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[IMGCAP(1)]DALLAS-Making every dollar count is more critical than ever as C-suite teams look for ways to control or reduce the bottom line amid rising concerns of a recession. The need to stretch dollars could drive increased demand for lease audits.

“Smart companies do it. I advise all clients who have larger leases after two to three years to audit leases,” Jim Vanderslice, senior vice president of private capital investment in Dallas for Santa Ana, CA-based Grubb & Ellis Co., tells GlobeSt.com. “The tenant doesn’t have to do it, but I think it’s important that any tenant 5,000 sf and over take a look at it.” The need is particularly critical if buildings change hands or the tenant has been in its space a long time, he says.

In a benchmark survey, the New York City-based Deloitte Financial Advisory Services LLP found 84% of 200 corporate executives realized cost reductions from lease audits, of which 41% reported “significant savings.” On the owner side, 74% reported lease reviews resulted in expense recovery.

Deloitte’s Dallas team will be hosting seminars Nov. 19 and 20 for lease administration and audits, respectively, for tenants, property owners and corporate account executives. The sessions will be held in Deloitte’s office at 2200 Ross Ave. in the Downtown.

“I think the demand is higher than it has been for awhile,” says Sean Stark, a Deloitte executive who is handling the advance work for the two days of forensic lease analysis in Dallas. Deloitte’s Brian Christie from Chicago will head up the lease audit session and Vinnie Borriello from New York City, lease administration.

[IMGCAP(2)]Vanderslice confirms that it takes a specialized skill set to audit leases, but “it’s definitely an important aspect of the business.” Front-end due diligence for leases always includes forensic analysis for the space, but the need for periodic reviews is equally as important as years pass and operating expenses change, says the veteran, who is hosting a 1031 exchange and tenants-in-common investment seminar Nov. 18 at Three Lincoln Centre at 5430 LBJ Frwy. in Dallas. The breakfast meeting qualifies for one hour of continuing education credit.

Audit rights are required lease language, as is fine-print explanations targeting operating expenses, real estate taxes, base years, pro rate shares, inclusions/exclusions, windows, occupancy gross-ups and “other potential protections from overly aggressive pro-landlord language,” Deloitte’s team cautions.

“More than ever, in today’s challenging economy, landlords appear to be striving to maximize revenues and tenants are, naturally, trying to minimize costs,” Josh Leonard, a Deloitte partner in Los Angeles, says in a prepared statement for GlobeSt.com. “Landlords have largely shifted their focus from acquisitions of new holdings to increased emphasis on management and maximizing the value of their existing investments through leasing and tenant billing efforts.”

Through reverse lease audits, building owners can assess pass-through costs and expenses “as well as direct billings being within the confines of the specifically negotiated tenant leases,” Leonard explains. “Lease audits are a low-risk way for tenants to potentially improve internal controls and assess whether they are being billed by their landlords in accordance with their leases.”

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