Commercial and industrial management rights valued landlord by landlord, lease by lease.

A commercial rent roll is valued on the recurring fees its commercial, retail and industrial managements earn, after the cost of servicing them, adjusted for how concentrated and how durable that income is. Because a few landlords and leases can carry most of the fees, a valuer works landlord by landlord: the fee basis in each signed agreement, lease expiries, vacancies, incentives and outgoings work. Leasing fees are event income, kept apart from the recurring base. Agency Valuations prepares fixed-fee reports banded on annual management income: $1,495 + GST under $2 million.

How is a commercial rent roll different from a residential one?

A commercial rent roll is the management agreements an agency holds over shops, offices, warehouses and other non-residential property, with the leases, records and fee income that go with them. It differs from a residential roll in four ways that matter to value:

• ·Fewer, larger managements: one landlord or one lease can carry a large share of the fees, so concentration is measured by income, not by count
• ·Fees negotiated landlord by landlord: a percentage of gross rent, a fixed annual fee or a mix, with separate fees for leasing, rent reviews, outgoings and works
• ·Longer leases: income is steadier between expiries, and the risk gathers at expiry dates, incentive periods and vacancies
• ·More administration: outgoings budgets and reconciliations, rent reviews and lease compliance take specialist time

Which fees count in a commercial management income base?

We build the base from recurring fees that a current signed agreement supports. In NSW, Fair Trading states that an agent is not entitled to its fees or expenses unless a written agency agreement is in place and a copy signed by the licensee is served on the client within 48 hours after the client signs. In Queensland, an agent cannot provide a property agent service until the client appoints the agent in writing, and commercial appointments use their own form, Form 6A.

Leasing, rent review and works supervision fees depend on events, so they are measured separately and kept out of the recurring base unless the history shows they recur reliably. Outgoings administration fees count where the agreement provides for them. Recoveries passed through at cost are not income of the roll. All figures exclude GST.

What drives the value of commercial management rights?

Each driver is tested landlord by landlord and lease by lease.

• ·Landlord concentration by income, and how long each large landlord has stayed
• ·Lease expiry profile: how much fee income sits on leases expiring in the next 24 months with no renewal agreed
• ·Vacancies and incentives: rent-free periods cut a percentage fee while they run, and a vacant shop or warehouse can take longer to re-let than a house
• ·Tenant arrears and the financial strength of the largest tenants
• ·Who holds each relationship: commercial landlords often deal with the principal or one specialist manager
• ·Fee terms in each agreement, including termination notice and fee review dates
• ·Quality of outgoings administration, since missed estimates or statements put a landlord's recoveries at risk
• ·Property mix across retail, office and industrial, and geographic spread
• ·Servicing cost, including the specialist staff the roll needs

How do outgoings rules affect a commercial rent roll?

Commercial leases often pass running costs, called outgoings, to the tenant, and the managing agent usually prepares the budgets and reconciliations. Getting this wrong has consequences for the landlord and, through the landlord, for the management.

For a Victorian retail premises lease, the VSBC says the landlord must give the tenant a written estimate of outgoings before the lease is entered into and at least one month before each accounting period, and a statement no later than three months after each period ends. The statement must be audited, unless the tenant pays just GST, utilities, council rates and insurance and proof of payment is supplied. A tenant is not required to pay outgoings if an estimate has not been given.

We look at whether estimates and statements were issued on time for the last two periods. Whether retail leases legislation applies to a particular lease, in any state, is for the parties' lawyers.

When do you need a commercial rent roll valued?

Common triggers include:

• ·Selling or buying a commercial management portfolio
• ·Splitting a commercial division out of a residential agency, or merging one in
• ·A partner exit in a commercial agency where the managements are the main asset
• ·A related-party transfer or restructure, where market value matters for tax
• ·Finance, where the lender asks for a report
• ·A dispute over a sale, a clawback or an exit, through an expert report

What do we need from you?

You need nothing to enquire. After you engage us, we ask for:

• ·A lease schedule: tenant, start and expiry dates, options, review dates and method, current rent, and incentives with their end dates
• ·Each landlord's fee basis and signed agreement, with any separate leasing, review, outgoings or works fees
• ·12 to 24 months of fee income by landlord, split between recurring and event fees
• ·Arrears by tenant, current vacancies and how long each has lasted
• ·Outgoings budgets and statements for the last two accounting periods
• ·Which staff member holds each landlord relationship
• ·Recent trust account audit reports

What does a commercial rent roll valuation cost?

Commercial managements valued on their own are banded on their annual management income, excluding GST: $1,495 + GST under $2 million, delivered in 2 business days; $2,495 + GST from $2 million to $3 million, 3 business days; $3,495 + GST from $3 million to $10 million, 3 business days; above $10 million, quoted in writing before work starts, with the delivery date agreed before commencement. A mixed roll is analysed segment by segment in one report, and if the whole agency is valued the band follows its total annual turnover. An expert report for a dispute is $4,495 + GST.

Each past valuation date adds $495 and each additional entity adds $795. Delivery time starts once payment and all required information have been received. You receive an independent written report that follows the guidelines of APES 225 Valuation Services, signed by a suitably qualified business valuer. We value the management rights, never the buildings.