Leases can provide many advantages to businesses, such as higher purchasing power, lower long-term maintenance costs, better cash flow management, and simplified asset disposal. When you rent out or lease your property, you need to track the income from those activities to assess your business’s financial health.

Leases can involve all types of assets, including buildings, equipment, machinery, and vehicles. Leases differ from rental agreements in duration and control. Generally,

Leases can provide many advantages to businesses, such as higher purchasing power, lower long-term maintenance costs, better cash flow management, and simplified asset disposal. When you rent out or lease your property, you need to track the income from those activities to assess your business’s financial health.

Leases can involve all types of assets, including buildings, equipment, machinery, and vehicles. Leases differ from rental agreements in duration and control. Generally, rentals are short-term, while leasing durations last months or years. Lease accounting is the process that records lease-related activities and refers to lease-related revenues and expenses. These activities are recorded on financial statements, including balance sheets, cash flow statements, and income statements.

The Benefits of Lease Accounting

Lease accounting is important because it aims to properly record and reflect the value of the asset at inception and how the value changes throughout the duration of the lease. Lease accounting also provides proper recognition of lease revenue, expenses, profits, and losses on leased assets. Recognizing and properly valuing lease liability is also a big aspect of lease accounting.

In 2019, new accounting rules changed accounting for leases for publicly traded companies. And by 2021, those changes took effect for private companies. One of the biggest changes to occur was that it became a requirement for lessees to carry the operating leases on their balance sheets – particularly if they have been leasing for more than 12 months. The goal is to help investors gain transparency on the lessee’s long-term liability. Unfortunately, complying with these rules has proven challenging for companies that don’t apply the right accounting systems.

However, there are benefits of the new lease accounting standards. And complying with them can ultimately improve your bottom line. One of the biggest benefits of lease accounting is that it leads to more intuitive insight and, consequently, better budgeting decisions.

To achieve compliance, you will likely implement new lease accounting software. And the right software system results in improved data management because lease contracts and related documents will be centralized. The right system with automation features also means you can save precious time and money that you would otherwise lose if you were still using a manual accounting system. The new lease accounting software makes the auditing process easier and more efficient. The right system allows auditors to log in remotely and can access data without making a physical visit to your accounting department.

Lease accounting also leads to better vendor management because its centralized nature gives you a holistic view of all leases, revealing your organization’s leasing power and opportunities with vendors. Ultimately, lease accounting impacts your bottom line by ensuring your business practices and reporting maintain compliance while also demonstrating transparency and trust. You make better financial decisions with a holistic view of your leasing activities. For more information, please do not hesitate to contact us at info@cbicommercial.com.

CA DRE #01523713

COMMERCIAL BROKERS INTERNATIONAL

11766 WILSHIRE BOULEVARD, SUITE 1120, LOS ANGELES, CA, 90025, UNITED STATES

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Few items in a commercial office lease are as important and timely as paying your rent, operating expenses, and monthly parking. If not paid correctly and on time, a tenant will likely find themselves in a monetary default that could severely jeopardize their rights under the lease. Landlord-drafted leases lean heavily in the landlord's favor; negotiating fair and reasonable terms and conditions on behalf of the tenant is imperative.

To avoid limiting and possibly losing valuable

Few items in a commercial office lease are as important and timely as paying your rent, operating expenses, and monthly parking. If not paid correctly and on time, a tenant will likely find themselves in a monetary default that could severely jeopardize their rights under the lease. Landlord-drafted leases lean heavily in the landlord's favor; negotiating fair and reasonable terms and conditions on behalf of the tenant is imperative.

To avoid limiting and possibly losing valuable rights under the lease, be mindful of the requirements for paying office and parking rents ("rent") and escalations (tenant's proportionate share of operating costs and taxes); they are all considered "rent" and handled accordingly by the landlord.

Understanding the time frame from which rent and escalations are due is critical. For example, are they due on the first of the month, or is there a three-day grace period? It is imperative to negotiate language that the landlord must provide "written" notice of a monetary default and allow the tenant the right to cure within a set time frame.

A material default under the lease may affect the tenant in myriad ways. For example, a default will negate a tenant's ability to exercise their option to renew; it can severely hamper sublease/assignment rights; affect parking privileges; and, in the worst case, allow for outright lease termination. Also, be aware that late rent payments and escalations come with steep fines and burdensome requirements for all future payments.

A sure-bet way to pay your rent on time is to pay by direct deposit; set this option up at the onset of the lease commencement. As for escalations, mark your calendar to keep an eye out for the landlord's escalation "reconciliation statement." Call the management company and inquire about its timing if you have not received the documentation by the end of April in any given year or the month the lease stipulates. Once the tenant has received the reconciliation, they should forward it to their broker for review and input.

The commercial lease document legally binds the parties. The purpose is to meticulously outline the details of the relationship, including the terms, timing, conditions, and responsibilities of both the landlord and tenant.

"If you’d like any more information on commercial leases, or if you have any questions or need assistance with your existing lease, do not hesitate to reach out to monique@cbi-commercial.com."

By-Line with Monique Lacey

CA DRE #01523713

COMMERCIAL BROKERS INTERNATIONAL

11766 WILSHIRE BOULEVARD, SUITE 1120, LOS ANGELES, CA, 90025, UNITED STATES

(310) 943-8530

INFO@CBICOMMERCIAL.COM

Three-quarters of US states have already legalized cannabis in one form or another. Thirty-eight states have legalized medical marijuana, while nineteen states have approved sales and possession of cannabis for recreational purposes. With more states legalizing recreational marijuana, 44% of Americans now have legal access. In 2021, weed sales reached $25 billion as 50% of cannabis users increased their consumption since the pandemic. And with only 8% of surveyed adults against the legalization

Three-quarters of US states have already legalized cannabis in one form or another. Thirty-eight states have legalized medical marijuana, while nineteen states have approved sales and possession of cannabis for recreational purposes. With more states legalizing recreational marijuana, 44% of Americans now have legal access. In 2021, weed sales reached $25 billion as 50% of cannabis users increased their consumption since the pandemic. And with only 8% of surveyed adults against the legalization of both medical and recreational cannabis, the cannabis market is expected to reach $32 billion in 2022 and $57 billion by 2030.

When we think about the legalization of cannabis, we don’t immediately recognize how marijuana legalization affects commercial real estate. However, medical and recreational marijuana legalization has more of a direct impact on real estate than you may realize.

A survey by the National Association of REALTORS covering the last three years, shows that states where medical and recreational marijuana have been legalized, have seen an increase in demand for commercial properties. Here are some interesting statistics:

• 35% to 36% of commercial members in states where medical and recreational marijuana is legal have seen an increased demand in warehouses

• 23% of commercial members in states where medical and recreational marijuana is legal have seen an increased demand in storefronts

• 18% to 28% of commercial members in states where medical and recreational marijuana is legal have seen an increased demand in land

The survey revealed that there had been an increased demand for warehouses and land. The report further revealed that thirteen to twenty-two percent of commercial members had seen an increase in commercial property values near dispensaries. The uptick in demand and value can be explained by a rising number of entrepreneurs that are looking for opportunities in marijuana-related businesses.

However, it’s also important to mention that 5% to 14% of commercial members from states that have legalized medical and recreational marijuana use have seen a decrease in commercial property values near dispensaries. It’s important to remember that marijuana, despite its legalization, still has a negative perception for some consumers. And not everyone is rushing to open a store or live in an establishment that sells cannabis, regardless of whether it’s legal. The most common issue that some people have is the smell, followed by a fear that the business will be more prone to fire hazards and crime.

Time will tell whether more states will legalize both medical and recreational marijuana. And how that will lead to an even bigger marijuana industry. For those interested in the cannabis space, it’s important to remember that municipalities regulate cannabis real estate, overseeing zoning and permitting regulations. Because the marijuana industry is highly regulated and complex, success in cannabis real estate will rely on the experience of the commercial real estate team you work with.

For more information on the impact of different tenant types to commercial real estate, please contact us at info@cbicommercial.com

CA DRE #01523713

COMMERCIAL BROKERS INTERNATIONAL

11766 WILSHIRE BOULEVARD, SUITE 1120, LOS ANGELES, CA, 90025, UNITED STATES

(310) 943-8530

INFO@CBICOMMERCIAL.COM

Penny wise and pound foolish. Everyone has heard that old saying, but do you really know what it means. At its most basic it means to not choose to save pennys on items that if not addressed will cost you much more (back when this saying first came about, a British pound comprised 240 pennys). How this applies towards real estate investments are many fold, and specifically really seen in the area of maintenance.

In fact, most savvy real estate investors realize that the best way to maximize their returns

Penny wise and pound foolish. Everyone has heard that old saying, but do you really know what it means. At its most basic it means to not choose to save pennys on items that if not addressed will cost you much more (back when this saying first came about, a British pound comprised 240 pennys). How this applies towards real estate investments are many fold, and specifically really seen in the area of maintenance.

In fact, most savvy real estate investors realize that the best way to maximize their returns is to make sure that their investments are well maintained. Not only will a well maintained property maximize their returns, but it will also protect their investment by at the very least maintaining their ROI.

Maintenance is as critical to your investment as any other component as staying ahead of issues can save you money, time and potential headaches. We reached out to our friends at Perma Pier to help us put together a checklist of sorts for routine property maintenance and advice on what to look for to prevent any issues getting out of hand. Here's a few of the tips you'll find:

• Walk Thru each unit at least annually to check for small water leaks, that may easily be fixed for a few dollars, vs. replacing damaged wood due to a continual leak.

• Have your electrical system inspected or tested annually: electrical issues account for 24.5% of all reported fires in non-residential buildings.

• Inspect the caulking and weather-stripping around windows and doors: finding and fixing air leaks could save you thousands in energy bills.

• keep an open line of communication with your residents and encourage them to report maintenance items they see and/or feel need attention.

If you’d like more information on different leasing strategies to either improve the bottom line of your property, or to increase its value, please reach out to info@cbicommercial.com

All too often I receive inquiries from a potential seller that wants to “get the highest price” for their property, but does not want to list it, or market the property. This seems counter intuitive, especially tothe basic law of economics… supply and demand. Although there is not much an average seller can do to affect the supply line, they can create demand by using a good agent.

I started my career working in real

All too often I receive inquiries from a potential seller that wants to “get the highest price” for their property, but does not want to list it, or market the property. This seems counter intuitive, especially tothe basic law of economics… supply and demand. Although there is not much an average seller can do to affect the supply line, they can create demand by using a good agent.

I started my career working in real estate auctions in the late 80’s through the mid 90’s. During that time, I was surprised at first when properties we took to auction (a method that was deemed as a “fire sale”) consistently sold for higher prices than neighboring properties, and in many cases sold at higher prices than what they were previously listed before going to auction. For the life of me, I couldn’t figure out what was going on.

As I thought more about the auctions, the knowledge that I had gained during my economics classes in college came to mind. The supply chain didn’t change, but by marketing the property and creating a pent-up demand the chances for a sale greatly increased.

We’ve seen this over and over the last few years in this current “sellers” market. Almost to the point where we now receive as many calls from investors saying they only want to look at “off market” deals, believing they’ll get a better price without other competing investors. So, is the answer that simple? If seller wants the highest price, do they just need to make sure the property is seen by as many possible interested investors?

Not exactly, to ensure the greatest exposure for the property, and therefore the best likelihood for the highest price, a seller should make sure the agent they use to represent them does ALL of the following, not just market to their own buyers. After all, even if that agent has a buyer it doesn’t mean that the agent’s particular buyer will pay the highest price. A good agent will create a marketing plan to provide maximum exposure for the property. This plan should include:

1) Placing it in Multiple Listing Services (CoStar, LoopNet, A.I.R, the Local MLS, etc..)

2) Contacting every owner of similar properties within the surrounding few blocks to see if other landlords are interested in acquiring additional investments in the area.

3) Sending out email flyers to their buyers’ lists, local brokers, and property owners.

4) Making direct contact with every client that has purchased an investment property within the last two years.

5) Making direct contact with every broker that has represented a buyer that purchased an investment property in the last two years.

This may sound like a lot of work , but a good agent will go above and beyond.

Please do realize though that no experienced real estate agent is going to do any of the above if they are not insured a representation commission. So to ensure maximum exposure, and thus maximum returns, make sure you draft up and enter into a fair listing agreement that details out what the agent will do for you, and what type of compensation they can expect from a sale

If you’d like more information on different leasing strategies to either improve the bottom line of your property, or to increase its value, please reach out to info@cbicommercial.com

CA DRE #01523713

COMMERCIAL BROKERS INTERNATIONAL

11766 WILSHIRE BOULEVARD, SUITE 1120, LOS ANGELES, CA, 90025, UNITED STATES

(310) 943-8530

INFO@CBICOMMERCIAL.COM

In recent years Single Tenant Triple Net Leased (STNL) investments have become very popular investments.   This was partially due to higher yields and relatively lower risk associated with alternative investments, whether in the bond/mutual fund market, or other types of real estate.  These types of investments are characterized by longer lease terms typically between 10-20 years, with options for the tenant to stay

In recent years Single Tenant Triple Net Leased (STNL) investments have become very popular investments.   This was partially due to higher yields and relatively lower risk associated with alternative investments, whether in the bond/mutual fund market, or other types of real estate.  These types of investments are characterized by longer lease terms typically between 10-20 years, with options for the tenant to stay at the location for another 10-20 years.  This, as well as stable positive, and known cash flow from commercial (and sometimes credit rated) tenants, coupled with ease of management has increased their popularity.  Usually all maintenance, repairs and bills, including taxes and insurance, are coordinated and paid for by the tenant making for an easier to manage asset.

Due to this we have seen many investors in recent years who either lack time, commercial real estate experience or  are just tired of having money not earning any interest enter into this market.  Of course, like anything else, as demand goes up, typically so does the price.  In fact over the last three to four years, we have seen a compression in the capitalization rates of almost 200 basis points in many areas.  Which brings to mind, what will happen as interest rates, and therefore, other competing investments offer more favorable returns.

With economic uncertainty looming, coupled with tightening lending standards, poor retail news, bankruptcies/store closures and the uncertainty of the political climate have certainly impacted the retail investment market, but due to the tenancy nature many are considered recession proof,  (fast food, drug stores, Urgent Care Centers, Dialysis location/specialty medical and grocery stores). Many of the STNL tenants in these markets have remained relatively strong during down economic times, especially in submarkets located in major metroplexes.  Additionally, with the long term leases, come set rental increases, these can act as a hedge against inflation and down economic times, when rents typically go down for other asset classes.

What is driving the strength in these markets?  Well, STNL investments are definitely considered one of the safer and one of the most liquid forms of real estate investments.   Additionally, and one of the key factors, is still the law of supply and demand.  We’ve already talked about demand, well the other factor is supply, and in in-fill areas supply is limited, therefore keeping upward pressure on pricing.   Will this change in the near future?  I don’t really see it changing quickly in the immediate future, and it will probably be impacted slower than other asset classes with a downturn in the economy.  With the longer term leases in place and set increases in rental rates, an investor will know going into a purchase of a STNL what they can expect as a return even if we do see another 4-7 year downturn.  

For more information on STNL investments or how to get started investing in STNLs, email info@CBICommercial.com

CA DRE #01523713

COMMERCIAL BROKERS INTERNATIONAL

11766 WILSHIRE BOULEVARD, SUITE 1120, LOS ANGELES, CA, 90025, UNITED STATES

(310) 943-8530

INFO@CBICOMMERCIAL.COM