Click here to view the video on YouTube.

Don’t miss the discussion between Andrew Zezas of SIOR NJ and Marc Betesh of KBA Lease Services & Visual Lease.  Together they outline the upcoming changes to lease accounting under GAAP and their potential impact on commercial real estate, developers and occupants. 

Topics Include

FASB and IASB:  Who Are They and Why Are They Important?
Upcoming Changes and Reasons behind the Initiative
Treating a Lease like an Asset
The Effect of Draft Delays, Roundtables and Comment Letters
Renewal Options and Inaccurate Projections
Evaluating the Likelihood of Exercising Options and Economic Incentives to Renew
What Tenants Should Do Today

Tomorrow’s webinar will explore the underlying theory behind the proposed FASB changes.  IFMA, a professional association for facility management professionals,  and Visual Lease’s President, Marc Betesh, will outline the potential ramifications and offer advice as to best prepare for the impact.

Topics Include:

1. Why the Changes Were Proposed
2. What Will Change
3. Impact on Lease vs. Buy Decisions
4. Treatment of Gross vs. Net Leases
5. The Most Current Updates/Deliberations/Alterations Made to the Original Exposure Draft
6. How to Start Preparing Now

Background:
Last August, the Financial Accounting Standards Board (FASB) sent shockwaves through the commercial real estate world when they proposed significant changes to how leases must be recorded in a company’s financial statements.  Although the Boards continue to deliberate, every major company (any company that follows GAAP) will be impacted by the upcoming changes.  At a minimum, substantial attention and manpower will be required to comply with the new rules.  But the changes could also impact such decisions as whether to lease or buy or how buildings will be serviced.

On February 2^nd at 12pm EST, Visual Lease and KBA Lease Services will host a free webinar outlining the impact on corporate real estate due to the proposed FAS 13 lease accounting changes.  Presenters include Marc Betesh, CEO of Visual Lease, Gary Illiano of Grant Thornton and Lou Ferro of KBA Lease Services.

“I attended Visual Lease’s FASB round table discussion in New York City and found it highly informative, says Meyer Last, Esq., Partner at Fried Frank.  “The emphasis on practical application will be greatly useful to anyone who must contend with the new rules, whether directly or as a consultant.”

Topics include:

• Updates from FASB’s Latest Roundtable Meetings
• What You Need to Know about the Proposed Changes
• Modified Gross Leases – A Thing of The Past?
• How Long is a Lease Term (Once You Count Options)?
• How Existing Leases Will Be Treated
• What You Can Do Now To Save Both Time and Money

The commercial real estate industry is abuzz with the proposed changes to lease accounting under generally accepted accounting principles (GAAP). As an aid for real estate professionals, Visual Lease has written a white paper.

You are just one step away from downloading Visual Lease's white paper on "The Impact on Corporate Real Estate of Lease Accounting Changes Under GAAP". Upon completion you will be taken to a page where you can download the white paper.

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Tuesday’s sessions started early with the hottest topic for corporate real estate end users and service providers – the future of FAS 13.  The room was packed with 150 people, almost a mega session itself.  Richard Podos from Lance and Russell Howell from Johnson Controls led the discussion.  Many of the questions and much of the debate was over how lease terms would be treated under GAAP.  Under the new rules, a lessee will have to determine the longest possible term that is most likely to occur.  This includes options to extend or terminate the lease.  The overwhelming response from the commercial real estate professionals in the room was the options in real estate leases should not be included in the term.

The moderators also made a plea for corporate end users to write their own comments and letters to FASB, as they will not accept group, association or form letters.  To learn more about how to comment visit the FASB website.

One of the fall-outs of these changes will be the necessity for companies to organize their lease information in a lease administration system.  Not only will the technology help manage the lease (critical dates, abstracts, reporting), but will also provide the tools to determine the ongoing obligations (most likely to occur).

To help our readers learn more about the upcoming changes, Visual Lease will be releasing a white paper outlining the full impact on corporate real estate.

By Bonnie Briand

Real estate leases can be very complex documents.  Tenants and landlords pay hundreds of thousands of dollars to brokers and others to negotiate favorable lease terms, but neglect to follow through with an effective way to manage the transactions once the deals are consummated.

In order to maintain control over these transactions and reduce the incidence of error or lost opportunities, many companies implement a lease management software system and expect that it will magically resolve all of their issues. However, the lease management software will only be effective if the company first designs and documents its Real Estate Lease Information Flow (RELIF) and then develops and implements a solution designed to monitor that flow.

To effectively track the flow of information the following steps can be taken.  This is part of a four part series exploring How Well Does Your Real Estate Lease Management Process Flow:

Step 1 – Define existing processes, identify hot spots and information required for and from each document that touches the lease deal.
Visualize the path that documents take, and then identify any redundancies, bottle-necks or other problem areas that can slow the process.  Be sure to think about all documents, including leases, amendments, estoppels, SNDAs, landlord invoices, change of address letters, etc.

For example, visualize what would happen if an estoppel letter were to come in.  Who should receive it, and what should happen prior to execution?  If your company requires (as it should) legal department approval, understand what documents and information it would need.  Consider who should be consulted in order to find out whether any claims exist against the landlord, the status of the rent account, etc.

Step 2 – Develop a documented process/system to keep hot spots and reporting requirements in focus.
By communicating with each department to determine their reporting needs, rework the process eliminating redundancies, bottlenecks and problem areas.  Most importantly, document the process with a flow-chart or an outline so each department/person can see how they fit into the overall picture.

Step 3 -Assign qualified personnel ownership of information.
Once you have the documents flowing correctly, delegate the responsibility of capturing missing information to those who understand the process.  They then take ownership of the data’s integrity, and retrieving missing information becomes their responsibility.

Step 4 – Monitor compliance using tools tailored around your processes.
Develop management reports that quickly identify errors in data or changes in your portfolio. For example, in order to ensure that changes in rent are supported by the lease documents, you should produce a report that identifies changes in rent from one month to the next.  Similarly, in order to measure performance of disposition activities, create a report that compares changes in net absorption of vacant, surplus and subleased space within the portfolio.

Technology is a great tool for automation, but it is only as effective as your Real Estate Lease Information Flow is developed, documented and monitored over time.

Galaxy Partners recently conducted a survey on important issues facing corporate real estate. From the results it is clear that the challenges of the current economy will continue to have an effect on how corporate real estate into 2010.

Here are the results:
1.   The most important real estate issue facing my business in the coming 12-18 months is:

• 53% reported Reducing occupancy costs with about the same locations
• 34% reported Expanding the number of locations
• 13% reported Reducing the number or size of our locations

2.   Regarding outsourcing real estate management tasks or services:

• 53% reported Currently outsourcing most or all corporate real estate services needed
• 40% reported Managing real estate in-house and it is working well
• 7% reported Is considering/open to outsourcing most or all corporate real estate services

Observations:

Reducing occupancy costs can be accomplished by managing the portfolio more efficiently with a set of tools and processes. Real-time, instant access to space availabilities and usage will be required.  This allows organizations to be responsive to changing space planning requirements.

Organized and report-able lease data will be needed to provide year over year comparisons of real estate expenses, making variances and anomalies easy to find and remedy. Variances will need to be researched using the lease terms, documents and notes. In addition, current and historical financial data for existing and expired leases will need to be accessible for desktop audits and forecasting.

The remaining 47% are planning changes in their portfolio.  This means that documents, financial information, contacts and critical dates will all need to be tracked and leveraged during the lease life-cycle.

In regards to question 2, whether outsourcing or managing real estate internally, a system is needed to monitor the process.  Changes, progress indicators and information will need to be shared.

Summary:

The combination of well implemented processes and tools can help lower occupancy costs, manage portfolio change, and facilitate an effective relationship with outsourced services. Visual Lease is a system that when combined with effective processes, helps real estate department work more efficiently.  The key features of Visual Lease that are used to meet the requirements in this article are space usage tracking, expense tracking, flexible reporting, centralized documentation and easily accessible lease terms.

About Galaxy Partners:

Galaxy Partners helps companies get the greatest possible value out of their commercial property. Through managing a wide range of lease portfolios and corporate real estate transactions, their seasoned team has solved real estate issues for clients ranging from local businesses to Fortune 500 companies.  Galaxy Partners can be reached at 770-350-0411 or online at http://www.galaxypartners.com