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Retailers Turn Attention to Lease Auditing To Cut Expenditures

There used to be a time, a few years ago, when most retailers paid only the most peremptory attention to lease auditing. A retailer’s accounting department would receive the bill from the landlord, go over the items to make sure there were no obvious mistakes and sign off on the check.

In fact, the lack of attention with which commercial leases often got treated after the negotiations phase ended was the main reason Marc E. Betesh, a real estate lawyer by training, decided to start a lease auditing firm in 1985. At the time, Betesh worked at the New Jersey-based offices of commercial brokerage firm The Kislak Organization. His lease auditing service started as a division of Kislak and eventually became the independently owned KBA Lease Services, where he now holds the post of president and CEO.

Today, retailers represent approximately one-third of KBA’s clients, with big-box operators and department stores serving as the firm’s main base. KBA’s specialty lies in complex transactions with many moving parts, Betesh explains, which is why it often ends up working on behalf of anchor tenants.

Of course, in the current environment, many firms are paying a lot more attention to their existing leases than they did even five or six years ago, both because they are trying to cut down unnecessary expenditures and because they are facing upcoming changes in the Financial Accounting Standards Board’s (FASB) lease accounting rules. But since retailers seldom have the necessary in-house expertise to see all the potential implications of a lease audit, Betesh feels the services of a professional auditor still come in handy. (Like many of its peers, KBA Lease Services only charges its clients if an audit results in savings.)

In addition, most of the 20 or so people who make up KBA’s staff have some background in law and can examine leases not only for accounting errors, but also for legal compliance. “We don’t represent clients as their lawyers, but we do bring that level of expertise” to the table, Betesh says. Site Optimizer spoke to Betesh about his firm’s work and the changes he sees happening in the market.

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