthly Archives: November 2013

National Flood Insurance Program Update

Posted November 22nd 2013

In 2012, the Biggert-Waters Flood Insurance Reform Act (“the Act”) was enacted. The goal of this legislation was to stabilize and revise the National Flood Insurance Program (NFIP). Provisions of the Act will roll out in stages, including some that have already occurred. On October 1, one portion of the Act went into effect which would require the Federal Emergency Management Agency (FEMA) to remove flood insurance subsidies for certain properties across the country.

Unfortunately, some of the flooding zones were inaccurately tagged so many areas are misrepresented on flood maps used by insurance companies. This has resulted in serious cause for concern by property owners because premiums increased at drastic rates without consistency among insurance providers. One of the Act’s co-authors, Representative Maxine Waters, says “inaccurate mapping” and “incomplete data [have] led to unreasonable and unimaginable increases in premiums.”

Although the Biggert-Waters Flood Insurance Reform Act significantly impacts flood hazard areas, the law poses great risk to property ownership. CCIM Institute is concerned with the significant rate increases impacting members who manage or own multifamily residential and commercial properties.

Legislation titled the “Homeowner Flood Insurance Affordability Act” (S. 1610 / H.R. 3370) has been introduced to address the exorbitant premium rate increases. The legislation would delay the rate increases sparked by the Biggert-Waters Act to allow FEMA time to provide accurate flood maps and to complete an affordability study that would look at the impact of the new rate structure.

The Affordability Act has garnered wide bipartisan support with H.R. 3370 having 138 cosponsors and the senate companion bill, S. 1610, having 23 cosponsors, as of November 21. 

If you have experienced significant rate increases since 2012, please contact the government affairs department at legislative-affairs@ccim.com.

– See more at: http://www.ccim.com/newscenter/323356/2013/11/22/national-flood-insurance-program-update#sthash.hnBZFxAL.dpuf

Strategic Leasing Can Reduce Costs for Your Medical Practice

Share on email Share on facebook

More Sharing Services 1

By Leo Griffin | June 12, 2013

As healthcare reform and Medicare funding changes unfold, physicians are paying more attention than ever to their operating expenses. In addition to patients, they must examine their medical office needs with the goal of maintaining the most flexibility possible in these changing times.

                        Strategic leasing could potentially be the vehicle to accomplishing the much-needed business flexibility. Lease terms can range from three to 10 years (the initial period having a definite impact on the rates and tenant-improvement allowance). Although rent is typically 6 percent of a practice’s budget, the expense has a tremendous effect on both the top and bottom lines. It impacts the location, patient flow and staffing requirements for the office.

We recently discovered an opportunity for a practice to move less than a mile away to capture rent savings of $2,000 per month. The short geographical move yielded substantial long-term benefits. The physicians could maintain current staff and reduce overhead in addition to enjoying the new digs.

It helps to think of a medical practice’s month-to-month decision making as an internal competition for cash. As they examine the business model to adjust to the changes in healthcare, the principals have to consider the best allocation of available funds. Will it be for new equipment or another provider or staff member? Could it be for an additional office in another location that offers the desired patient demographics? Interwoven with the decision on how cash will be dispersed is the measurement of the return on investment. The proverbial “Cash is King” mantra rings true as ever for medical practices.

One key tactical maneuver has been to take the practice off campus to a medical office building offering lower occupancy costs. Baby Boomers want their off-campus facilities to cover all the services available in one facility, just like the retail center they grew up with. In the example above, the practice had nine months remaining on its current lease term. We found an opportunity that was much better for the business’ bottom line, and current patients only had to make one additional turn to get to the new location.

Reduced costs are just one part of strategic leasing. When planning to keep your practice on the road to success, think triple A: Access, Agility and Assets. Strategic leasing can allow the practice to better reach its desired patient demographics, while providing the ability to react to the aforementioned major market forces. The biggest asset is the business itself, so making a move that boosts its availability, versatility and bottom line makes plenty of sense.

Securing the most favorable occupancy costs through strategic leasing allows doctors to focus on their patients, people and, of course, the pursuit of business value.

— Leo Griffin is vice president of Healthcare Real Estate Services at Atlanta-based Bull Realty.

www.tampamedicaloffices.com

Understanding the Full Service Lease is Just One Piece of the Commercial Real Estate Puzzle

August 28, 2013 By Propertymetrics Understanding a full service lease in commercial real estate is easy when you have the right information. Commercial real estate professionals understand the ins and outs of this type of lease on commercial property. However, a full service lease is one of the commercial real estate terms that often confuses the general public. Here, you will find full service lease information and how this type of lease compares to other commercial real estate leases.

We’ll start with a simple definition of a full service lease. But first, it’s important to note that the term “full service lease” isn’t clearly defined and standardized. As with any legal agreement, it’s crucial that you actually read the lease terms and calculate a total cost of occupancy, which is rarely provided by the landlord. On its simplest terms, a full service lease typically refers to a leasing agreement in which the owner (lessor) is responsible for covering the building’s operating expenses in the rent. Those expenses that are covered in the rent can include – but are not limited to – real property taxes, insurance, utilities, maintenance, etc. So, to be clear, the full service rate of this commercial property lease covers building operating costs in the rent.

To someone renting commercial space, this sounds like a great deal. You pay a monthly rent based on square footage, and the building’s owner pays the operating expenses for the building. However, when it comes to full service leases, there are more terms involved than just paying a set rate. If you were to negotiate a deal to pay a quoted rental rate that did not change throughout the term of your lease, then you would most likely be negotiating what’s often called a gross lease and not a full service lease.

Here’s the big difference – one which all potential tenants must understand. The terms of a full service lease usually require the tenant to be monetarily responsible for any increases in the owner’s building operating expenses beyond the base year of the lease. What is the base year?

In most cases, the base year references the first calendar year of your lease. For example, during the first year of your full service lease, the owner of the commercial building pays $15 per square foot for operating expenses. Now, as you begin the second year of your lease term, the owner sees his building operating expenses increase to $18 per square foot. In this scenario, you would see your full service lease rate increase to cover that additional cost.

As you can see from the previous example, it is not just important that tenants have in writing exactly what operating expenses are being covered by the owner of the building. It is also extremely important to understand how those operating costs have risen each year in the past. While you can not predict the exact cost of increases in expenses like insurance, property taxes, or utilities; a tenant can review the trends in those increases to have a general idea how much their full service lease will increase year to year.

Now let’s take a quick look at some other commercial leases. We’re not going to explain in detail all of the types of commercial real estate leases available. However, it is good for you as a business owner and potential tenant to know the major differences between these leases. Below are a few more lease terms you may run across while researching commercial space to lease.

We mentioned gross lease earlier. There are also modified gross leases. These leases are similar in regard to a full service lease because the owner usually covers some operating expenses. It is unlike a full service lease because you usually pay a set rent throughout the term of the lease along with paying agreed upon expenses as well (i.e. tenant may be responsible for utilities.)

Another popular lease for commercial property is a triple-net lease. These are also referred to as NNN leases. What’s the difference between triple-net and full service leases? Simply put, a NNN lease normally requires the tenant to cover all building operating costs in addition to the agreed upon rent.

Finally, there are occasions where you may see a full service plus lease. You can probably guess exactly what this lease entails. When you sign a full service plus lease, you are agreeing to let the owner exclude a specific operating expense(s) from the rent. An example is that you may agree to cover utilities while the owner covers all other operating expenses for the building.

As you can see from the different commercial real estate lease structures, it is very important to understand what terms you agreeing to when you sign the dotted line. You might think that signing a $0.75 per square foot NNN lease is a great deal when compared to a $1.35 square foot full service lease. And, in fact, it could be a great deal. However, now you know that you can not make that call until you understand how much the annual operating costs are and how much they increase each year. When comparing alternative lease options, it’s critically important that you understand the total cost of occupancy for each lease. If you’re working with a good leasing broker, these calculations will be calculated and presented to you.

Full service leases are just one piece of the puzzle when it comes to commercial real estate leases. And yes, educating yourself on the terms and differences in leases is important. However, before you make any decisions and sign any lease for commercial space, we recommend that you have representation from a commercial real estate broker to ensure you are fully informed on the type of deal you are signing.

www.ItsTheLeaseWeCanDo.com