New CAM expense to NNN tenants

[Chet Cromer]

New CRE owner here. One year into owning a 6 year old 8000 sf flex space that my main business leases 1/3 of with 2 other tenants.

All NNN leases and predictable CAM except this past year we had to reseal and stripe the parking lot for the first time. I envision this to be part of CAM. Would you work it into a one time reconciliation at end of year (lease says we can) or spread it out over 3-4 years to reduce impact and ups and downs of lease payments?

[Chet Cromer]

The lease contracts say there is an annual reconciliation and we can collect any underpaid CAM expenses (or refund any overages).

We communicated with tenants about the project, but not enough in writing and to the point that I would not expect any surprises. I think as an act of good will, we will give them the offer to pay the cost up front (and maybe offer a 10% discount if the do as we didn't fully prepare them for the expense), or spread the cost over the upcoming year (or the remainder of their lease term, as one has the end (hopefully a renewal) coming up late next year).

I love the idea of sharing the capital improvements plan with tenants - knowing this is an every 4-5 year thing, knowing we may have another project coming up, etc. etc. It's still a relatively new building so has little problems, but this is a great idea.

Communication communication communication. I let it slip through the cracks a little on this in terms of the difficult part of the discussion. Lesson being learned.