Audit Case Study Synopsis™ (6004)
Savings (square foot)
Exclusive Service Provider
North American Portfolio
RRG’s audit encompassed four (4) years and two (2) ownership entities.
Following the review of the base year expenses provided by the current landlord, RRG noted that the methodology used in establishing the base year was not in compliance with the lease. The current landlord had provided a “re-stated” base year that had been constructed following the purchase of the building which misstated the actual value of numerous base year operating components. Additionally, the current landlord had attempted to change the proper base year “gross-up” calculations and apply a methodology that used incorrect occupancy statistics thus understating all accounts where a “gross-up” applied. RRG corrected the “re-stated” base year to properly reflect the actual figures as previously established by the previous ownership and then performed the appropriate “gross-up” calculations utilizing the correct occupancy rates for the base year. Each of these audit corrections would be applied across the remaining accounting periods within the term.
Following RRG’s cap analysis, it was confirmed that the landlord had not appropriately applied the cap on controllable expenses as outlined in the lease. The designation of “controllable” and “non-controllable” expenses utilized by the landlord was incorrect, and as such, the protection provided by the cap was understated. RRG modeled the cap in accordance with the lease and applied it properly resulting in a further reduction in client liability. RRG also confirmed during the audit that the landlord had been passing through marketing expenses related not only to the subject building, but also five (5) other buildings that it owned. g.