What You Need to Know Now About FASB 13 Changes

By Scott Henley

The Financial Accounting Standards Board (FASB) will soon significantly change how the commercial real estate industry reports lease transactions on financial statements. These changes are right around the corner, impacting both tenants and owners adhering to GAAP standards—and will likely have a substantial effect on companies’ bottom lines. Here’s what you need to know.

First, let’s understand FASB 13—it’s what regulates accounting standards for office leases in the United States. Every lease must be classified as either an operating lease or capital lease based on specific criteria, and most leases today are classified as the former. The difference: operating leases are treated as an ongoing operating expense while capital leases are treated as a financing transaction and are reported as an asset and a liability.

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The M&A Explosion and Real Estate

JACKSONVILLE, FL—Across the globe, mergers and acquisitions are on fire—in fact, the Wall Street Journal reports that activity is on pace this year to hit the highest level on record, even greater than the boom year of 2007. Additionally, the strong economy has led to rampant company growth in many sectors. And with that, there are many challenges that come with mergers, acquisitions and growth, particularly on the real estate side.

“For instance, a company may end up with excess space, discover redundancy in a certain market or have assets that don’t fit in with its strategic vision,” says Scott Henley, SVP of global corporate services with Newmark Grubb Phoenix Realty’s office in Jacksonville, FL. “What it ultimately chooses to do with these properties will have a significant impact on its bottom line.”

Other situations that may arise include having to close office locations or deciding where to base headquarters operations. One of the best examples is in the technology sector, where M&A activity has exploded. Recently, a well-known Fortune 500 firm hired NGKF in the lease of a new headquarters site, which effectively consolidated multiple spaces nearing lease expiration. The firm was able to negotiate a 15-year lease with an option to buy the property, which comprised multiple buildings, after five years. It was one of the largest recorded deals for office or R&D space in its market.

“The period after an M&A or during growth mode are ideal times to bring in real estate consultants to address a company’s current real estate needs,” Henley continued. “We have the experience and expertise to address current real estate needs, manage growth and integration and determine whether space is being used efficiently.”

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Digital Risk moving to Prominence office park

By Karen Brune Mathis, Managing Editor – Daily Record

Prominence office park in Baymeadows is gaining another tenant — Digital Risk LLC.

Digital Risk, a financial services company, will relocate 320 employees from JTB Center, at 5011 Gate Parkway, to 8900 Freedom Commerce Parkway, according to spokeswoman Brandie Young.

Young said the move will take place in mid-January, the month the lease expires at Gate Parkway.

“The company opted for the new, larger space largely because of the improved amenities for employees, such as increased parking, restaurants and cafeteria,” Young said.

She said the park, at Baymeadows Road and Interstate 95, is centrally located.

Digital Risk is one of several new tenants signed at the former Freedom Commerce Centre, whose owners have been repositioning the office park since buying it three years ago.

Crocker Partners has lifted occupancy from about 30 percent upon the purchase to 71 percent with the newest leases.

Young said Digital Risk will move from 40,000 square feet at JTB Center to about 55,000 square feet at Prominence. Scott Henley with Newmark Grubb Phoenix Realty Group represented Digital Risk. Jones Lang LaSalle represents property owner Crocker Partners.

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Five Reasons to Outsource Facilities Management and Lease Administration

By Scott Henley

When it comes to facilities management and lease administration, companies have two choices: to hire in-house or to outsource the work to firms with vast knowledge in each.

While there are many experienced professionals who can provide these functions in-house, there are multiple benefits to outsourcing both facilities management and lease administration functions to a third-party service provider…

 

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