Real Estate Operating Statement Form Procedures

REAL ESTATE OPERATING STATEMENT FORM PROCEDURES V.07.15

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REAL ESTATE OPERATING STATEMENT FORM PROCEDURES

When you view the Microsoft Excel workbook for the Limited Liability Company’s (LLC) Operating Statement reporting you will see nine sheets:1) Statement 2)Property Info. 3)Income & Delq. 4) Expenses 5) Capital Exp. & Deposits 6) Bank Acc’t. 7) Security Deposits, 8) Expense Categorizationand 9)Ins. Claim Worksheet. An explanation of each sheet is given below.

NOTES: 1) All reporting is to be on a CASH Basis for the reporting month.

2) These forms include some Macros which should be “Enabled” if prompted during the start up of the program.

3) To move from one entry cell to the next entry cell you may use the TAB Key on

your computer keyboard.

1. STATEMENT:

This sheet requires no input on your part. These fields will populate themselves automatically as you complete the subsequent sheets.

1. PROPERTY INFORMATION – INCOME – LEASING REPORT:

You must complete all PROPERTY INFORMATION & update this each month. Please make sure the correct LLC name is input on the first line of this form.

If the Net Leasable Sq. Ft. does not balance with the Leasable Square Feet in the Rent Roll section on the “Income & Delq.” worksheet the following message will appear to the right:

“< Leasable Sq. Ft. Out of Balance with Rent Roll!”

Should this message appear after all entries are made, please reviewyour records and establish why the leasable square footage is out of balance.

Enter the Building % Occupied and the Building % Leased.

Building % Occupied = The percentage of the building which is physically occupied as of the statement period.

Building % Leased = The percentage of the building which is currently leased whether the tenant occupies the space or not.

NOTE: The “% Occupied” should never be greater than the “% Leased”.

On the INCOME form, the Gross Rent, Expense Reimbursements and Other Income from Tenants section will be populated from the entries to the “Monthly Tenant Income Reconciliation” section of the “Income & Delq.” worksheet.

Any other property income received for the month which is not already accounted for and on which a management fee may be calculated, should be described and entered on the lines highlighted in blue under Additional Income.

The final line should then show the Total Income Received for the property during the month.

Next is the “Property Leasing Report”. This should be completed each month by updating the number of leasable spaces/suites and the number of vacant spaces/suites in the building. Then listing the names of tenants with Renewed Leases, New Tenants and/or Tenants Lost during the month.

The final section on this worksheet is for free form “EXPLANATIONS” of any area of the entire operating statement which requires further clarification.

1. INCOME & DELQ.: RENT ROLL – TENANT INCOME RECONCILIATION –TENANT DELINQUENCY & PREPAID:

The Rent Roll form must be completed or updated each month for the property. Please fill in all applicable information. If a tenant has vacated but is still paying rent, complete all information and indicate this type vacancy in the “Other Information” section. With regard to any non-income, Vacant spaces, list the Suite#, Tenant Name as “Vacant” and the Leaseable Square Feet in the space (leave the other cells blank). (Do Not enter “0” or list anticipated annual rent/SF or estimated rent amounts). Monthly Rent should not include any expense reimbursements. This column should reflect the current monthly rent only.

Note: as mentioned in the Property Information Section above, the LeasableSquare Feet on the Rent Roll mustequalwhat your records reflect as the property’s Net Leasable Square Footage.

The MONTHLY TENANT INCOME RECONCILIATION is to report the actual collections from the tenants during the reporting month. The Suite # and Tenant Name will populate from the Rent Roll entries. Enter all amounts collected this reporting month for Rent (Including any Prepays), Tenant Reimbursements and Other Income, therefore, if you collect this month’s rent and reimbursements and the next month’s prepaid rent and reimbursements show all collections in the correct category for this month, i.e. enter Prepaid Rent as Monthly Rent and Prepaid Reimbursements as Reimbursements Collected not Other Income.This will reflect all current collections in the month it was actually collected. One exception to this is if there is a credit from previously collected annual CAM charges and it will be applied as Rent for the current month. This would be applied as “Monthly Rent Collected” then make a negative entry of the same credit amount under “Reimbursements Collected”. This will reflect it being taken into “Monthly Rent Collected” and a reduction to the “Reimbursements Collected” account. Please make a notation in the Explanations section of this report. Should there be an annual settlement payment for Expense Reimbursements, report the excess over the normal monthly payment in Other Amounts Collected and explain in Explanations. Continue to report the monthly reimbursements, if applicable, in the Reimbursements Collected when received.

The Misc. Income From Tenants section at the bottom is for miscellaneous collections from the tenants (not other collections from the property such as vending income, etc. which would be listed directly on the INCOME form as Additional Income). The total months collected amounts on this form will automatically populate the appropriate sections of the INCOME form on the “Property Info” worksheet.

See below for collection of delinquent and prepaid rents.

NOTE FOR FLORIDA PROPERTIES ONLY: The State Sales Tax Collected should NOT be entered as income on this worksheet. (See #4 Operating Expenses for instructions)

The next section is the TENANT DELINQUENCY & PREPAID REPORT. Here we need a complete listing of all amounts outstanding from any tenant, i.e. rent, late fees, reimbursable amounts, etc. Please use a separate line for each months' due amounts, i.e. a line for each tenant with amounts past due in Jan. and another line for amounts past due from the same tenant in Feb. Continue to carry the current status of each month’s delinquency on the report until fully paid. No amounts should be removed from this sheet unless it is paid or a decision is made by the LLC to waive/write off the amount. Should the amount be waived or written off, note that in the explanations section of the current months report then remove it from the following report.

Enter Prepaid Rent, Prepaid Reimbursements or Other Credits as a negative number on this part of the report so we can better track these liabilities each month. Please enter the Prepaid Rent under “Rent Due & (Prepaid)”, and Prepaid Reimbursements under “Reimbursements Due & (Prepaid)” or any other Credits the tenant may have under “Other Amounts Due & (Prepaid)”.

These amounts should remain on the Tenant Delinquency & (Prepaid) Report until they have been credited to amounts when due from the tenant.

The report should only reflect the amount due or prepaid amount from the tenant as of the end of the reporting month.

When a Delinquent amounts is paid remove the entire line item, preferably the oldest due item, if that item is totally paid. If the amount is partially paid then reduce the amount due on the Tenant Delinquency report leaving only the outstanding amount due. Then enter the amount collected under the appropriate column on the Monthly Tenant Income Reconciliation with an Explanation of the tenant name, etc. in the last column.

With respect to the Prepaid items, enter on the line with the Tenant Name in the appropriate column of the Monthly Tenant Income Reconciliation and explain, if necessary. Then remove the (Prepaid) item from the Tenant Delinquency & (Prepaid Report). If the tenant prepays again the same month, update the information as Prepaid on the Tenant Delinquency & (Prepaid Report) and update the dates due column.

1. OPERATING EXPENSES:

Fill in the Type/Payee, Check # and Amount of expense for each of the categories. The different categories are listed down the spreadsheet and subcategories of each are listed to the right.

NOTE: The last page of the workbook is EXPENSE CATEGORIZATION and will give you a guide for placing the expenses into the correct categories. You may want to print this for use as a reference during input.

If a replacement check has to be entered for an existing check: Enter “VOIDED CHECK” under Type/Payee, the CHECK # and the amount as a negative number. Then enter the replacement check Payee, new Check # and the amount as a positive number.

If any check(s) are outstanding for more than twelve (12) months you should determine the Unclaimed Property rules for the state of the last known address of the payee and process the funds accordingly. DO NOT credit the funds back to the property checking account.

The Management Fee category will calculate the management fee after you input the Rental Income on which the fee is to be calculated and the appropriate Management Fee Rate. If you are on a Flat Fee basis, please enter the flat dollar amount in the Rental Income or Flat Fee

Amount section and do not enter a Fee Rate. Enter the management fee check number in the green box.

Security Deposits will not be used in the calculation of management fees unless they are taken to income. (See the Security Deposit sheet for entry of Deposits Applied to Rent)

NOTE FOR FLORIDA PROPERTIES ONLY: The State Sales Tax Collected and the Distribution of the State Sales Tax will both be entered in the Other Expenses section of this worksheet. The amounts collected for this tax should not be entered as income nor entered on the Monthly Income Reconciliation worksheet.

1. CAPITAL EXPENDITURES & DEPOSITS:

This section is for the expenditures which are paid from the property account and will be classified as a Capital Expenditure rather than an expense. These expenditures should be approved in advance by the LLC on the Expenditure Authorization form or Real Estate Lease Commission Request form. When the Capital Expenditure is entered in the Operating Statement Form the LLC Auditor should also receive a copy of the invoice or receipt evidencing the work and the cost of the expenditurewhen you submit the monthly report.

Leasing Commissions- For leases with a term of less than 12 months andthe lease expires before September 30th (Fiscal Year End), expense leasing commission under ‘Payroll and Benefit Expense’ and explain, otherwise, all leasing commissions will be capitalized, unless the LLC instructs you differently. Before deducting any lease commission, you must submit the “Lease Commission” form to the LLC for approval. The approval will be faxed back to you then the commission may be taken from the account. Please remember we must have the following:

• Lease Approval Form
• Executed Lease (Send to both the LLC and the designated LLC auditor)
• Lease Commission Request Form

You must click on the box indicating this form has been submitted and approved.

Building, Grounds and Other Capital Improvements:

Note: Any expenditure for improvements, replacements, tenant finish, etc. of less than $5,000 will be expensed unless you are instructed otherwise. Also, while it is not necessary to get written approval on expenses under $5,000, we request the Property Manager notify the LLC of this expenditure by fax or e-mail prior to the work being done. For expenditures in excess of $5,000 Property Manager must submit a Real Estate Expenditure Authorization form for approval prior to incurring expenditure, unless, in the Property Manager’s opinion, the expenditures are necessary to protect the property or the life, health or safety of invitees, employees, etc.

The last section of this form has been added to account for PROPERTY DEPOSITS AND OTHER PAYMENTS MADE FROM OPERATING ACCOUNT BUT NOT TO BE SHOWN AS AN EXPENSE. This will be used to report reimbursable amounts, such a utility deposit, which are paid from the property’s operating account but will not be expensed. The amounts entered here will be shown on the front “Statement” sheet along with the Capital Expenditures.

1. BANK ACCOUNTS:

This sheet is for your reporting of the Cash Balance In Property OPERATING Account for the reporting month as well as CASH BALANCES IN OTHER ACCOUNTS HELD FOR THE PROPERTY such as Security Deposit Account, Tax and Insurance Escrow Account, etc.

In the Property Operating Account Activity report, you should enter the Bank Name, Bank Account Number and all information in the colored (blue) boxes. The yellow colored boxes in the form will be populated from entries made in other parts of the workbook forms…for example, the Receipts, Cash Disbursements and Capital Expenditures will automatically come from the front input sheets. Usually all income and expenses will be accounted for on the front pages, however, there are a few exceptions. Therefore, the Miscellaneous Cash Receipts section of this report is for receipts and disbursements not listed on the front pages but collected or paid on behalf of the property. If you use this section, please give a good explanation!

Tenant Security Deposits collected for the month which will be run through this account (i.e. not directly deposited into the Security Deposit Account) will automatically be reflected here as a Misc. Cash Receipt after the appropriate entry on the “Security Deposit” worksheet.

When it is time for the Tax, Insurance or Capital Improvement payments to be made from the Property Operating Account(s), the appropriate entry will be made in the Tax & Insurance or Other Cash Balance Account Form (found below the Operating Account Activity) and that amount will be automatically reflected here as a Miscellaneous Cash Receipt. The payment will then be accounted for in the Expenses or Capital Expenditure worksheets.

Enter the amount to be deposited in other LLC account(s) (i.e. money to be held for the Security Deposit account, Tax and Insurance Escrow account, property improvements, capital expenditures, replacement reserve, etc.) on the appropriateAmounts Transferred to Other LLC Accountsline of the report. Do not enter these amounts under Operating Expenses until the bills are paid. Transfers of funds for these escrow accounts should be made every month, during the month unless there are not sufficient funds. (Remember the balance in the operating account should always maintain the minimum amount specified in your Property Management and Leasing Agreement.) These transfers should occur by the 20th day of the current month so that the transaction will be reflected on the current month’s bank statement for both the operating and escrow account. This is particularly important in the last month of each quarter, because the reports must clearly reflect the amount if money available to be distributed to the LLC.

At the end of each quarter enter the DISTRIBUTION TO LLC(amount to be wired at the end of the quarter) leaving a Cash Balance as set forth in the Property Management and Leasing Agreement. The funds wired box will automatically populate the amount to be wired. These fundswill be transferred to the LLC in the month following the last month of each quarter and should be wired no more than one working day after you are notified by the LLC Auditor that the statements have been approved and forwarded to the LLC.For example, the September report should reflect the amount to be distributed to the LLC, even though the actual transfer will be made in October after the reports are approved. Wiring Instructions are set out below.

However, notwithstanding the above instructions, should the amount remaining at the end of any quarter be less than $10,000 after all accounts are funded, the funds should remain in the operating account and the report adjusted to reflect that there will be no funds wired to the LLC.

The Cash Balance Statements for other accounts listed below the Property Operating Account Activity are for LLC approved accounts such as Security Deposits, Tax Insurance Escrow/Replacement Reserve type accounts which you hold for the property. The amounts listed on the AMOUNTS TRANSFERRED TO OTHER ACCOUNTS line above will be distributed/entered in each respective cash account automatically. The “Direct Deposits Into Account During Period” line is for amounts collected from Tenants (Security deposit) or refunds from the Taxing authority, etc. which was deposited directly into the separate account and not run through the Property Operating Account. The next lines are for Interest Earned on the Account, Interest Transferred (See Security Deposit Section below) and Other Charges (i.e. Bank Charges)incurred inthis account. Any other Adjustments to the account would be listed below (explain each in Explanation Section – Property Info worksheet). On the Tax & Insurance and Other Escrow Accounts there is a line to enter “Amounts to be Transferred to Operating Account for Payment”. This will populate the Miscellaneous Cash Transactions line “Payment Transfer from Escrow Account” which will put these funds into the Property Operating Account for necessary payments but will not affect property income.