Client
National bank that leased 900,000 square feet of office space in Chicago, IL

Audit Discovery
KBA reviewed the lease and analyzed all available charges since lease commencement in 2003. KBA conducted tests for consistency with the lease language for each charge, performed trend analyses of all line items of expense, analyzed the space size and utility consumption and compared expense levels to BOMA and other data sources. KBA learned that the building was built for the Company in the early 2000′s. At the time the lease was negotiated, all parties understood that the building would be managed by its owner and not by a third party management company. As a result, the lease called for the Company to pay for the cost to manage the building as a part of operating expenses. KBA discovered that the landlord had been billing the Company for all costs to manage the building plus a management fee.

Resolution
The landlord asserted that although it did not do so, it could have hired a third party management company and billed the Company for the cost. Therefore, it claimed that it would not be unfair for the tenant to bear some liability for the management fees. KBA negotiated a settlement whereby the Company agreed to pay the landlord the market rate for a third party management company, thus reducing the Company’s originally liability by more than 50%. This resulted in savings of $9 million from the date of settlement through the end of the lease term.