Background An industrial property totaling 108,812 SF had been self-managed for over 30 years. Over time, a lack of systematic financial oversight led to significant challenges, including the failure to reconcile NNN (Triple Net) expenses for more than a decade. Additionally, tenant repairs and maintenance costs were not being fully recouped, resulting in reduced operational income. Challenges Prolonged Lack of NNN Reconciliation: The absence of regular reconciliation caused a backlog of unpaid expenses that the tenants were contractually obligated to cover. Under-Recovered Expenses: Repairs and maintenance costs that should have been passed through to tenants were absorbed by the property owner, further impacting profitability. Tenant Retention Concerns: Implementing overdue reconciliations and expense adjustments could potentially disrupt tenant relationships and jeopardize retention. Strategy & Execution Conducted a detailed financial audit of historical NNN charges. Reconciled outstanding NNN expenses over the 10+ year period to identify recoverable amounts. Implemented a tenant communication strategy to clarify obligations while maintaining goodwill. Updated systems to ensure timely and accurate reconciliation of NNN expenses moving forward. Results Recovered Unpaid Expenses: Successfully reconciled NNN charges, recovering $117,778 in previously unpaid expenses. Increased Property Income: Streamlined management and recouped costs resulted in a significant income increase of over $300,000 annually. Tenant Retention Secured: Despite implementing overdue adjustments, all tenants were retained, preserving long-term stability. Conclusion This case highlights the importance of proactive financial management in maximizing property value. By addressing long-standing issues, the property owner not only recovered lost revenue but also positioned the asset for sustainable growth while maintaining strong tenant relationships.
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