1. The Art of Lease Abstracting
Presented by:
Kelly Kepley, Vice President CoStar Real Estate Manager

2. Agenda
Welcome and Introduction Abstracting Requirements Critical Data to Abstract Abstracting Challenges The Future of Abstracting 2 2

3. The abstracted data must be: Accurate, Consistent and Complete
What is Lease Abstracting
“The Art of Lease Abstracting” is the ability to read pages of legal information, and then interpret and summarize this critical infor-mation. Information such as critical dates, detailed financial information and paraphrased sentences of provisional information.
The abstracted data must be:
Accurate, Consistent and Complete 3 3

4. Advantages of Lease Abstracting
Monitor Critical Dates
Manage Lease Events
Financial & Corporate Reporting
Portfolio Analysis
Easy Access to Information
Strategic Planning 4 4

5. Leases Continue to Get More Complex
Dates and more dates
No standardization
International leases
Non-real estate leases
Percentage Rent
Contingencies
Complex Options

6. Abstracting
Requirements

7. Documentation and Tools
Lease and Amendments
(Modifications, Addendums, Riders)
Lease Commencement Date
(Commencement Date agreement, exhibit, Letter)
Possession Date
(Financial requirement for Straight Line calculation)
Contact Information
(Landlord/ Tenant Notice and Payee Information)
Abstract Form
(Database, Excel, Word)
Abstraction Instructions
(Field by Field detail)

8. Designing The Abstract Form
Who will use the information?
What is critical to abstract?
What reports will be required by the consumers of the information?
What can be maintained consistently?
Who will maintain the abstract?

9. Abstract Form
The Abstract Form or Template is the formatted document that will house the abstracted data.
Predetermine:
Data Types
Data Formatting
Date
Numeric
Drop Down List
Text
Content size
Character Limit

10. Abstract Form Sections
Location – Premises
Critical dates (Term, Notifications)
Financials – Rent and related charges, Percentage Rent, Security Deposit
Options, rights, use, restrictions and other obligations
Tenant Improvements – Allowance

11. Critical Dates
Commencement Date

12. Commencement Retail Lease
Critical Dates
Commencement Retail Lease
The 3 big CD issue are When does it start, when does it end and is it fiscal .v. camadar year

13. Critical Dates
Commencement Retail Lease

14. Critical Dates Possession Certificate of Occupancy
Substantial Delivery Date
Store Opening
Lease Agreement Date
Lease Commencement (Original and Current)
Rent Commencement
Rent Increase (Fixed/Percentage/CPI/FMV)
Lease Expiration (Original and Current)
Lease Year(s)
Option Notifications

15. Critical Dates - Corporate Lease One Lease, Multiple Units/Suites
Unit/Suite 300
1,000 SF
5/1/17-1/31/19
Unit/Suite #100
2,000 SF
Term
2/1/17-1/31/19
Unit/Suite #200
1,500 SF
Term
4/15/17 -1/31/19
Sublease
Unit/Suit 500 SF
7/1/17-6/30/18

16. Options Renewal Option

17. Renewal Options

18. Renewal Options Critical Requirements Number of options
Term length of each option
Notice period
Rent amount (and other charges) during option term
Each Option will be abstracted separately with all applicable dates and conditions abstracted for the specific option term.

20. Option Types Renewal Auto Renewal Termination Relocation
Expansion/Contraction
Right of First Offer (ROFO)
Purchase
Kick Out
Required Remodel
Contingencies
Term Break

21. Financial Data –
CAM/Operating Expenses

22. CAM/Operating Expenses
Financial Data
CAM/Operating Expenses
Inclusions

23. CAM/Operating Expenses
Financial Data
CAM/Operating Expenses
Exclusions:

24. CAM/Operating Expenses
Financial Data
CAM/Operating Expenses
Pro-Rata Share
Payment Terms

25. CAM/Operating Expenses
Financial Data
CAM/Operating Expenses
Audit Rights
Estimated Payments

26. CAM/Operating Expenses
Financial Data
CAM/Operating Expenses
Critical Data
First Year’s Estimated Payment
PRS (Pro-rata Share) Numerator/Denominator
Capped Expenses
Anchor Contributions (Retail)
Base Years (Corporate)
Minimum Occupancy (Retail)
Gross Up (Corporate)
Admin Fee
Management Fee
Audit Rights
CAM Exclusions/Inclusions

27. Rights Assignment and Sublease

28. Rights Assignment and Sublease

29. Rights Assignment and Sublease
Critical Data
Is Landlord consent required?
Is consent required for Subsidiary and/or Affiliates?
Does Landlord have a right to recapture?
Does Landlord have a right to profit?
Does Tenant remain financially liable?

30. Rights
Alterations

31. Rights Alterations Critical Data Is Landlord consent required?
Is Tenant limited to a dollar amount for alteration?
Define the types of alterations Tenant may make: structural, non structural, exterior, interior.

32. Obligations Repairs and Maintenance

33. Obligations Repairs and Maintenance - HVAC

34. Obligations Tenant Repairs and Maintenance
Critical Data
Who Is responsible to make the repair?
Who is responsible to pay for the repair?
Is there a cost threshold for either party?
Preventative maintenance requirements?
Repairs and Maintenance Types:
HVAC
Building Systems
Parking Lot
Glass/Doors/Façade
Janitorial
Roof
Structure

36. Data Instructions
Lease Agreement Date: Abstract the date of the Lease. Usually found in recital on first page of the lease or on signature page. If unknown, leave blank.
Original Lease Expiration Date: Abstract the Expiration Date of the Original Term. If unknown or cannot be verified, add a Discrepancy Note stating how date was calculated.
Possession Date: Abstract the possession/delivery date of the Premises. If unknown, leave blank.
Rent Commencement Date: Abstract the current Rent Commencement Date of the Current Term. If Lease is in its Original Term, use the Rent Commencement Date of the Original Term. If T exercised a future renewal option which begins more than 3 months from the date of abstracting, add a Term Comment. If the exercised future renewal is within 3 months of the date of abstracting, use that date as the Rent Commencement Date and no note is needed. Add a Discrepancy Note if date cannot be verified and/or was estimated.
Original Lease Commencement: Abstract the Commencement Date of the Original Term. If unknown or cannot be verified, add a Discrepancy Note stating how date was calculated.

37. Data Instructions
Current Lease Commencement: Abstract the Commencement Date of the Current Term. If the Lease is in its Original Term, match the Original Lease Commencement Date. If T exercised a future renewal option which begins more than 3 months from the date of abstracting, add a Term Comment. If the exercised future renewal is within 3 months of the date of abstracting, use that date as the Current Commencement Date and no note is needed.
Term Comment: Abstract if Term is MTM. Otherwise abstract "None." EXAMPLE: Term is MTM. Abstract reflects Current Expiration Date of 12/31/ If T exercised a future renewal and the Current Lease Commencement Date will be in the future beyond the current quarter, add note. EXAMPLE: T exercised a future renewal option for 10/1/18 - 9/30/23. Abstract reflects Current Commencement Date and Rent Commencement Date per 2nd Amend, and Current Expiration Date of 9/30/23. Future Commencement Date and Rent Commencement Date per 3rd Amend = 10/1/ If Lease has not yet commenced, Abstract contingencies relating to delivery.
Current Lease Expiration Date: Abstract the Expiration Date of the Current Term. If the Lease is in its Original Term, match the Original Expiration date. If unknown or cannot be verified, add a Discrepancy Note stating how date was calculated. NOTE: If T has exercised a future renewal option (e.g. 10/1/18 - 9/30/23), the Current Lease Expiration Date should be the latest Expiration Date of the term (e.g. 9/30/23). If Lease is MTM, Abstract the Current Lease Expiration as 12/31/17.

38. Abstracting Requirements
READ the entire Lease and all amendments

39. Abstracting
Challenges

40. Abstracting Challenges
Lack of Documentation
Reading all documents in their entirety
Date calculations
Abbreviations
Intent lost in translation or interpretation
Maintaining data
Training
Review process
Consistency across all abstraction analysts
Resource constrained

41. Review Process Required Accurate, Consistent, Complete!
No Review – RISK HIGH
Review of Critical Dates and Dollars – RISK MODERATE
100% Review (All Data) – RISK LOW
+ Report Review (All Data) – RISK VERY LOW

42. The Future of Lease Abstracting

43. Lease Abstracting - Today
Web Based Systems
Remote & Mobile access to Data
Electronic file rooms
Enterprise solutions – Data warehousing
Construction, Legal, Real Estate, Operations, Risk management, Accounting and Financial reporting 43 43

44. Lease Abstracting – The Future
Abstract Generation - From Lease Draft to Execution
Machine Learning – Highlights critical data on electronic documents
Voice Recognition – Records data read from Document 44 44

45. Questions? Thank You! Kelly Kepley Vice President, Lease Services
CoStar Real Estate Manager