Continental Realty University (CRU) recently began a new five-week Executive Series course titled Commercial Real Estate Leasing - Impacts on Valuation. The weekly, two-hour courses are free, taught by Continental’s President, Gene Parker and target local real estate managers, CPA’s, investors, analysts and other professionals involved in commercial and retail real estate. Another course which is part of the CRU Executive Series, examining real estate investments concluded in April. For information about attending, contact 410.298.4800.

The current course is designed to teach students how to understand and negotiate commercial leases to create maximum value for property owners, including institutional owners and investor groups. In-class discussions include the risk-return considerations property owners must evaluate when negotiating individual lease provisions. A special focus will also cover how real estate owners view leases and execute overall leasing strategies, and how different tenant uses are considered when creating a workable shopping center mix.

Concepts addressed at the first session included an examination of the acquisitions and development teams and a definition of their roles; a discussion about proformas and a property’s “best and highest use;” an overview of the lease, its function and legal ramifications; and an explanation of different lease types including inline, anchor and ground lease.

Specific issues and topics addressed by Gene Parker included:

- there are many different disciplines involved with real estate development, such as construction, property management, acquisitions, leasing and marketing and, from a leadership perspective, it is always important to “know the math.” This relates to having a clear understanding of accounting and finance principles and the ability to “talk the right language to investors.”

- when considering the scope of a development, a civil engineer is first engaged to create a feasible site plan and determine what can reasonably be constructed on the site. The next step examines the leasing possibilities,the type of tenants which might be interested, and what the rents might be. From there, a development budget and a proforma are created to determine if the project makes financial sense.

- it’s important for owners to ensure the development is functional and able to support a variety of uses over the long-term. Tenant spaces should be designed so that they are flexible, expanding or contracting them over time as tenant demand changes.

- a lease provides tenants with contractual permission to use their space and access the common areas. It defines who does what, including taking care of common area maintenance (CAM) issues such as grass cutting, snow plowing and keeping the electricity running. Lease provisions can be categorized as economic, legal and control-related.

- understand the difference between lease structures, such as triple net, gross, full-service or industrial gross. Also, understand the differences between inline, anchor or ground leases.

Continental Realty Corporation, headquartered in Baltimore and founded in 1960, is a full-service commercial real estate investment and management company. The privately-owned firm owns and manages a diversified portfolio of retail centers consisting of more than three million square feet of commercial space, as well as almost 10,000 apartment homes. Positioned throughout the Mid-Atlantic and Southeast regions, the portfolio’s value exceeds $2 billion. For additional information, visit www.crcrealty.com