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Revenue Allocation

The Opportunity

A major tenant in a Colorado facility was concerned with the complex formulas utilized to determine the allocation of certain revenue streams between themselves and the facility owner(s).

The Lease was amended several times over the course of the initial term. Each Amendment affected the financial performance of the Lease, and altered the formulas used to determine revenue allocation.

The facility was sold, and the new facility management interpreted certain Lease clauses in a dissimilar fashion as the previous owners interpreted these clauses.

An Estoppel Certificate and a Subordination, Non-Disturbance and Attornment Agreement were issued by the lender and executed by the new Landlord and Tenant.

The Challenge

Determine the exact benchmark and criteria for the allocation of revenue streams.

Research and determine the apparent intent of the parties to the original transaction, and formulate a model to reflect this objective.

Apply the determined break points to the revenue allocation formula at the precise moment each Amendment was applicable.

The Solution

Data was gathered and analyzed covering a five-year occupancy period to determine periodic gross revenue.

Arithmetic formulas were implemented to recalculate the correct allocation of the revenues.

An agreement was negotiated and agreed to with the new facility owner regarding the correct method of calculating revenue allocation.

An agreement was reached with the lender and a new Estoppel Certificate and Subordination, Non-Disturbance and Attornment Agreement were issued and executed by both parties.

The Deliverables

The client received an executive report, recording in detail, the discrepancies that were uncovered and resolved, the full amounts recovered, and the corrections made to the revenue allocation systems. As an aside, our reports also come with a complete Lease Abstract, and verification of every Lease payment made since inception (if records available).

The Results

The client received a large cash settlement and continues to save money and maintain a mutually beneficial relationship with the facility owner.