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Common Area Maintenance reconciliation, often referred to as CAM reconciliation, is one of the most financially consequential processes in commercial real estate. Yet in many organizations, it is still treated as back-office work. Administrative. Accounting-driven. Routine. That framing creates risk. For properties operating under Triple Net Lease or NNN structures, CAM reconciliation and operating expense recoveries are not peripheral tasks. They directly affect net operating income, tenant relationships, and asset value. When these functions are treated as clerical rather than strategic, owners absorb financial consequences they rarely see until years later or at disposition. CAM Reconciliation Is an Interpretive Process, Not Just Math At its core, CAM reconciliation is not simply the allocation of operating expenses. It is a series of interpretive decisions governed by lease language. Those decisions include: How lease provisions are interpreted and applied Which operating expenses are considered recoverable How exclusions are defined and documented How consistently methodology is applied across tenants and years While accounting ensures numerical accuracy, CAM reconciliation requires lease fluency and judgment. Two professionals can reconcile the same property using the same financial data and arrive at materially different results depending on how the lease is interpreted. This is where most value is either protected or lost. Why CAM Reconciliation Often Falls Outside Governance In many organizations, CAM reconciliation exists between disciplines. Accounting focuses on expense classification and totals. Property management focuses on execution and tenant communication. Asset management reviews aggregate results. What is often missing is formal oversight of interpretation. When no clear standard exists for how CAM decisions should be made, documented, and reviewed, reasonable assumptions quietly become policy. Conservative exclusions become precedent. Informal decisions made to resolve one situation carry forward indefinitely. These outcomes are rarely the result of error or negligence. They are the result of structure. A Common Example: Management and Administrative Fees Consider a typical Triple Net Lease (NNN) provision allowing recovery of management or administrative fees, often capped at a percentage of total CAM expenses. When CAM totals $190,000 and the lease allows a management fee of up to five percent, the allowable recovery is $9,500. If a tenant’s Pro Rata Share is 30 percent, the recoverable amount under that lease is $2,850 annually. When that fee is excluded out of caution or uncertainty, the owner absorbs $2,850 each year for that lease alone. Over a five-year period, that is $14,250 in unrecovered operating expense, despite clear lease authority. At sale, assuming a conservative seven percent cap rate, that single decision reduces asset value by approximately $40,000. This is not an aggressive billing scenario. It is an example of how overly restrictive interpretation quietly impacts NOI and valuation. How These Decisions Compound Over Time Most CAM reconciliation risk does not appear as a one-time loss. It compounds. Once an expense is excluded without a lease-based rationale, reintroducing it later becomes difficult. Tenants adjust expectations. Teams normalize the exclusion. Documentation fades. Across multiple leases, multiple operating expense categories, and multiple years, these small decisions reshape the financial profile of an asset. Owners often discover this only when: Recoveries decline without clear explanation Disputes increase during ownership transition Buyers scrutinize operating expense recoveries at disposition By then, the baseline has already shifted. Why This Matters for Triple Net Lease (NNN) Assets Triple Net Lease structures are designed to shift operating expense responsibility to tenants. That structure only works when CAM reconciliation is executed with precision and consistency. When operating expenses are under-recovered due to interpretation gaps, owners subsidize costs tenants contractually agreed to pay. Over time, this undermines the financial integrity of the lease structure itself. CAM reconciliation is therefore not an administrative task. It is a financial control function. Reframing CAM Reconciliation as Financial Stewardship CAM reconciliation should be governed with the same rigor applied to leasing, budgeting, and capital planning. That includes: Clear interpretation standards Consistent methodology across assets Documentation of assumptions and decisions Alignment with lease intent rather than habit This is not about maximizing charges or minimizing disputes. It is about accuracy. When CAM reconciliation is treated as routine, the asset absorbs the risk. When it is treated as a financial discipline, the asset is protected. Final Thought for Owners and Professionals Whether you own commercial real estate, manage assets, or oversee property operations, CAM reconciliation deserves closer attention than it traditionally receives. The most significant CAM risks are not found in spreadsheets. They are found in how decisions are made, applied, and carried forward. That distinction is where NOI is either preserved or quietly surrendered. Lisa Shull, CPM Author, The NOI Lens

Transitioning a commercial property between management companies demands a well-executed plan. As a seasoned professional in commercial property management, I’ll guide you through a step-by-step process, focusing on key considerations, including Common Area Maintenance (CAM) reconciliation, for a successful handover. 1. Review Existing Contracts and Calculate Timelines - Thoroughly review current property management agreements to determine required notice periods, transition provisions, and wind-down details. This will vary by contract. - Factor in notice periods and lead times needed for various transition steps as you assemble a full timeline. Ideal notice is 60-90 days. 2. Notify Current Provider and Tenants - Formally issue written notice to existing provider at earliest date allowed per contract. - Draft tenant communications to send at 60, 30 and 14 days before transition about the change. Assure them of continuity in service and introduce new contacts. 3. Gather All Documentation from Current Provider - Create a documentation checklist that covers leases, vendor info, warranties, maintenance records, inspection reports, plans, invoices, certificates, etc. - Set firm date for all documentation to be submitted by. Conduct spot audits throughout gathering period. 4. Review Budgets, Reconcile Accounts - Analyze at least 2 years of financial records—budget variances, account reconciliations, CAM billing support for any irregularities. - Outgoing manager provides final account reconciliations of security deposits, reserves, operating funds, petty cash, etc. CAM Reconciliation Common Area Maintenance (CAM) costs can be one of the trickier areas when transitioning between property management companies. Here are some additional considerations to ensure CAM reconciliations go smoothly: Review existing CAM reconciliation schedules and discuss timing with the new manager. You’ll want to coordinate so tenant billing cycles aren’t disrupted. The outgoing manager should provide very detailed supporting calculations, expense allocations worksheets, and tenant chargeback schedules for at least the 2 most recent reconciliation periods. If the reconciliation periods don’t align cleanly, the outgoing manager may need to provide a stub period reconciliation covering the last period of their active management before the switch. Analyze at least 2 years of CAM reconciliation paperwork from the outgoing manager to look for any irregular reconciliation practices that may need to be addressed under the new manager. Have the outgoing manager walk the new manager through 1-2 sample tenant chargebacks in detail early on so calculations and allocation methods are clearly understood when the latest is prepared. Consider having audit rights and retaining review responsibilities over the outgoing manager's final CAM reconciliation covering any period while they were still active. There may be a need to bring in third-party consultants if there are any disputes regarding allocable expenses and chargeback calculations on the outgoing manager’s final CAM reconciliation. Following protocols like these around CAM accounting details will help avoid any disruptions to property financials or tenant relationships during and after the management company transition. 5. Plan Staff, Payroll and Benefits Transitions - If applicable, determine which current staff will stay on site. Plan payroll payment and insurance coverage transitions. - Communicate changes to affected staff immediately so they can prepare. 6. Migrate Data, Systems to New Platforms - Document all data and templates to be migrated from current software platforms. - Map out transition to systems used by incoming provider. 7. Conduct Final Property Walkthrough - Do walkthrough with managers from both outgoing and incoming firms with extensive photographic documentation. - Log all maintenance items identified for follow up. 8. Formalize Vendor Transitions - Get full contact info and pricing for current vendors. Set up new billing with incoming manager. - Consider requiring outgoing manager to close out open work orders. 9. Exchange Final Reconciliations, Fees for Approval - Outgoing manager submits final reconciliations of all managed accounts to owner. - Owner pays final fees to exiting provider once satisfied all obligations completed. 10. New Provider Assumes Full Responsibility - As of transition date, new property management company steps into full operational, financial and tenant relations responsibility for the asset. -A complete transition will typically take between 60-90 days. Subscribe to never miss valuable CRE insights!

As we stand on the threshold of 2024, reflecting on the 2023 commercial real estate (CRE) landscape reveals substantial trends that have reshaped the approach to Common Area Maintenance (CAM) charges. Let's take a look at these trends and practical strategies to help you effectively manage CAM charges in the coming year. 2023 Market Trends Impacting CAM Charges 1. Investment Volatility and Yield Sensitivity: According to cbiz.com In 2023, the CRE sector experienced fluctuations, with NNN sales volumes initially plummeting but later showing signs of recovery. Investors demonstrated increased sensitivity to yields, adjusting to rising interest rates and seeking properties with elevated cap rates and strong tenant profiles†. 2. Heightened Focus on Tenant Quality and Lease Durability: Amidst market uncertainties, investors prioritized tenant quality, long lease terms, and strategic locations. This shift towards stable, long-term investments was evident in specific sectors like car wash deals, which gained popularity due to attractive lease terms and tax benefits†. 3. Rising Operational Costs and Inflation Challenges: The persistent inflationary environment in 2023 continued to drive up operational costs, compelling adjustments in CAM charges to accommodate the increased costs of services and maintenance†. 4. Construction Inflation and Escalating Insurance Premiums: High construction costs, resulting from labor shortages and expensive materials, led to significant hikes in property insurance premiums. This trend exerted additional pressure on CAM budgets, especially in regions with higher inflation rates†. 5. ESG Factors Driving Investment Decisions: Environmental, social, and governance (ESG) considerations increasingly influenced CRE investments. The focus on sustainability and social responsibility, accelerated by global events, is expected to continue shaping investment strategies and operational costs†. Strategies for 2024 1. Enhanced Communication and Transparency: Emphasize clear communication with tenants about CAM charges, ensuring they understand the rationale behind any changes. Send letters as early as possible in the new year if CAM estimates will be adjusted so tenants have ample time to make the change. 2. Leverage Tax Incentives for Energy Efficiency: Utilize incentives like those in the Inflation Reduction Act to invest in energy-efficient improvements, balancing initial costs with long-term operational savings. 3. Risk Management and Insurance Strategies: In response to rising insurance costs, reassess risk management strategies and explore more affordable insurance options to mitigate the impact on CAM charges. Insurance policies tend to include built in increases and may need to be sent to market in order to shop current rates bringing the premium back inline with more competitive rates. It is imperative that you know your property prior to taking this step. It can also have the reverse effect and cause premiums to increase even more if switching to a new company where an inspection may be required. 4. Aligning with ESG Trends: Integrate ESG practices into property management to meet evolving investor and tenant expectations, potentially increasing property value and attractiveness. Consider adding EV Charging stations as an additional revenue source to offset CAM expenses. 5. Strategic Tenant Engagement and Lease Management: Focus on securing reliable tenants and offer flexible lease terms that align with the current market trends to reduce financial risks and enhance property stability. 6. Proactive Property Maintenance: Maintain a proactive approach to property upkeep and improvements, controlling CAM costs effectively while ensuring the property's appeal and competitiveness. As we approach 2024, the lessons from 2023's dynamic commercial real estate market provide valuable insights for managing CAM charges. Property owners who adapt to these trends and implement strategic measures can effectively navigate the challenges, maintaining strong tenant relationships and positioning their properties favorably in an evolving market. This proactive and informed approach is key to sustaining the financial health and competitive edge of commercial properties in the coming year. † https://www.cbiz.com/insights/articles/article-details/our-top-6-commercial-real-estate-concerns-from-2023

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Explore the latest trends, insights, and strategies for success in the commercial real estate space. From commercial property management to CAM reconciliations and lease administration, Lisa Shull's expert articles provide valuable guidance for investors, brokers, and professionals in the industry. Latest Editions: 6 Tips to Managing Q4 for Budgets and CAM Reconciliations Commercial Property Management 1 2 3 4 Commercial Lease Administration 1 2 3 Commercial Building Maintenance 1 2 Market News & Real Estate Finance 1 2 3 4 Real Estate Technology