Triple Net Calculations

[Jeff W.]

Hi everyone,   I'm new to commercial real estate and this forum so bear with me.  I recently built a 11k sqft strip center of which I manage as well.  One of my companies occupies half the building, I have 1 tenant, and am trying to fill the rest of my space.  

I need help with triple net calculations. Currently I use excel and have a list of items that are included but things are getting complicated. I am trying to decide exactly what to include, ie future repairs, managment fees, etc. Also, I'm not sure what to do at the end of the year if my calculations/expenses aren't equal to the contracted triple net amount (do I reimburse or adjust future NNN rate). Can anyone recommend any good sources of info regarding this. Thanks!

[Stanley Bronstein]

A lot of what you ask depends on what your lease says. Some leases allow you to bill for reserves for future expenses and some don't. Some allow for inclusion of management fees and overhead fees and some don't.

Even if you have standard leases, sometimes tenants (especially ones with a strong negotiating position), will negotiate caps on their expenses and even negotiate out some of the expenses.

There is software out there that handles all of this, but if all you have is an 11,000 SF shopping center, I'm guessing it's going to be cost prohibitive to buy it.

The main advice I can give is to write down everything single category of expense you plan on billing for and see if your lease form (or forms) allows for you to bill for it (or says you can't bill for it). Look for any leases that might have special provisions.

You say you currently only have 1 lease, so that makes it less complicated.

If it turns out you overbilled, I usually don't issue refunds (unless the lease says you're supposed to). Instead, I just adjust the NNN rate downward by the appropriate amount for the next year. Tenants usually are happy with that.

Hope this helps.