All Forum Posts by: Chris H.

@Daniel Chang Thank you for the response. Many valid points. I'm thinking it would be best to have all new leases reflect the rentable sqft but lower the cost per sqft to keep the rents in line with what they are currently paying. I believe that would help the tenants stomach the change. Getting reimbursed for the utilities expense alone would be a huge improvment. I really liked you comment on focusing on the higher value tenants first, keeping them leased and happy. I do not intent to jump to where I feel I should be on rents, just woringon a roadmap.

@Nicholas Daddis Thank you for the well laid out response. I think my problem is trying to do this myself in an industry I barely know. I'll take your advice and hire some experts to get me pointed in the right direction, learning as I go.

@Joel Owens thanks for the feedback, my experience in in mobile home parks, trying to learn of commercial office side. Most recent analysis I have is from 2012. Our rents are 1.46 where comparable buildings with a lesser location were at 1.65-1.85 in 2012. I will look into a SIOR broker. Thanks

@Joshua Leite I believe your idea on leasing new tenants at the correct sqft is a good idea. Bringing up the rents on current tenants would help the escalating expenses. I'm interested in hearing more about your experience with usable vs rentable. I called a few other office complexes and thier advertised sqft was rentable, I had to ask for the usable sqft. When I refer to rentable common areas im referring to covered hallways that give access to the offices. I'll be giving a SIOR broker a call on Monday. Thank you. 

@Account Closed Great points! Would you happen to have any contacts for exterior renovations and pylon signs? I'm in the Orange County area. My commercial building is from the late 60's although it's kept up and painted, it could use a face lift.

I recently had my office complex re measured and maped out to BOMA standards. Usable sqft when up by 1000sqft and rentable sqft went up by 9000 sqft. 50 of the 60 leases are up for renewal (negligence of the previous property manager). Rents are below market. Utilities were covered in the gross lease but utility expenses have went up by 15% yoy over the past few years. It's time to break utilities out of the gross lease and offer modified gross leases.

We are at 100% occupancy. I realize I will probably lose a few tenants more so if all these changes happen at once. I've only ever rented usable sqft, not covering any of the shared common areas. Is it common to use a flat price per sqft or are common areas generaly lower then usable? How would you guys handle this issue?

• SQFT will go up by 30%
• Rents need to go up by about 20% to market rents. (Rents havent been increased in 3 years.
• Tenants will have to start paying thier own utilities.   

My thought is keeping the sqft cost the same for the first year of the lease and having kickers plus CPI to get more in line with the market. The new rentable sqft alone will boost NOI greatly.

@Mark CreasonThanks for the reply, I'm not sure a NN or NNN Lease will work in our situation. How would you advise breaking up the Utilities? What is the common practice, can you use last years charges or is it more common to use the previous months charges?

Hello BP community,

I need some advice on handling escalating utility bills. My previous office manager really let things slide on my 30k sqft office complex. We have 60 tenants with 6 in lease. Thats right, the office manager had not renewed leases in the past few years. Our leases were a gross lease with utilities included. This has become a problem. It's time to write up new leases and I'm unsure on how to handle utilities.

Electric, gas, water and trash cost me ~80k a year. I'd like to move to a modified gross lease with tenants paying utilities. The problem is most units share electric meters. The water and gas meters are one per building. We have 25+ electric meters which include meters for community lighting and AC.

What are some methods to divide up the Utility costs?

• Add sub meters for each unit. I'm not sure this would work as our electric meters are on a rate schedule that I do not believe can be legally submetered.
• Take the previous years utility costs from all the meters and charge it by sqft. At the end of the year charge/refund the difference in the actual charges.
• Use the previous method but break out utilities for the units on each shared meter instead of the total cost for all meters.
• Break up each bill as it arrives. and divide it by units on the meter This would add a lot of overhead to the work load.

For water, gas and trash service I think it would be acceptable to share the costs based on sqft. I just dont know what the common practice is and my experience isn't in commercial offices. On the residential side of my business we are master metered and submeter 400 tenants. Any advise would be greatly appreciated. Thank you, Chris

@Account Closed Tried tagging you above, guess I did it wrong.

Originally posted by @Adam Pierce:

Welcome to BP Chris!

You have a very impressive portfolio. If you don't mind me asking, how did you get started and reach the level you are at?

 Wish I had a great success story but the mobile home park is built on the family farm. It was meant to be a temporary use but turn into a very profitable business.

@Bob Bowling Yes that is a lot of tenants and yes it can be a nightmare at times. It's a very unique complex. There are a large number of small offices tailored to tenants who need a home sized office but do not want an office at home. We are currently in the process of getting all the rentable square footage re measured and mapped. I believe the buildings are much bigger then we had realized. 

Thank you all for the kind welcome, I look forward to learning and contributing to the community.

Hello all,

I'm a property owner and operator in Southern California. Currently own and operate a 50 acre Mobile home park, lease a 10 acre parcel to a condo development and have a 30k sqft 60 tenant office complex.

I am involved in all parts of the business. From General maintenance, tractor work, bookkeeping and business software tailored to our needs.

I have recently taken a more hands on approach with the office complex as the former manager was not doing a great job. Most of my experience is on the residential side of real estate so I'm looking to gain a better understanding of commercial properties.