CPA as Trusted Intermediary for Client’s Space Change

Agency Leasing

Users of commercial space need negotiating advantage and a level playing field to perpetuate and/or facilitate their competitive advantage.  Handling space change as a demand-driven commodity often leads to overpaying and gives up legal rights of space use; that can become a material encumbrance on future revenues and operations.  Commoditized space change (e.g. listings, business terms, legal, uses of cash) enters a deal’s lifecycle 2/3 of the way into the transaction.  It enables the landlord [or seller] to benefit well economically and legally over the lease term [or at sale closing].  As space costs rise, a planned space change is more likely to facilitate operating objectives during the occupancy period (e.g. sharp cost, legal flexibility of space use).

Cpa - Certified Public Accountant, Word Cloud Concept 8

Clients expect their CPA [and CFO] to advise how to keep more of the revenue they make.  Unbeknownst to [client-facing] the firm’s practice partners, the CPA team can be leveraged as trusted intermediary to help evaluate feasibility, prepare for, and complete space change.  The client-facing [practice] partner should offer preliminary due diligence services that includes projections of future space costs, occupancy term per trends in [client] revenue history, plus a budget for space change.  The result is Occupancy Cost Ratio (OCR).  OCR suggests revenue as consistent healthy multiple of space costs; what ratio is in the client’s best economic interests?  What do operating trends suggest the term of the lease to be, limiting the impact of space costs on revenue?  If a property purchase is considered, what size should the land and building be to meet operating and future growth needs?  Should a portion of the building be leased until needed to grow daily operations?

finan-modeling

The CPA team projects a budget for space change, that plans for rent security [or down payment], tenant improvements, and moving costs, leaving room for unexpected nominal items.  Space change costs can be factored into the change year’s P&L to assess its impact and payback term.  Any tenant improvement costs may be depreciable over the lease term.  The CPA team also explains the tax advantages of property ownership when applicable.

Biz Partners

The firm’s business development executive should build a network of savvy commercial tenant reps to partner with when client’s require space change.  BREG’s 7-Point Service partners with CPA’s to process their client’s space change; the project partnership factors Occupancy Cost Ratio.  Click here to learn more.