Why Investors in Net Leased Properties Need Asset Managers

Net leased investments remove a lot of the complexity from individual property investing by focusing on properties which in many ways manage themselves. Still, administrative burdens and complexities exist and to the uninitiated it can be daunting.

Tenants in net leased properties are responsible for most of the onsite maintenance and upkeep of the property. However, there is still a need to collect the rent, pay some bills, keep a set of books, get the tax return prepared, make distributions and prepare for a re-sale when the current tenant’s lease expires, or sooner.

An asset manager can add significant value by dealing with these issues. The cost of an asset manager is relatively low based on the services provided.  An asset manager will handle all of the day to day details associated with the property like collecting rent, paying bills, including the mortgage payment, providing monthly reports, arranging for tax return preparation, and making the required cash distributions. They can also provide guidance and insight as to current market conditions, transaction support and due diligence in the acquisition and disposition of the property itself, and sound advice on the positioning of the property throughout its holding period.

Professional asset managers can provide advice as to when the optimum time to sell is, and whether there are other net leased property opportunities that might provide a better return.

Net leased properties are one of the most passive real estate investments in the market. However, like all investments, proper management is needed to ensure a stable and substantial payoff.

We would be happy to discuss our professional asset management services.

Impact of Lease Accounting Changes to Affect Long-Term Leases

Proposed new accounting standards have been drafted in order to push lease liabilities back onto corporate balance sheets. Such a change would represent a major shift for companies that have typically favored the off-balance-sheet treatment of operating leases, and it could have a significant impact on corporate decisions to lease or purchase real estate in the future.

The proposed guidelines are a joint initiative by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board to create a uniform global standard and greater corporate transparency in lease accounting procedures. The most recent draft issued Aug. 17 would establish one method of accounting that requires firms to recognize all lease liabilities and assets on their corporate financial statements.

Another key component is that companies would be required to record the lease value or rent commitment over the entire lease term, including renewal options. Although the intent is to stop off-balance-sheet activity, the changes would add significant weight to corporate balance sheets. Continue reading “Impact of Lease Accounting Changes to Affect Long-Term Leases”