hi my name is Beth aor and I own shopping centers in South Florida and this is my podcast I own a shopping center now what so today it's March and many many many of us have been working on and getting to the tenants their cam wrecks cam reconciliations so I'm going to be a little basic here because some of you just bought your first Shopping Center I'm hearing from a lot of you that you fell into or bought your first shopping center and there's so many nuances and new things that you are experiencing and just this week I got three calls about cams so I want to talk about that so I apologize for some of you vets that are listening that this might be a little basic So when you buy shopping centers many times hopefully as much time as possible your tenants leases are fully triple net meaning they pay a base rent of 15 bucks a square foot and then they pay a cam common area maintenance taxes and insurance which by the way is also called operating expenses and passrs you know there's many many names for for the extras that the tenants should be responsible for and they include real estate taxes and Insurance utilities security if you have it maintenance you know all anything that you're spending to upkeep maintain and run the property in a fully trip net lease that gets passed through to the tenants so in my portfolio my triple Nets my cams my operating expenses are running between $15 and $18 a square foot now remember I don't have any Supermarket anchored shopping centers if you have a supermarket anchored shopping center and your anchor is let's say Publix they do not pay their full prata share of Maintenance they might only contribute 50 cents towards a $4 per square foot maintenance so what happens the smaller tenants the local tenants the tenants that are not the grocery stores usually there's a clause in the lease that says that they pay the shortfall so for example let's say the maintenance is four bucks a square foot and when I say maintenance I'm excluding taxes and insurance so let's say taxes are $5 a square foot and insurance is $2 a square foot and maintenance is $4 maintenance is again utilities grass cutting Porter service roof repairs all of that stuff management fee so the anchor the supermarket anchor might say that they'll only contribute 50 cents so for their 40,000 foot space there's $3.50 per square foot that is usually passed on to the local tenants now if the maintenance is four bucks and the other 20 tenants get their perus share of that extra 350 that the anchor does not pay then their maintenance might go from $4 to 550 okay so that is very prevalent in our industry that the local tenants pay for what the anchor doesn't pay now an unsophisticated local tenant might say well why is that and the answer is well why did you pick this shopping center to come lease at well I picked it because it's a public Sinker Center well okay that's why you're paying their Pera share okay they're paying you're paying your pered share of their expenses because you're here for their thousand people a week that go into the grocery store if you don't want to pay their per redish share then go to the center down the street that has no anchor okay so that is the argument and that happens all the time now if your tenants if you believe your tenants cannot afford to pay the groceries their share of the grocery share you as the landlord can always cap you know you can say well you only have to pay $475 instead of 550 you have the ability to do that but just know that you will be eating the difference okay anytime you give a cap for example I have two National Coffee tenant leases and I made the mistake in both of them to not do full passrs of garbage I have the garbage category in the maintenance category and this National Coffee tenant has a cap on their maintenance so their cap is not as limited as the grocery store's cap of0 50 cents but their cap is maybe $2 with a 5% increase every year so they say we'll pay up to $2 and it's Capa at 5% so if for some reason my garbage costs skyrocketed the next year I'm only able to pass through what the lease says I made a mistake with that I will never do that again garbage for me now is a non-controllable in the world of cams we've talked about this before there's controllable costs the landlord can control because you can bid it out grass maintenance but there's uncontrollable taxes can't control taxes utilities security you can't you're not going to pick the lowest bidder for security so that's an uncontrollable another un controllable in Florida are hurricane cleanup expenses if we have a hurricane and our entranceways are closed I'm not picking the the lowest bidder guy I won't even get someone to bid I've got to get the the first guy that can come with the chainsaw and cut the trees down and open my entrance way so that's an uncontrollable cost and now in utilities is uncontrollable and now I add garbage as an uncontrollable because many times the municipality is in charge of that and I can't bid it out and in two instances right now I am eating the landlord I can't pass I don't pass through another tenant's garbage to the other tenants that I don't do that so I'm eating it as the landlord so you need to be careful and this is when you as the landlord need to be very astute in when your leasing people are negotiating leases and saying oh you know if you want this tenant you've got a cap cam you've got to be very careful and understand what that's going to do to your cash flow Okay so back to camre many people the goal is always in my world to get them out between March and April so basically what you're doing is the tenants the prior year you've given them an estimate and you've said your the real estate taxes were $5 your insurance was $2 and your maintenance was $4 and they pay those estimates quote unquote all year long then at the end of the year it's time for a true up well Insurance went up to $4 so now I've got to pass through an extra $2 to the tenant in a wreck reconciliation so all of the tenants get letters and they say dear tenant you paid you know $10 for your cam last year your taxes your insurance and your maintenance but it really cost us 12 so you owe the difference of two and please pay this as soon as possible some tenants you know want backups a lot of times the Nationals play games with this they ask for backups and backups and backups and backups and all of a sudden you know I've consulted with companies where I'm looking at their delinquencies and I see that major companies owe thousands and thousands of dollars and I ask what is this and they go oh they're disputing the cam well what I say to them is okay if your cam Bill National was an extra three bucks and your 20,000 ft so that's $60,000 you're not disputing the whole cam maybe you're only disputing $5,000 of it pay me the 55,000 and then we'll dispute the five so I'll three-day Nationals very quickly if I think they're playing games which a lot of times they are so back to the point that I want to get at so the $2 so now the tenants get build the $2 this is very very important you need to raise the estimate on the tenants for the new year so for example my cam bills went out last week so it is March it's the first week of March so dear tenant here's your cam wreck your cam wreck is $2 a square foot more and oh by the way your new rent is your base rent and your new cam plus the $2 you owe February and I mean January and February and March and going forward your rent will be X and you need be including the new estimates so that's one way to do it another way to do it is when you do your budgets back in September and October you know okay it looks like our Cam's going up $2 because of insurance so you can start in January dear tenant here's your new 2025 here's our new 2025 budget we believe you know last year our insurance went up so and we believe that will stay consistent so your new cams are blank and you start January off fresh there are some landlords that don't increase the estimates at all so the landlord has three choices one don't increase the EST the monthly estimates and every year they have a cam wreck and the cam wreck is could be pretty substantial two you increase after you do the cam wck in March you then increase the estimates and you go back and tell them they owe for January and February and then going forward or three you do a budget and then you start right away in January with the new estimates I have done all three I'm a new partner in a deal where they never increase the estimates and they just always get a new cam wck every year and it's significant our our tenants have gotten four and $5,000 bills and that's a problem because you know a small local mom and pop tenant doesn't have three or four or $5,000 to pay that so I'm changing the game this year I'm going to do the budget and then in January 2026 we will send a letter increasing the estimates and I'll explain why I'm doing this and I'm telling them that now in my camre meetings because I'm warning them that their rents are going to go up in January so that this will allow for them not having such a big cam wreck in the spring I know this is a lot of information I am happy to talk more about it in future calls if you're interested just send me specific questions so I know what it is that you want me to drill down in a little more but yeah it's cam season so and then sometimes people say well do you give them payment plans so if I get sales reporting and I know they're killing it I don't allow a payment plan if I get sales and I know they're hurting of course I'm going to allow a payment plan it's all a negotiable thing right if someone would give me back their option I'd wave it but they're not going to do that for three or $4,000 so you are the landlord you can make all kinds of decisions like that but the Nationals I don't give a payment plan for the Nationals they have money pay pay your camera so that is everything you wanted to know about camx but but didn't ask hope you guys have a great week I'll see you next time