I Survived the Audit !

I Survived The Audit!

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About five years ago, I had a large corporate client who owned around 400k square feet of industrial, retail and office space (outside of their normal business that involved a different kind of real estate). This was a fun portfolio to manage simply based on its diverse makeup and geography, but the financial reporting requirements were a killer.

Aside from the general reporting requirements of a mom and pop or high net worth individual, the corporate client required an array of balance sheets, income projections, specialized capital draw reports, accrual and cash based books.  Essentially, they wanted all reports in both accounting formats, in two file formats and they threw in a couple additional customized requests for good measure. But answer we did, meeting each and every one of their requests. I remember one call where the panicked accounting analyst commented that they were undergoing an audit and while she was confident it would all check out, she just wanted the process over with.

Now, I know the feeling! We have recently completed a portfolio wide audit where I was the direct point of contact for 4 auditors covering 10 properties. Some properties had two audits, some had three. It became apparent early on that I should save the information sent to the auditors, because they would misplace it, delete it or not share it with the person sitting next to them for whatever reason. Some of the most simple, pedestrian questions were asked over and over. “Wait, their lease expired in August 2014, where is their lease for November 2014?” Yes, they convert to month-to-month lease agreements upon expiration of the initial term. Aside from minutiae such as this, there were the hundreds of emails that seemed to multiply like wild mushrooms in my inbox, where I’d have to go back and tie together information they did or did not have access to.

At the end of this painful process, I found humor and irony in the fact that this madness is all self-inflicted in that we hire the auditors to come in, evaluate our business and tell us how we are doing. It is the time and effort of our teams on-site and on the front line who through their ability to focus, multi-task and quickly shift gears makes us successful. So while death and taxes might be the only two guarantees for an individual, audits, budgets and taxes are the three guarantees for a real estate fund. The fun should all start again in 6 months.

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