Friday, December 14, 2018

Five Year-End Considerations for your Commercial Real Estate

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A column like this one would normally be reserved for a period closer to Auld Lang Syne. However, with the dawn of December and Black Friday behind us - we will blink our eyes and it will be 2019. So let’s get a jump on those year-end issues - shall we?

Here - in no particular order are the five things I suggest you 
address during the final month of 2018.

Budget for 2019. If you are a tenant, chances are the owner of your building has compiled a projection of operating costs for 2019. Taken into consideration are things such as property taxes, insurance, utilities, landscaping and any repairs planned for next year. These estimates are rolled into a monthly bill which you will receive January 1. As the occupant, you have the right to audit these expenses - which I recommend you do. If you own the building you occupy - I suggest you undertake a similar accounting. Simply take a look at that property tax bill you received in October. Remember the first half is late if not paid by December 10. Next drag out that insurance premium and review it. Finally, will your gardner expect a raise next year? Are you planning to add solar or replace the roof? You now have the basis for billing your occupant.

Locate your lease. Easy, right? Except when it’s not. I’d suggest keeping both a digital and a hard copy. Make sure you have the latest amendment signed by you and the owners. Next take a quick peak at things such as the expiration, options to extend or terminate, and increases in your base rent. Calendar any dates of importance for 2019. Must you give your owner a six month heads up you will be exercising your tight to expand into the suite next door? Yep. How’s the time to note that. No lease with your tenant? No better time than now to commence a new one come January 1.

Check on your loans. Will any of the debt mature in 2019? In our environment of rising interest rates - now may be a great time to re-finance. If you agreed to a variable rate loan - your payment may be bumping up. Plan accordingly.

Tune up those systems. Roofing companies get very busy and very cranky once the rains hit. Doubt what I say? Ok. Just wait until you’ve water pouring onto your computer numeric machinery and need someone to immediately patch the hole. Good luck! During the brief business respite we experience during the last two weeks of the year - why not engage your roofer to complete an annual maintenance? Now that the weather is cooler - have your HVAC company replace the filters and insure all is well with the cooling. Finally, has your warehouse sprinkler system been certified recently? Take care of that while the timing allows.

Project. Will 2019 be business as usual? Or, will next year find you searching for a new building to buy or lease? Remember - inventory is still scarce. Plan for the process to take longer.

Allen C. Buchanan, SIOR is a principal with Lee & Associates Commercial Real Estate Services. He can be reached at 714.564.7104 or abuchanan@lee-associates.com  his website is allencbuchanan.com