Commercial Real Estate Investment/A CAM Math Question

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Expert: - 5/15/2009


Question
Lets say that a center has 20 spaces, and for sake of argument all are the exact same size. So each store is responsible for 5% of the CAM. But some people are paying $1 per sq ft CAM annually and some are paying $20 per square foot CAM annually.

Which means that everyone is paying a different percentage of the total actual CAM expenses, some could be covering only 1% of the expenses and some 40%, but they're the same size store.

Is this normal?

Answer
J Rod-

Your math logic is OK but it excludes other potential explanations for the variations in the CAM reimbursement payments also.  

It could be that the definition of which CAM expenses could include more or less expense items depending upon what each tenant negotiated in its lease agreement.  For example one tenant could have told the landlord that they would not reimburse them for the cost of "administrative expenses" which is often a major cost of questionable integrity in many CAM reimbursements.  There are many expenses that could have been excluded or included in each tenant's lease.

Another reason for the variation could be that some of the leases provide that the CAM expense each year is assessed by how much the specific year of CAM costs exceed a set BASE CAM amount.  That is, some tenant's tell the landlord that they will only pay for the INCREASES in CAM costs above the CAM costs that occurred in the first year of their lease.  If the tenants each moved into their space during different years; a different Base CAM amount would have been in effect and would further impact any uniformity in the CAM billings.

There are many possible explanations.  

-Jim

Commercial Real Estate Investment

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Jim Avancena, CPM

Expertise

Best qualified to answer questions that involve commercial leases, that is, basic issues as well as the often unexpected effects of the complexities and inter-relationships of the provisions a lease may contain, explain how seemingly innocuous text in your lease can have a major impact on a Tenant or Landlord and their business operations, and the common practices utilized in the industry. I can untangle most matters that may come up from the time a tenant begins searching for a office or store space and the lease acquisition process, concerns related to remodeling/improving the leased premises, moving-in, subletting or assigning the leased space, and a long list of problems that may come up during the lease term and even after a tenant moves out. I have practical experience with most property management issues and resolving landlord and tenant disputes - especially those involving what may appear to be overcharges assessed for additional lease charges like CAM costs, operating expense reimbursement, real estate taxes, utilities, construction improvements etc. Note that I am not an attorney and cannot provide legal advice.

Experience

Thirty years active experience in the commercial real estate industry as a licensed real estate broker in the Washington DC Metro area (DC, Northern Virginia & Maryland). I have been admitted (approved) by the Maryland and DC courts to testify as an expert witness on the subjects of Commercial Leasing and Property Management in the area of standard industry practices. I have had a business for the last 14 years advising virtually every form of business entity from large national corporations to the smallest ma & pa new businesses regarding a wide range of commercial real estate matters in addition to property management and commercial leasing.

Organizations
Currently my three children keep me so busy that it is difficult to participate in organizations with continuing and specific time requirements.

Publications
I publish a local commercial real estate newsletter titled: "Tenants First". My firm was the subject of a high profile Washington Post business section cover page (2.25 full pages) feature story on January 13, 1993; titled "Overcharging Overhead".

Education/Credentials
BA in Political Science from Memphis University, and five years of study in the real estate development summer program at MIT. I was certified as a commercial property manager (CPM-IREM), and currently hold a brokers license in Maryland and the District of Columbia.

Awards and Honors
The same plaques and honors that most others in my industry have earned. I have none that I consider especially meaningful.

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Past clients include: The World Bank, George Washington University, National Association of Criminal Defense Attorneys, US Department of Commerce, The American Benefits Council, K-Mart Development, many law firms, a national union, other major organizations, and many, many small business firms and retail operators that I am most honored to serve. I estimate more than 1,500 firms/organizations.

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