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March 5, 2024

AI-Powered CAM Reconciliation: How Prophia Saves Time for PMs & VPs

We can’t make CAM reconciliation season go away, but we can make it a little more palatable. Find out how Prophia’s advanced AI captures important figures relating to CAM.

CAM Reconciliation

CAM reconciliation season is not a fun time of year. Between verifying countless amendments, chasing down leases, and communicating with third parties, property managers juggle many balls as they approach Q2 of the new year. 

At its best, the CAM reconciliation process can be labor-intensive and complicated—especially when managing multi-tenant properties. At its worst, owners could potentially undercharge their clients, impacting a property’s cash flow.

There are many reasons to get CAM right, and if you’re a property manager in charge of verifying copious amounts of contract data or you’re a VP executing a review, Prophia’s vertical AI can help automate administrative tasks related to CAM and imbued the review process with a sense of confidence.

Jump To A Section in This Article
Landlord & Tenant Motivations During CAM Season
Why Is CAM Important for VPs and Owners?
CAM Reconciliation Process Inefficiencies
Prophia’s CAM Coverage With AI
How Radom Capital Uses AI for Property Management

Landlord & Tenant Motivations During CAM Season

Every party involved in a CAM recovery process has different goals and desired outcomes. For tenants, reviewing CAM expenses every year allows them to verify the amount of money they’ve put toward common area maintenance and whether or not they have overpaid. If that is the case, they’re entitled to reimbursement.

CAM reconciliation periods provide tenants with a breakdown of total annual costs. This allows them to verify that they are paying a proportional amount to other tenants in the building.

For landlords, CAM reconciliation allows them to compare their estimates with actual spending. If their CAM expense estimates fell short and they spent more than they collected from their tenants, they could be entitled to money. This is just another way CAM reconciliation helps balance property expenses and makes it possible for property owners to oversee cash flow. 

The Importance of CAM Reconciliation

The property manager or a third-party management team has a stake in properly calculating CAM expenses, too—even if they seem a few degrees removed. For one, the CAM period allows property managers and VPs to verify the effectiveness of their landlords. Are their CAM estimates accurate? Were there any leaked expenses that impacted the property’s income?

However, what is even more important, perhaps, than expense recovery is the execution of lease obligations. CAM Reconciliation periods require property managers and owners to verify and interpret their tenants’ contract agreements. It’s an opportunity for those responsible for managing lease agreements to fulfill important obligations to their tenants.

Why Is CAM Such an Arduous Process?

Getting CAM right is difficult. There are many moving parts and parties involved in reconciliation and if every individual isn’t in step throughout the process, you could end up with a misinterpretation of your tenants’ lease obligations. When misunderstandings like this occur, it unnecessarily opens your team to exposure and the potential for a contract dispute.

Another difficult aspect of the CAM reconciliation process is that every lease handles CAM differently. If you’re managing a multitenant building or property with co-tenancies, you could be required to interpret extremely complex terms and lease language with little to no standardization across your tenants within the same building. This can make interpretation extremely difficult for one individual, let alone an entire team or property managers, VPs, and third-party accountants.

Then, there are process inefficiencies. If your team uses multiple spreadsheets or different systems for storing your tenants’ information, you could run into challenges with data access. It’s also extremely time-consuming to compile all of your tenants’ lease data in a central location and manually run verifications on every lease, amendment, and poorly written clause. Between complex legalese, time constraints, and collaboration woes, it isn’t surprising so many teams struggle to be effective during CAM season.

6 Critical Components of Prophia’s CAM Coverage

Whether you’re in the middle of a CAM recovery period or you’ve just completed one, you’re likely already familiar with the lease components that are important for creating a reconciliation. Yet, each lease handles these terms uniquely, posing challenges.

This is where Prophia’s advanced AI steps in to streamline lease management by analyzing tenant agreements. Trained on extensive commercial real estate data, it identifies over 200 lease terms. This machine-learning capability swiftly generates lease summaries, stacking plans, and custom reports from your portfolio documents. It also extracts crucial lease terms for CAM reconciliation.

1. Expense Limits & Caps

Caps will often apply to controllable CAM expenses such as marketing, advertising, labor, landscaping, repairs and maintenance, etc. This lease obligation is incredibly important to consider in a CAM rec period as it can clear up confusion as to what is ultimately owed. By capturing language that relates to expense caps across all of your tenants’ leases, Prophia removes any ambiguity around owed expenses relating to controllable CAM fees.

2. Base Years

Everyone is familiar with base years when running a reconciliation. They’re essential for creating an accurate ledger for tenants. What isn’t essential, however, is the amount of time it can take to find a simple base year amount if you’re forced to look through pages of unstructured data. With Prophia, the base year is captured in your tenant’s lease summary as a hyperlink to the original language in the original lease so you can always be sure you are referring to the correct amount.

3. Expansions & Relocations

Changes in your property's size due to expansions, contractions, or tenant movement can affect how CAM recovery is calculated at year-end. Your property’s stacking plan in Prophia shows exactly which tenants’ leases contain expansion rights, relocation amendments, etc. so you can easily adjust CAM calculations or build an additional reconciliation without any significant data verification.

4. Exclusions

Prophia also tracks exclusions, making it possible for management teams to understand the expenses their tenants are not liable for and keep landlords from “double dipping” if they are being reimbursed through different means.

5. Gross-Ups

Gross-ups are incredibly important for properly calculating CAM expenses at the end of every year—especially when there are vacancies. Prophia allows you to search through original lease documents for any terms relating to gross-ups on the space. Our building-wide search feature will also pull up any additional document tied to your tenant’s space that mentions gross-ups making cross-document verification simple and CAM reconciliations speedy.

6. Pro-rata Shares

With Prophia, all of your essential tenants' terms like SF Leased (L) and SF Occupied (O) are captured in our dynamic stacking plan so you can easily determine pro-rata shares and remove any guesswork when calculating CAM. Additionally, hyperlinks tether your AI-generated lease abstract and stacking plan to the original lease language so you can be confident your pro-rata amount is accurate and each tenant is charged fairly based on their lease agreement.

Prophia Transforms Prop Management Tasks for Radom Capital

Vice President of Property Management, Lauren Crenshaw, is no stranger to the challenges of CAM season. Whether that includes tracking down a base year amount or verifying pro-rata share, she’s a veteran of the process and the inefficiencies that can occur when things don’t go smoothly thanks to poor data management practices. Thus, when she joined Radom Capital, she quickly implemented Prophia for her team to use in CAM reconciliation and beyond.

“It’s the tool that I use on the fly for Q and A with my clients, my investors, and my tenants. It’s the tool that provides so much more than I originally thought.”

Lauren Crenshaw, Radom Capital, VP of Property Management

Lease Abstraction

With over 114,000 real contracts synthesized by our system, Prophia's AI has put in well over 10,000 hours to become an expert in CRE data. That's why when Lauren's team picks up a new asset, Prophia is the first tool they turn to to get operations up and running, "I tell my team to throw in a rent roll so Prophia can create a background. Then we add lease documents and everything just builds."

Having all of that lease data in a Prophia-generated summary makes it possible for real teams, like Radom Capital’s property management team, to immediately access concepts found in their tenants’ original lease data and pass the proverbial torch onto the next person.

The Dynamic Stacking Plan

In addition to automating lease abstraction, Prophia also creates a dynamic stacking plan based on tenant lease data. This provides individuals across an organization with another view of critical data points such as encumbrances, critical dates, etc. that may impact a property today or in the future.

Prophia’s stacking plan is also a great onboarding tool for new property management team members. By providing a detailed overview with hyperlinks connecting AI-annotated terms to the original document, team members can get a sense of a property’s state in seconds, not days.

Lease & Building Reports

Reporting provides property managers with important information about their tenants, but assembling them by hand can be arduous and inaccurate if data is forced to sit untouched for long periods. With Prophia, property managers can instantly create lease and building reports from their AI-synthesized data and handle activities like reconciliation with greater confidence and fewer sanity checks.

These are just some of the many ways property managers in the CRE industry are leveraging AI to complete historically arduous tasks, like CAM reconciliation. Find out more about the impact Prophia can have in your organization whether you’re struggling with annual tasks like CAM reconciliation or poor data practices are impacting your ability to be efficient every day. 

If you would like to harness the power of AI specifically designed for CRE, contact the Prophia team to learn about reporting, data visualization, and customization options.

Hannah Overhiser

Hannah is Prophia's Content Marketing Manager and a seasoned B2B and B2C marketer. Her career began in eCommerce consulting with a focus on code testing. This technical expertise transferred seamlessly to SEO and she started working agency-side as an SEO and Content Strategist. Today, her home is Prophia, and she puts...

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