Small Problem In Managing A Commercial Property
This is a question re: managing a commercial property, and I'm not sure if it would appropriate to post this here or not.
First, brief background: I recently purchased a commercial property that I have been renovating for some months now. The commercial area was once 1 LARGE ROOM which has since been divided into an aisle with smaller rental spaces to either side of the aisle. Several of the spaces share partial walls (the walls do not go all the way to the ceiling), which allow warm/cool air flow to the units for comfort control.
I am approaching the end of the remodel and am starting to entertain questions and inquiries for rental space.
For purposes of simplicity, I have priced the spaces utilities paid. However, I am in negotiations with a public access TV station that is interested in renting some space as a production facility. The problem? Their power requirements are much higher and I'm concerned about structuring the lease to make sure I don't end up taking it in the shorts by paying for their electricity. Remember that because electricity, heating and cooling are shared among several spaces, I can't easily tie their actual consumption to their space, and pro-rating the bill according to the sq. ft. consumed isn't realistic, especially if the adjacent rental space uses nothing but the lights (light retail).
One thought I have had was to do an energy/equipment audit periodically to estimate their consumption and adjust quarterly or semi-annually or something like that.
Anyone out there have any other ideas? All thoughts and comments would be appreciated.
TIA.
Gary [ Edited by glieberman on Date 04/29/2004 ]
It may not be as difficult as you think to seperately meter the electric usage. Did you wire with romex or conduit?
The building is 100 years old. The electrical systems are in rigid conduit. The breakers that control 1 rental space also control other rental spaces, as well.
Frankly, the electrical systems were a MESS when I bought the building....they are much better now, but still quite complicated.
I'm sure they realize their need for extra power. Is your utility company giving you "averaged" bills so they are about the same every month or will they vary? If they're averaged, you could simply word the lease so that this tenant is liable for any electrical costs over X. That would be the extra they're using.
If they aren't averaged, you could have them liable for the entire bill, but credit against their rent the amount you were expecting the other three offices to "consume". For example, if you were expecting bills of around $200, and charging $500 for each unit. You were basically saying that each unit would be using $50 of electricity a month. So charge them $300 for rent (the other three guys the 500), and have them responsible for all the electricity. If you talk to them and explain how the utilities were suppose to be part of the rent, show them the numbers, a reasonable tenant would accept this. Set it up with the utility company that any late notices, etc., get copied to you so you won't have mad tenants if these guys fail to pay the bill.
I had forgotten about the averaged billing for the utilities. I don't think I can "qualify" for that until I've had the account for 1 year, but I'll check.
Good idea to "back out" of the total bill the charge for the other spaces, since (at least at this time) they are very predictable (lights, maybe a computer).
Also a good idea re: talking to the tenant and showing them the numbers. These guys seem like they want to work with me on this, so I'll try that out.
Thanks for the ideas.
Well the wire in the conduit is pretty easy to re-wire. I'd at least think about re-pulling this section of the building and adding a seperate meter.
Thanks for the idea. I have a couple of crack electricians working for me...I'll run it by them and see what they say.
Thanks again for your thoughts.
did it work out?
Get the prospective tenent to submit their previous electric bill to you ( say three months) along with their current as well as prospective equipment. You should then be able to adjust their net rent.
You might have more then just electrical problems.
If the production company produces a lot of heat (lighting) then it sounds like temperature control will be an issue. As some units share heating and cooling and are not isolated from each other when it comes to sound a lot of bleed over is possible.
I guess I do not understand how the units are really laid out (only some are open to each other) and why you are not interested in better segregation. Consider making such things a tenant improvement or at least something that causes a longer lease commitment if you are fronting the costs of the refit.
John
[addsig]