Adobe Systems Incorporated, commonly known as Adobe, is an American multinational computer software company. Adobe occupies 65% of their building and has a 2013 base year for operating expenses.
During a preliminary audit of the tenant’s 2016 operating expenses, trending indicated that the landlord had increased the level of services being provided to the building but had not made an adjustment to the base expenses to reflect those increased service levels. Under the terms of the tenant’s lease the landlord is required to adjust the base expenses if any substantial item is included in the current year but was not included in the base year. In late 2014, the property management company had been acquired by a large real estate firm, which could account for changes to building management.
The Cushman & Wakefield team faced a challenge in obtaining detailed documentation from the landlord to confirm initial findings and then presenting the landlord with sufficient documentation and lease language to substantiate our findings.
- Adjust the base year expenses to bring expenses in line with current service levels.
- Increase the base year expenses in order to decrease the tenant’s share of current year expenses over the balance of the lease term.
- The landlord increased the tenant’s share of 2013 base expenses by $70,400 per year, resulting in savings of $140,800 for revised 2016 and 2017 operating expenses.
- In addition to cost savings, the tenant will receive a future cost avoidance for the balance of the lease term of $381,300. The tenant’s current lease expires May 31, 2023.
- The total savings and cost avoidance benefit to Adobe exceeds $522,000.