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One very important skill that
every syndicator, who does real

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

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

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lease analysis. In real estate,
the investment real estate

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

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

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

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

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

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

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

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

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

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

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the very top real estate
brokers, real estate developers,

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people who really understood
leases and understood it in

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

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actually running a property from
an asset management point of

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

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need to understand the whole
lease structure and where each

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

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

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how to actually figure out what
that absolutely fundamental

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

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

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

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

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

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lease.

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

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lease abstracting Now the
purpose of abstracting your

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

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

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

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

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

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

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manager under the command
structure to be able to

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

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

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

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developing that rent roll much
much easier because we actually

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

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

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

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

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

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

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

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helps me sort through when
everything happened in time

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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know what the definition of
premises is. And this is

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probably this maybe something
like the premises itself is the,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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what what parking looks like,
have there been allocated one

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

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

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

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

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

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

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in their security deposit. And
certainly as things change,

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

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

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

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

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

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

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

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

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

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main or the main sort of basic
categories that probably fit

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

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

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important things are not more
important than the things that

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

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

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

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

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

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

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

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

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

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

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to seeing it is and what the
escalations are

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

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

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

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31.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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tenant improvements rent
abatement Construction was a

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

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

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

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

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

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

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it is replace carpet change
fixtures whatever is normal for

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

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

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you know, tenant is going to be
install UPS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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addition, great then add those
two

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real estate taxes, cams
insurance now I make this a

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

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simple. So I put in like
landlord pays.

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tenant pays

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

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and caps.

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

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

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little bit differently. tenant
pays tenants paying for all

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

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

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

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

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

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

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questions that are here. So I
want the section for

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

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

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

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

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certificate. So that's another
reason expansion rights these

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

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becomes available

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

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

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kind of referenced the things
that are very frequent over here

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

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rents you are referencing to
some extent that this is getting

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pulled over into your renderable
so you're probably not

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referencing that much you're
referencing cams this section

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

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

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

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dig for it. So this section is
May the

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May the tenant assign without
landlord consent in paragraph

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

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

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next question is does tenant
have exclusivity? If Do they

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

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

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

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

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

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

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

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

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

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

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

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

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

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have a right of first refusal

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Do they have any early
terminations

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

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

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

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guarantee

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

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

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

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

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

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

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

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

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it makes it pretty
straightforward. So this purpose

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

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

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get your stuff together so that
when your investors have a

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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syndication attorney for the
Moschetti syndication Law Group.

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Before I was a syndication
attorney 10 years ago, before

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

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

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

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issues tended to revolve around
doing cases where property was

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

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

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

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

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

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

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

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

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

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would be happy to talk with you