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Lease Administration Tools: Augmenting your ERP

Updated: Jul 11, 2023



Lease abstraction is one of the most critical functions in a commercial real estate back office culminating in accurate billing and a proper summary of lease clauses saves time going back to the lease when looking at covenants and restrictions. The larger your portfolio the more important this function becomes particularly with multiple amendments.


One of the main challenges in lease abstraction is trusting that the processes that resulted in the abstraction is what is indeed in the lease and subsequent amendments or letters. Systems like Yardi or basic MRI rely upon processes and controls to ensure that the commercial lease has been abstracted properly but you cannot see where the data was abstracted without going back to the lease itself and without any reference to where the data was pulled.


What is Lease Abstraction?


First, let’s define what lease abstraction “should” mean. Lease abstraction is not simply a PDF or other document summarizing the lease. Proper lease abstraction summarizes the entire tenancy including amendments and ancillary documents. It includes not only “dates and dollars” but also extracting data points critical for options, rights and restrictions as well as the set up and interpretation of the expense recovery clauses. This process culminates in data being entered into the ERP system or other integrated lease administration system of record. Done correctly - this occurs just once at the inception of the lease or other document and is valid for the entirety of the lease term. Often times, company employees rush this process and may just see this as billing but it is so much more than that when done correctly.


Companies that get lease abstraction wrong can end up either operating inefficiently or incur additional cost to re-abstract the portfolio. Compiling that data into a report and uploading that data into a database to which will enable your organization to make better-informed real estate decisions and mitigate risk.


Lease Administration Supplemental Tools


Several software solutions exist that help provide a better replacement and storage of leases, provide line of site to the abstracted data and the lease itself, and as well as the chronological history of the abstracted information and the current governing document. Most of these products tout their “artificial intelligence”, OCR, or other technology capabilities. However, all of them require manual review oversight as commercial real estate abstraction is simply too complicated for AI today.


The image below is from Adex.AI. All of the solutions below typically consist of a similar ability to see abstracted data side by side with the lease and highlighted text indicating from where the data was abstracted.



Value Proposition


Using one of these tools enables the user to see the abstracted terms (data) adjacent to a highlighted lease without the need for additional searching & research. Instantly you can tell if the abstraction was correct or not with this side by side presentation saving significant time going to find the lease or worse - the applicable amendment(s).


Here are some solutions that your firm should consider:

DealSumm is an excellent tool that provides customizable inputs not only into leases but also into other documents as well. These can include any agreements for your business including: operating agreements, loan agreements, fund agreements, easement agreements and so on. DealSumm is offered as a product of some abstraction firms too.


MRI Contract Intelligence (formerly Leverton) is another excellent tool in particular for MRI users. It does not integrate well with Yardi who continues to lag behind in this area despite their prowess in other areas. The product is also capable of supporting insurance, retail, telecommunications and legal sectors.

REmaapAI is a product of nTrust who can also wrap abstraction services around the software offering as well. REmaapAI uses Natural Language Processing (NLP) to streamline lease abstraction and significantly improve lease data accuracy and can push data to Yardi & MRI as well as consume data from ERPs.


AdexAI: InteLease by AdexAI also provides software combined with professional lease abstraction team. This product also extends into loan servicing, title officers, loan processing, and commercial brokers by automating and streamlining document workflows.



Prophia is a relatively new product with integration capabilities to Yardi and MRI. It also incorporates a stacking plan as well as version history. The organization has an impressive management team with a CTO from Stanford. It does come with a standard set of fields.



LeasePilot: LeasePilot approaches the same problem upstream in the lease origination processes. The software aids in ensuring standardized lease language and monitoring changes amongst all negotiators. The end result of the lease negotiation is the full and accurate abstract of the lease. This integrates with Yardi, MRI but more importantly with CRM solutions like Salesforce, VTS and MS Dynamics. It’s limitation is acquired leases.


Conclusion


Your organization will still need an ERP to bill and collect. However, these solutions can augment your ERP to make your organization more efficient.


No matter your selection, incorporating proper processes around any software is critical to any successful implementation. In addition, a proper evaluation of the software vendor for the correct fit within the overall IT framework and roadmap of an organization is also important. When done correctly, the data and information you rely upon can be easily updated and maintained using these solutions.


Contact Thurston Advisory & Consulting - jim@thurstonadvisory.com


Optimizing real estate process for better improved operations



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