Commercial developers · Real estate and construction
Office and retail assets where the rent roll agrees with the ledger
A leased office or retail asset is valued on its rent roll, and the rent roll is only as good as the billing behind it. We reconcile each lease to what is invoiced and collected, so escalations are applied on time and recoveries cover the cost they are meant to cover. A lender or investor then sees the same number you do.
In one paragraph
Developers of office buildings, business parks, retail and mixed-use assets earn over a decade of leases rather than at a sale, sometimes alongside strata sales of part of the space. For their owners and finance heads, the work is less about construction cost. It is about lease terms, recoveries, deposits and the debt raised against future rent.
Managing director or chief financial officer, often with the asset manager
The economics
How the money moves in this trade
Revenue comes from leases with lock-in periods, scheduled escalations, rent-free periods and contributions to tenant fit-out. Under the accounting standards, rent with fixed escalations and rent-free months is generally recognised on a straight-line basis over the lease term. That separates reported income from cash billed. Tenants also pay maintenance and utility charges meant to recover the cost of running the building, and those recoveries are where margin quietly leaks.
The asset is usually financed against its rent. Lease-rental discounting and similar loans size the debt on contracted rent. They carry covenants tied to occupancy, tenant quality and the timing of lease expiries. GST on commercial rent is charged to tenants. Input tax credit on constructing a building to be let out is restricted, a position that was litigated to the Supreme Court and then amended retrospectively. The finance function has to hold all of this lease by lease, not building by building.
The problem
Where the numbers usually break down
Escalations are missed or applied late
A lease provides for an escalation on a fixed date, but billing continues at the old rent until someone notices, and the arrears are rarely recovered in full.
Maintenance recoveries do not cover maintenance cost
Common-area charges are billed at a rate fixed years ago, while the actual cost of security, housekeeping, power backup and repairs has moved, so the owner subsidises tenants.
Rent-free periods and fit-out contributions are not tracked
Incentives given to win a tenant are recorded as a one-off, so straight-lined income, cash rent and the true effective rent per square foot are all different and nobody reconciles them.
Security deposits are treated as working capital
Interest-free deposits from tenants are spent on construction, leaving no plan for refunds when large leases end in the same year.
Lease expiries are not modelled against debt
Covenants on the rental-backed loan depend on occupancy and expiries, but the expiry schedule sits with the leasing team and is not run through the cash flow.
What we do
The work, and the result each part produces
Rent roll reconciled to billing
Every lease abstracted for rent, escalation dates, lock-in, rent-free months and deposit, then compared with invoices raised and cash received.
Missed escalations and under-billing are found and recovered.
Common-area cost pool and recovery
Maintenance and utility cost collected into a pool by building, compared with recoveries billed, and trued up as the leases allow.
Recoveries cover the cost they are meant to cover.
Straight-lining and lease incentive schedule
Rent-free periods, fit-out contributions and fixed escalations scheduled over each lease term, with the difference to cash rent tracked.
Reported income, cash rent and effective rent are reconciled.
Security deposit register
Deposits held by tenant, with refund dates mapped against lease expiries and the cash available to meet them.
Large refunds are planned rather than discovered.
Lender and investor reporting
Occupancy, rent roll, collections, expiries and covenant ratios prepared on the cycle the loan agreement requires.
Covenant headroom is known before the lender asks.
Asset-level profitability
Net operating income by building after recoveries, leasing cost, incentives and property tax, with financing shown separately.
Hold, refinance or sell decisions rest on asset-level numbers.
Where we start
The first steps of an engagement
Leases, invoices and collections
We ask for every lease and amendment, the property manager's billing register, tenant ledgers, the security deposit list and the covenant schedule from the loan agreement.
Lease-to-invoice reconciliation
Each lease is abstracted for rent, escalation dates, rent-free months and deposit, then compared line by line with invoices raised and cash received.
Escalation calendar and cost pool
Escalation dates go into a billing calendar the property manager works from. Maintenance cost is collected into a pool by building for comparison with recoveries.
Rent roll variance report
The first report lists rent contracted against rent billed for each lease, missed escalations with the arrears due, and maintenance cost against recoveries by building.
How it is measured
The reports the work is judged on
Each is recorded as a baseline before the work starts, so later reports have an honest comparison.
- Rent billed against rent contracted, by lease
- Common-area cost against recoveries, by building
- Effective rent per square foot after incentives
- Lease expiry profile against debt maturity
- Security deposits held against refunds due
- Net operating income by asset
Who it suits
Written for, and not the right fit for
- You need a registered valuer's valuation of the asset or a statutory audit; those are performed by independently engaged professionals.
- You want brokerage or leasing services; we work on the finance behind the leases, not on finding tenants.
- Developers holding leased office, business-park or retail assets, alone or alongside strata sales.
- Owners who have raised, or plan to raise, rental-backed debt and report to a lender quarterly.
- Asset owners preparing for an investor, a stake sale or a move towards an institutional platform.
Services
Services this work draws on
Outsourced accounting
Your books kept current and reconciled, closed to a published calendar.
Explore service ↗MIS and financial planning
Reporting built around the questions you actually need answered.
Explore service ↗Banking, funding and due diligence
Information a lender or investor can verify without a reconstruction.
Explore service ↗GST, TDS and tax compliance
GST, TDS and income-tax prepared from reconciled data, not a working file.
Explore service ↗Internal controls and risk
Controls sized to your business, documented and actually tested.
Explore service ↗Every other service, also available in this trade
Common questions
Questions owners in this trade ask
Our property manager handles billing. Why would finance need to check it?
Because the property manager bills what it's been told to bill. If a lease amendment or escalation never reached them, the error runs for months. A periodic reconciliation of leases to invoices is the control that catches it.
What reporting does a lease-rental discounting loan need?
Usually the rent roll, collections, occupancy and covenant ratios, on the cycle the loan agreement sets. We prepare them from the same reconciled records you run the building on, so the lender's numbers and yours match.
Do you value the property for the bank or for our accounts?
No. Valuations required by a lender or by law are done by an independently engaged registered valuer. We provide the lease and income data the valuer works from.
5th Quadrant maintains lease, recovery and asset-level accounts and prepares lender and investor reporting. Statutory audit, tax-audit reports, statutory valuations and any certificate a lender requires from a licensed professional are issued by an independently engaged professional, coordinated through 5th Quadrant. Full detail is on our Professional Scope page.
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