CAM Reconciliations - Prorata Share Determination (SF vs Income)
I know CAM expenses are calculated on a pro-rata basis around square footage, but is it ever done on an income basis for specific recoverable expenses?

For example, property taxes allocated based on revenue/NOI of the building?  Specifically for a mixed-used building where a higher value might be placed on the retail component.  

One of our mixed-use properties has a retail lot that costed us $7m to purchase and build.  However, using the SF approach, we're only getting a prorata value of $6M to pass through taxes on.
[{"id": "ig1ailg", "text": "If you are using the income approach in valuing the property than expenses and offsetting expense recoveries (including for common areas) will be part of the NOI calculation. What's recoverable (paid by tenants) is outlined in each lease and often subject to negotiations.", "replies": [], "depth": 1}, {"id": "ig1ajh9", "text": "I think the issue with CAM being done on a PSF basis sometimes is that the common areas of any asset can drastically be different depend on what your working with especially in mixed use. I would use comparable mixed-use asset P&amp;Ls in the area to get a basis or number idea or just get some rough estimates for the larger % work that will be done for your specific building from contractors or a management company.", "replies": [], "depth": 1}, {"id": "ig1fsyw", "text": "At the end of the day, you generally shouldn\u2019t be recovering more than what you are paying in expenses. So if you\u2019re 100% leased, you should be recovering 100% of what you paid for property taxes. If you have some vacancy then you will have some leakage unless your leases allow for taxes to be grossed up. \n\nThe only recoverable expense that is based on income are management fees.", "replies": [{"id": "ig1g5li", "text": "It's a mixed use building with a single property tax bill since all the land parcels got tied the other year.  So we are only recovering taxes from the commercial tenants.", "replies": [{"id": "ig1gvwv", "text": "Got it.  I\u2019ve dealt with something similar before. Ended up having to use a third party tax consultant to basically \u201cparcel\u201d out the taxable values and apply the rates for a recoverable tax calculation.", "replies": [], "depth": 3}, {"id": "ig2kdbr", "text": "We call that landlord expense in our accounting. What are you going to do with the land?", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ig1h8t2", "text": "Short answer: yes.\n\nThe property owner can split up expenses however they want. A lot of times it is done by straight square footage just because it is simpler, but I have read many leases that use alternative metrics.\n\nNot all space in a property is created equal and it may make sense to charge different tenants in different ways.", "replies": [{"id": "ig1ie4h", "text": "Thanks, ultimately it is up to us since we are the ones writing the lease terms.  Just wanted to check if anyone else has insight into already doing this.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ig1juuf", "text": "You can make two different CAM pools for unlike areas.  I have one site where there are ground leases and buildings.  The project wide costs are allocated by land SF and the building specific costs are split by SF of building space.  \n\nAllocating by NOI might be confusing because your tenants are going to have rent bumps at different times and from retenanting so NOI is always changing, SF does not.  If a space goes vacant what are you attributing to it?  the former rent?\n\nBut as many have mentioned, do what makes sense for your project.", "replies": [{"id": "ig1q7i9", "text": "Would allocating by gross revenue work?", "replies": [], "depth": 2}], "depth": 1}, {"id": "ig398w0", "text": "The assessor's will often have derived the residential separately than the commercial, but add it up for one tax schedule #.   ...... One city will split the parcel into a commercial parcel # and resi parcel # at the landlord's request.", "replies": [], "depth": 1}]