Signing a new lease is an exciting yet nerve-wracking time for business owners. It is a very large commitment to make – after all, the lease is one of the most, if not the most, expensive line item on your balance sheet. With a good landlord it is intrinsic to continually work at keeping rents as low as possible in order to pass on the savings to a net lease tenant. The following are some of the ways that Weston continues to keep rents as low as possible:
Relationship With Lender. The relationship that an owner has with his lender is an essential part of real estate ownership. A lender dictates what the interest rate will be for a particular property asset. If the borrower has a track record with the lender, if business has been done in the past and the loan covenants were fulfilled, if the reputation is there, then the borrower is more likely to negotiate a more favorable rate for his transactions. If goodwill is involved, all the better, because the tenant will become the beneficiary of the savings. Weston has a long standing reputation as a property owner and we fulfill our promises. In other words, we are the type of client that a lender looks for. As a result we get better pricing, are able to buy a building with better terms, and can turn around and make space available at more advantageous rates than our competition.
Reduction of Property Taxes. One of the largest component of operating expenses or additional rent paid by the tenant to a landlord is property taxes. Although real estate tax is an unavoidable expense that is levied by the county to property owners, Weston is very attentive and watches it carefully. According to the tax law a property owner is allowed to appeal their taxes once every 3 years. Weston has procedures in place whereby once every 3 years, like clockwork, we start the appeal process. This requires us to hire an attorney, file the paperwork with the county, and appear in court to plead our case. It is a somewhat arduous process but we are diligent in our procedure. While the decision can go either way, you can bet that if we win, the savings are passed along to our tenants.
Reduction of Property Contract Service Costs. Another component of additional rent on a triple net lease is the contract services. This is the cost to operate and maintain the facility, outside of utilities. A triple net lease provides for landscaping, snowplowing, and other contract services that get billed back to the tenants on their monthly rent bill. If a landlord can negotiate good pricing on contract services, the tenant will realize the savings. Weston actively searches for the best contractor to do the best work at the best price. We challenge our contractors to find ways to do the work that we need at better than market rates. As a result we are able to save money for our clients.
Insurance. Property insurance also makes up some of the additional rent on a triple net lease. Although insurance is usually the smallest expense, a good landlord will give consideration to the associated fees. In order to keep the cost as low as possible, Weston takes our book of properties out to bid each year to ensure that we are guaranteed a fair price for the services that we as well as our lenders require. Also, because of our larger portfolio size, we are likely to get better pricing simply due to economies of scale.
I know what you’re thinking – this is just an attempt at shameless self-promotion! But actually that is not the case. We continuously strive to make ourselves better by negotiating better rates with lenders and reducing the operating costs of our properties. These savings are passed on to our tenants in our attempt to keep our base rental rates low and our triple net operating expenses as minimal as possible. Contact us if you have any questions or you would like further information.