AUSPL Lease Rate Negotiation Assistance

Guidelines for Requesting Comparable Lease Rates (Comps)

As most AUSPL members know, the USPS formerly maintained a publicly available database that reported pertinent information about post office buildings the USPS leased.  For each leased property, the database disclosed a wealth of information, including (among other things) (i) the building’s size, location and date of construction, (ii) the amount of rent being paid for the building, (iii) the type of maintenance rider included as part of the lease, (iv) whether property taxes were reimbursed under the lease, and (v) whether the lease included renewal and/or purchase options.  The database was a valuable resource for both lessors and the USPS in lease renewal negotiations.

In the second half of 2017, the USPS made the unfortunate decision to terminate the public’s ability to access the lease information database.  Moreover, at the same time or shortly thereafter, the USPS (through its agent, Jones, Lang, LaSalle, or “JLL”) also started refusing in lease negotiations to allow postal lessors to review the “comps” the USPS claimed supported the rental amounts the USPS proposed to pay.  Through both actions, the USPS essentially left lessors in the dark in lease negotiations and expected them to simply trust that the rents the USPS proposed were fair and reflected “market value.”

After the USPS restricted public access to the lease information database, some large post office owners (in terms of number of buildings owned) began to use databases that report lease information for private sector commercial buildings.  Although private sector commercial buildings are not identical to post office buildings, information about leases of such private sector buildings can provide a starting point for information about market value rents for post offices.

Because the absence of public access to the USPS’s lease information database has severely limited data that is important to postal lessors negotiating leases, AUSPL decided to establish a new service for its members.  AUSPL has subscribed to CoStar, a national database that provides a variety of information about leased commercial properties.  While not specific to post offices, the rental and other commercial lease information available through CoStar can at least give lessors a sense of lease rates in the areas where their buildings are located.  AUSPL is currently training individuals who will examine lease data for properties in the vicinity of members’ post offices in an effort to provide general information about lease rates in those areas.

AUSPL’s primary roles on behalf of its members are to provide information and education regarding commercial real estate investment in general and post office leasing specifically, establish, operate and manage a casualty and liability insurance program for AUSPL members, and represent the interests of post office owners in dealings with the USPS, regulatory agencies and Congress.  While examination of market lease rates is ancillary to AUSPL’s main functions, it is not a core competency.  As a result, members’ utilization of the new program will be subject to the terms and conditions summarized below.

1.         Members must recognize that the AUSPL program to provide lease rate estimates through CoStar will necessarily be imperfect for various reasons.  Those reasons include (but are not limited to):

a.         The absence of public access to the USPS lease information database means that the comparable properties examined through CoStar will not normally be post offices, making them imperfect as comps.

b.         Lease rates for comparable properties located through CoStar will often be “asking” lease rates rather than lease rates from leases that have actually been signed.  Recent indications are that the USPS is aware of this issue and will still consider such “asking” lease rate quotes as indicators of market rental rates.

c.          Post offices are often located in rural areas that may not have a significant number of commercial buildings for lease, which can sometimes make it difficult to locate suitable comparable properties.

d.         Then USPS’s lease forms for post office leases can differ substantially from lease forms used for private sector commercial leases.  In particular, private sector leases are often “triple net” leases, which allow lessors to pass through to tenants the amounts lessors pay for property taxes, insurance and maintenance.  Therefore, rental quotes for “triple net” leases will normally be lower than those for leases (such as USPS leases) that require lessors to pay some or all of those costs without reimbursement from tenants.

Because of these and other factors that cause rental rate estimates determined through CoStar to be imperfect as indicators of appropriate USPS lease rental rates, the rental rate amounts determined through AUSPL’s CoStar program should be considered as guidance in arriving at negotiated rental rates, rather than as hard and fast negotiating positions from which lessors should not deviate.

2.         AUSPL has and will continue to maintain a copy of the USPS lease information database that was public information prior to the latter part of 2017.  Lease rates and lease terms from that database will continue to be available.  However, it should always be recognized that the data from that database is significantly out of date and may not accurately represent current conditions.

3.         AUSPL cannot and does not represent the accuracy and/or completeness of lease rate or other information provided through AUSPL’s CoStar program.  Any information provided by AUSPL is provided on an “as is” basis without any representation or warranty of any kind.  Member using information provided through the CoStar program release AUSPL from and waive any claims against AUSPL and/or its offices, directors employees, contractors, subcontractors, successors and assigns (collectively, “AUSPL Representatives”), and agree to indemnify and hold harmless the AUSPL Representatives for, from and against any and all claims, causes of action, liability, loss, cost, damage and/or expense, including but not limited to court costs and reasonable attorneys’ fees, arising from or related to the AUSPL CoStar program and/or information provided through such program.

4.         The lease rate estimates and other information provided by AUSPL through the AUSPL CoStar program is for informational purposes only.  AUSPL does not offer brokerage, legal, or investment advice.  For guidance on lease negotiations or legal matters, AUSPL members should consult qualified professionals.

5.         AUSPL may choose at any time to charge an hourly or other fee for use of the AUSPL CoStar program.  Any such fee is at AUSPL’s discretion and may be changed by AUSPL at any time.  Users of the AUSPL CoStar program will be notified of the applicable fee (if any) before work is performed for them thought the program.

6.         Agreement to the terms and conditions described in this document is a condition upon a member’s use of the AUSPL CoStar program and will be appropriately acknowledged by such member in the manner AUSPL determines.

7.         To request information about comparable rental rates in the vicinity of a post office, a member should submit a detailed inquiry specifying the member’s needs, and should include a full copy of (i) the current lease with the USPS for the property in question, (ii) a copy of any letter of intent provided by JLL with respect to any proposed lease renewal, and (iii) copies of communications with JLL regarding such a renewal.  AUSPL will review the request and provide an estimate of the time required to process the request and any associated costs.

8.         For further information or to request a rental rate estimate, please contact AUSPL at (800) 572-9483, Ext. 1002.  We will be happy to assist you with your request and provide additional details.