Our lease audit systems are designed to complement a client’s real estate and finance models by minimizing the post-transactional costs associated with their lease portfolios. Our innovative procedures are designed to proactively implement lease audit programs that operate seamlessly with a client partner’s corporate real estate, finance and/or administration department(s).
RRG’s business model was created to audit lease portfolios. Our lease audit policy is to review every lease within a given audit scope to ensure portfolio-wide cost compliance. The objective of any lease audit campaign is to become an extension of the client partner organization, thereby assisting in the efficient administration of its real estate portfolio. Our current services aid and support an organization in managing its real estate holdings as an integral part of its business.
Each lease audit program has a clear action plan designed to add economic and educational value that is delivered in a manner that enhances operational flow. RRG’s audit system is comprehensive, and customized to the client’s operational strategies, finance structure, accounting framework, real estate model, reporting requirements and overall corporate real estate goals.
Our customized audit systems are established in the first year of the audit campaign and are designed to support continuous, annual portfolio reviews. Multi-year audits followed by on-going, annual audits, normalize operating expenses, identify accurate expense baselines, prevent errors from accruing and establish standards for future benchmarking. This annual review structure has proven beneficial to our clients as buildings are constantly sold, new property managers hired and new accounting systems implemented, which are all tied to potential errors.
This process details the complexities of a real estate portfolio in order to plan and implement an effective audit schedule and ensure accelerated campaign success. When determining audit scope, RRG focuses on the overall Exposure Value™ of each location rather than size/cost thresholds or other arbitrary guidelines. RRG systematically conducts “deep dive” analyses on client portfolios to determine each Exposure Value™, and to support the audit viability of each location. We strive to capture the core elements that define each lease, which include, but are not limited to, lease type, lease size, lease structure, location, rent exposure, additional rent exposure, marketplace, property manager, landlord, lease audit clause, expiration date, disposition plans and seasoning.
RRG also leverages our vast experience by utilizing hundreds of thousands of recovery data points captured by our historical audit databases. This process segment identifies additional economies of scale, and allows for the inclusion of properties that may not appear to be viable audit candidates based on surface metrics, but become viable due to secondary and tertiary data correlations. Ultimately, RRG creates a refined, data-driven report cataloging portfolio-wide and “location specific” recovery opportunity.
RRG’s staffing model is quite unique and operates in a distinct fashion. Everyone at RRG supports our audit team, ensuring that our experienced auditors are solely responsible for expense trending, financial analysis, report preparation and presentation and recovery negotiation. The project management responsibilities associated with audit campaigns are owned and managed by our Quality Control department. Our Quality Control team transitions campaigns upon commencement, gathers initial file information, uploads lease data and works with property management companies to coordinate the transfer of the support data requested by our auditors. This added layer of distinction enables RRG to leverage the specialized talents of each RRG team member to conduct every audit in the most effective and efficient manner.
More specifically, RRG’s comprehensive audits include, but are not limited to, a review of the lease files, the financial files, reconciliation statements, operating expense statements, tenant payment histories, landlord payment histories, base rental streams, rental adjustments, general ledgers, management fee calculation methodology, real estate taxes, standard utilities, after hour/overtime HVAC, parking, repair and maintenance expenses, insurance, vendor invoices, service contracts, interviews with building personnel, interviews with applicable vendors, consultation with taxing authorities and consultation with utility suppliers.
RRG believes that the general, macro recovery opportunity in any audit campaign includes, but is not limited to, errors/non-compliance in the following: operating expenses, real estate tax pass-throughs, proportionate share computations, base year calculations, gross-up calculations, cap calculations, rental streams, CPI/base rental escalations (when applicable), capital improvements/expenditures, utility pass-throughs, electricity usage, after-hours utilities, management fee calculations, HVAC, ADA compliance, payroll and insurance. On a micro recovery level, the number of recovery permutations is immeasurable. It is this fundamental variability that defines the dynamism of each lease audit that is undertaken.
This relationship is always taken into consideration when negotiating the settlement of audit claims. RRG’s strategy is to utilize our audit experience and the level of detail in our work product to drive recovery negotiations. Each negotiation requires a specific and customized approach dictated by factors such as recovery type, recovery amount, number of years covered, property manager, landlord, lease support, audit rights and/or other timing mechanisms that may apply.
Once the audit strategy is determined, we utilize detailed reports to substantiate audit cases and support recovery requests. Our audit reports act as the basis for all negotiations, where each audit concern is grounded, supported and thoroughly substantiated by the lease, Generally Accepted Accounting Principles (“GAAP”), real estate/marketplace benchmarks and legal precedent before audit reports are prepared and negotiations commence.
We use our proprietary web-based technology tool, the RRG Portal™, and our operation-specific database system Recapture™ to manage campaigns, document/recover overcharges and update campaign progress. The report formats utilized, along with the frequency of issuance are customized and determined based upon client requests and/or feedback during the initial stages of the campaign.
Our plans encompass each step of the lease audit process from approval communication to collection, and are developed following RRG’s clear understanding of the client’s real estate/finance model, reporting structures and its existing, internal communication strategies. RRG is always conscious of client time investment, and each customized plan provides control elements to avoid unnecessary communication layers and ensure the campaign is supported efficiently.
Our system is accessible to all authorized members of the client partner team. RRG designed the portal as a firewall protected, proprietary, interactive vehicle to provide its clients on-line access to audit reports and general audit campaign information. Our decision to develop this system has streamlined audit campaigns, and made it convenient and easy for clients to proactively access information pertaining to their audit campaign from anywhere in the world, 24/7.