One very important skill that
every syndicator, who does real

estate, every fund manager who
does real estate they need to

understand, even if they
delegate this out is how to do a

lease analysis. In real estate,
the investment real estate

world, the very bottom layer,
what drives everything is the

lease, it all comes back to the
lease, all the properties come

back to the lease, right. That's
how it generates the money. If

it wasn't for leases, it
wouldn't be realistic, it could

be something else and wouldn't
be an underlying investment real

estate property. So it could be
still related to real estate,

but it wouldn't be a real estate
investment thing that you're

doing. So in this video comes
from, again the past, but what

it does is it talks specifically
about how we do lease analysis,

I put this video together for
the very top of the industry. So

the very top real estate
brokers, real estate developers,

people who really understood
leases and understood it in

context of well how a property
is done. But when it comes to

actually running a property from
an asset management point of

view, not a property manager,
but from the asset level, we

need to understand the whole
lease structure and where each

lease lies within it. So I know
you're going to find this video

useful if you do real estate at
all. This is where we talk about

how to actually figure out what
that absolutely fundamental

building block, the lease is,
and all the terms of everything

that move it change our value of
the proper underlying property,

or the which, of course,
underlies the entire portfolio,

whether you have one property,
or 1000 properties, it doesn't

matter, one door or 1000 doors,
it all comes back down to the

lease.

We are going to dive deep into
lease analysis also known as a

lease abstracting Now the
purpose of abstracting your

leases, so that you don't have
to dig through the leases in

order to know what the next step
is. So or when you have a tenant

who's asking, can they do this
or if they need that, it's all

there in your lease abstract, it
makes your life much much

simpler and easier to manage the
property. Even if you are not

acting as the property manager,
it helps you as the asset

manager under the command
structure to be able to

understand where you're at in
your leases, it will make it

easier for you to communicate to
your investors. And ultimately,

when it's time to sell the
property, it will make

developing that rent roll much
much easier because we actually

do the rent roll as part of this
process as well. So let's start

at the beginning. I'm going to
list out here pretty much all

the things that I like to see in
a lease abstract, and then I'll

give you kind of some hints
along the way as to where about

you'll find them. So first is
the date of the lease. This is

normally at the very beginning
of the lease itself. I like to

know this because I like to know
when this was entered into it

helps me sort through when
everything happened in time

because as time goes on, you're
going to be getting amendments

made as tenants renew, and so it
helps to have that date of the

lease or the date of amendment
at the top. I like to know when

the term commenced, or is going
to commence. Want to know that

so that it's very easy to see
what that date is. I want to see

when rent started. Sometimes
these are on the same date, but

it's not always the same date.
So I like to know sometimes the

term commences there's a period
of rent abatement, and then rent

starts two months later, for
example, sometimes it is that

the term commences when the
rental period starts. I've

looked like to know what what
period that is. And then when is

this lease expiring? I want to
know that so I can keep that in

mind and it's put make it a part
of my rent roll and so that I

know when that lease is no
longer going to be useful. I

should also mention at the top
here, I kind of like to put the

tenant name just so I know who
we're talking about and In the

unit number it makes it easier.
Alright, so now what I like to

do is I like to, when I'm
writing these out, everything

below this part, so everything
after this, I like to do two

columns, sometimes more, but
certainly two columns. And what

I want to know is I want to
know, what paragraphs what

paragraph number, I find it in.
So it's very, very simple for me

to see. And then I have the
category. And then there is the

answer. We fill in the blank. So
what I, for example, I want to

know what the definition of
premises is. And this is

probably this maybe something
like the premises itself is the,

the unit number or the premises
is, you know, the whole building

or whatever it is. I like to
have that definition. Normally,

this is in paragraphs one or two
or something like that. But

here, let's just, let's just say
in here, we found it in

paragraph 1.1. And then I would
put the specific answer. Now

here, I probably am going to use
some shorthand, I would do

something like unit to a one of
building something like that. So

premises, I want to know, what
is the permitted use? Now, this

is very, I mean, you're
certainly gonna have this as it

relates to a retail building an
office building, you may or may

not, there may be some
restrictions on use. Certainly,

if it was medical, you probably
would include that. If it's not

medically, you probably
wouldn't. And then, but I like

to put in the permitted use now
in an apartment building, you

probably don't have it, I've may
still put it there. Leave it

there, just so that I know that
if something comes up, and

there's a specific restriction
that's been put in there kind of

on the way they use the
property, I may put it there.

Like it's like they're going to
be using it as an air b&b or

something like that. I may want
to know. And I may want to know

whether I gave them permission,
I want to know what the square

footage is. In that lease, how
it's defined. I want to know

what what parking looks like,
have there been allocated one

space two space, three spaces?
How's it done? Where are those

parking spaces? It's all in the
lease. And again, as we're going

through these, we're putting in
where, what paragraph number?

And we're filling in what the
answer is on. On for each

category. I want to know the
term in months. How long is this

lease gonna last? I want to know
what how much have they paid

in their security deposit. And
certainly as things change,

sometimes you get an increase in
security deposit. And so let's

say this was an amendment it may
say something like they gave me

$5,000. On June 120, whatever
the year is, and then the

following year, they added $500
on May 31, and whatever that

year is I may want to do that.
So that way I know okay, I've

got a running tally of what that
security deposit is. So it's

always there. I never have to
look at a lease and it's all

done properly. Then I've got my
renewal options.

The next section I break down is
so these are sort of like the

main or the main sort of basic
categories that probably fit

into your rent roll along with
part of the next section. And

what this does is this sort of
sets up some of the more

important things are not more
important than the things that

are referenced more frequently.
The next part I will put is I'll

build a table. And what I'll do
is I'll put build a table that

has a rental periods so that I
know what time period we're

talking about how much we're
talking, and rent per month.

What this translates into rent
per year. And then I want to

know also, not in my apartment
buildings necessarily, but maybe

you might as well put it is
what's my cost per square foot,

by either month or year
depending on what what, what's

normal for your industry. So in
California, it's month, most of

the other country, it's a year.
But whatever you were most used

to seeing it is and what the
escalations are

now notice right now, I'm not
talking about pass throughs at

all, I'm all I'm talking about
is just rent. So in here, I may

say, Let's do an example. So I
may say, June 120, through May

31.

This is a table remember. And so
my rent dollar amount is say,

oh, let's do what we'll do $1
Oh, we'll do just for keeping

math easy. We'll say it's $1 a
month. $1 a square foot month,

which means that's 12. And let's
say it's 1000 square feet. So

that's, that's $12,000 per year,
$1,000 per month. And then my

escalations are gonna take place
that next year, right most of

the time, that's when they
happen. And so it'll be

starting. Now, obviously, you'll
put this in a spreadsheet. And

that'll be a lot easier way to
do it. And you can automate the

calculation of all those things
as well. And so I would put now

say there is a 5%. That's an
awfully high rent bump, we'll

make it a 3%. And so that would
suddenly bring my dollars per

month to $1,030. My rent per
month, is, let's see, if I can

do this quickly in my head
$12,360 per year, my cost per

square foot is now $1.03. And
then next year, it's going to be

another 3% rent, for example. So
that's the way I would do this

next section on what the rents
are. Now, I would still put the

over here, I would still put
what paragraph number in the

lease that's found, because it's
gonna make your life much much

simpler when you need it. So
basically, we're building out a

cheat sheet so that we can
quickly find whatever we need to

do in the lease. Because if you
have a tenant in front of you,

and they're saying, Well, why is
it this you can just simply say,

okay, look, paragraph three in
your lease says this. Underneath

here, I like to just put a
section for percentage rent, if

as if it is a retail space. And
then I want to also now I want

to code to kind of some of the
other money kinds of things so

I've got percentage rent. I
would put a section on what

tenant improvements rent
abatement Construction was a

made available so I'd put a
space for that and again always

putting the paragraphs so I can
find it then I would put a

section for landlord repairs now
you're not looking for this to

be comprehensive This is a table
of contents or an index or

whatever to make it simple for
you so I would put you know

landlord repairs replace carpet
I don't know what it is whatever

it is replace carpet change
fixtures whatever is normal for

what you're doing and then
tenant repairs so this landlord

repairs can be in the first part
and then tenant repairs would be

you know, tenant is going to be
install UPS

installing new bathroom. Now,
this is for, I tend to use this

for these specific things at the
outset of the lease, you could

also use this same kind of
section to say that the tenant

is or the landlord repairs and I
probably wouldn't would still

note it here. So a common thing
in a retail space is the

landlord's responsible for
windows, doors, roof structure.

And here, everything else, you
know, the tenant takes care. And

when there's specific different
sections, I'll probably put

paragraph five. And then here,
put paragraph seven, or wherever

it is, again, so it's easy for
me to find. Now the next thing

is I do build out a table of
operating expenses and pastures.

So here we've got we still are
doing our paragraphs, right so

so I've got my paragraph labels
going down. And now I've got my

operating expenses, rebuilding
another table and so here I'm

looking for the normal ones. And
if you have things that are in

addition, great then add those
two

real estate taxes, cams
insurance now I make this a

personally I make this a
checkbox to make it's kind of

simple. So I put in like
landlord pays.

tenant pays

tenant pays, pro rata. And then
if there are any expense stops

and caps.

So then filling this out, you
know for utilities, it's

something like tenant pays their
pro rata share. Or let's do a

little bit differently. tenant
pays tenants paying for all

their utilities, it's under
their name. Real estate taxes is

the tenants paying their pro
rata share. Cams is that tenants

paying pro rata share insurance
is paying their pro rata share.

But let's say there is a cap on
property taxes of no more than

3% per year. Something just to
give me an idea about whatever

it says. So, then I like to get
into more of the legal type of

questions that are here. So I
want the section for

destruction. I want the section
for CO tenancy do they have the

right to do a or to have to
share that space condemnation

rights now these are probably
things you're not going to need

much but it also helps when
you're filling out your estoppel

certificate. So that's another
reason expansion rights these

does happen so do they have the
right to occupy another space

becomes available

Alright, and now we get into
kind of the things that that are

referenced the most so you'll
see what we've done is we've

kind of referenced the things
that are very frequent over here

you know, those you're
referencing all the time now

rents you are referencing to
some extent that this is getting

pulled over into your renderable
so you're probably not

referencing that much you're
referencing cams this section

you're not going to reference
quite as much here are the

things that certainly come up
and when you need them you want

to know right where they are in
the lease rather than having to

dig for it. So this section is
May the

May the tenant assign without
landlord consent in paragraph

six still going here what I do
is I normally put either a yes

or no and then if it's a yes I
want to explain

next question is does tenant
have exclusivity? If Do they

have any exclusivity rights? And
I do again do yes No. And

explain this these things now
come up much less after this.

These things I certainly want to
know about. But here's these are

certain things that will make it
easy just to have them all there

for when they come up. So is the
lease subordinate? To mortgage?

In other words, do they need to
sign an snda? answer is probably

yes, but I want to know it and I
want to know what paragraph so

that I've had I've dealt with
situations where tenants have

refused to sign NDAs and and
it's very frustrating and it

makes it much easier if you can
quickly tell them right where in

the lease they have to sign it I
want to know do they have to

sign an estoppel and I will know
where that happens a lot too.

And then the others are Is there
a purchase option I do do they

have a right of first refusal

Do they have any early
terminations

and anything else any other
thing notes I want to put here

and then last I like to close it
out sort of the same way the

lease is typically written I
want to know is there at least

guarantee

I want to know if there are any
lease amendments. And so you see

this is an evolving document. I
want to know who's signed it.

And when one thing I should also
mention is under renewal options

have so. So you may have options
for the, for the renewals, I put

those up here. So I put option
period one. And I put your six

through 10, whatever it is, and
then I'll put whatever the

information is there. So that
way, then I've got, I know at a

glance that there are renewal
options that are out there. And

it makes it pretty
straightforward. So this purpose

of lease abstracting isn't just
an exercise in in, in generating

paperwork, this is to make your
job easier. And it's really to

get your stuff together so that
when your investors have a

question, or when anybody has a
question your property manager,

if that's you, or if you have
one, need something specific to

provide a tenant, or so you can
just have a baseline so you can

look at what you're doing across
your center in one straight

place. And really kind of move
everybody to getting the same

similar kind of lease, this is
the way to do it. So we do that

with lease abstracting. And this
is part of lease analysis. My

very first mentor taught me a
very, very important thing. He

said, when there's ever a
question, it comes to the lease,

go to the lease, read the lease,
it always is the lease. I heard

that in law school. I heard that
in understanding real estate

when I was studying. For my CCIE
am, my original mentor taught me

that always, always always, it's
the lease that controls the

entire thing. And that's why we
do lease analysis. That's why we

need to understand those basic
building blocks. Also, as you

saw in this video, it has
pointers to where all those

things are in the lease. So if
you ever need to understand it,

it's all right there for you. My
name is Tilden Moschetti. I am a

syndication attorney for the
Moschetti syndication Law Group.

Before I was a syndication
attorney 10 years ago, before

this, I was a real estate
litigator. What does that mean?

Most of the time I was referring
to the lease. I didn't do

evictions or that sort of thing.
But when it comes to it, my my

issues tended to revolve around
doing cases where property was

at stake, where property was the
main issue, not eviction, not

tenancy, not things like that.
So most of the time it was fight

over the property and ownerships
of the property. And when that

happens, what's very important
is value. And when is value and

what's the key building block in
value for any kind of commercial

real estate? It's the lease. And
so that's why we did this video.

If I can help you do your own
syndication investment fund get

you started doing your own 506 B
or 506 C syndication, whether

it's real estate or totally
unrelated to real estate. I

would be happy to talk with you