How do I set up Retail Recoveries with Major/Anchor Contributions?

Recoveries for retail tenants whose recovery pool(s) are reduced by contributions from major/anchor tenants may be modeled within rDCF by following the steps below.

Step 1: Create Report Tags

Report Tags allow for (i) the grouping of recoveries for reporting purposes, or (ii) grouping of recoveries for major tenants that will be used to reduce recovery pools of non-major tenants. Recoveries that are assigned the same Report Tag will be grouped together.

Report Tags are available for use within recoveries and are modeled within any of the following three areas of the application: Rent Roll, Market Leases and Named Recoveries.

Suggestion: Create Report Tags using a Code that depicts where and how they are used, e.g., "Exterior CAM," "Common Area Taxes," etc.

Step 2: Model Contributor's Recovery

Model the recoveries for the major/anchor contributors that will be deducted from the recovery pools of non-majors.

Alert: It is imperative that the contributor's recoveries have an appropriate Report Tag attached.

There are three general categories of recoveries in the application by which contributor's recoveries can be modeled:

• Pro rata/Fixed %
  • Tenant pays a specified percentage of the expenses in a Recovery Pool
  • Recovery Pool may include gross-ups, capped expenses and admin fees
  • Net or stop amount (base year amount)
  • Pro rata %; calculated or specified %
  • Caps (pool or tenant's recovery amount)
• Amounts that are scheduled and defined in the lease; either flat throughout the lease term or scheduled to grow over time.
• Tenant Mgmt Fee where a tenant pays a percentage of it's rent and/or recoveries as a replacement of it's pro rata share of the property level management fee (this is not typical for retail tenants).

Suggestion: If a contributor's recovery mechanism might apply to other tenants, or if the contributor has options modeled, using Named Recoveries may provide efficiencies. 

Step 3: Create Tenant Group

Tenant Groups are groupings of tenants (Rent Roll records) for the purpose of:

• defining who contributes to a pool
• creating Area Measures based on specific tenants
• defining tenants for whom a different vacancy/credit loss applies

When creating the Tenant Group, enter a Code that describes which tenants comprise the group, e.g., "Majors > 20k SF."

Suggestion: If you do not know all the tenant groupings required up front, create an individual group for each tenant who is a major contributor.

Step 4: Create Tenant Contribution

A Tenant Contribution is the combination of a Report Tag and a Tenant Group. Recoveries for all tenants within the Tenant Group containing the same Report Tag will be combined together. This Tenant Contribution can then be used to reduce the Recovery Pools of non-major tenants (see Step 5).

Suggestion: When creating Tenant Contributions, enter a Code that describes (i) what is being contributed via a Report Tag and (ii) who is doing the contributing via a Tenant Group, e.g., "EXT CAM > 20K SF."

Step 5: Create Recovery Pools for Non-Majors

Using the Recovery Pools tab, create the recovery pools for the non-major tenants. When the Display is set to "All," the "Item" column will provide a list of:

• all recoverable expenses available for inclusion in the pool; &
• all Tenant Contributions that are available to reduce the pool

Select the recoverable expenses and Tenant Contributions that apply to the non-majors pool by assigning a Percent to be included in the pool.

Note: Even though Tenant Contributions reduce the pool, enter the percent of the applicable contribution as a positive amount.

Read about: Recovery Pools

Step 6: Create Non-Major Denominator

Area Measures to be used for the denominator can be set up using either the:

• Basic state (a fixed square footage amount for non-major tenants)
• Detailed state (a fixed square footage amount for non-major tenants that changes over time)
• Tenant Group state (occupied square footage for the non-major tenants with the ability to add a floor or a cap). To use the Tenant Group state, a Tenant Group must be set up for all non-major tenants included in the denominator

Read about: Area Measures

Step 7: Create Non-Major Recovery

Use the pro rata recovery to create recoveries for non-major tenants with (i) the appropriate recovery pool that reflects a reduction for major Tenant Contributions (Step 5); and (ii) the appropriate Area Measure for the denominator that excludes the square footage of the major tenants (Step 6).