The client
A global real estate investment manager with 9 funds and about 610 US properties, including 7,400 commercial leases. It buys about 46 properties a year. Leases and accounting run in Yardi, documents in iManage, and its 24 lawyers and 20 paralegals work in Microsoft Teams.
The engagement
The general counsel and the chief financial officer sponsored one engagement, because both teams work from the same document. Legal reads each lease, and its summary goes into Yardi. Property accounting bills each tenant's share of costs from that summary. Five workflows were in scope:
- Due diligence on purchases: about 46 a year.
- Leases and amendments: about 2,600 a year. About 40% went to outside counsel, at $5.7M a year.
- Year-end tenant statements: about 7,000 a year.
- Expense coding: about 210,000 invoices a year, each coded as billable to tenants or not.
- Tenant audits: about 190 claims a year, costing $4.1M.
What the pilot found
Four forward-deployed engineers ran a 4-week pilot with the legal and property accounting teams. They read 600 signed leases, 3 years of deal files and billings, and the firm's policies. They also interviewed the people who do the work. The statement process was written as 11 steps. The records showed 19, with 6 rework loops.
- The lease summary in Yardi often differed from the lease. 14% of the 600 leases had at least one billing term wrong, usually because a later amendment was never fully read. The firm under-billed some tenants and refunded others after audits.
- In diligence, outside counsel read only a sample: about 35% of leases, covering 80% of rent. 3 of the last 5 disputes after closing came from leases nobody read.
- About 310 leases void any statement sent more than 9 months after year end. The team worked properties in alphabetical order, so 38 statements went out late last year, losing $1.8M.
Legal put diligence at $104,000 a deal. Counting all the work and the disputes after closing, it cost $218,000. A tenant statement was costed at $140. Counting legal reviews, reissues, and audit answers, it cost $560, and the last statement went out 31 weeks after year end, against a plan of 12.
The redesign
The focus was the path from a signed lease to the tenant's year-end statement. Agents read every lease and amendment against the firm's 64-point checklist. They record each term that changes what a tenant pays, linked to its page. During the year, they check that each expense is coded to the right cost pool. At year end, they draft each tenant's statement with the invoices behind every line. Properties are worked in order of their earliest deadline, and a lawyer sees only the clauses that can be read two ways.
Before19 steps, 6 loops
31 weeks
After7 steps, 2 human decisions
13 weeks
- Manual step
- Agent step
- Person decides
- Rework loop
Process steps
- Before
- 19
- After
- 7
- Change
- 63% fewer
Year end to final tenant statement
- Before
- 31 weeks
- After
- 13 weeks
- Change
- 58% shorter
Leases whose Yardi terms match the signed lease
- Before
- 86%
- After
- 98%
- Change
- +12 pts
Statements issued with no analyst correction
- Before
- 16%
- After
- 74%
- Change
- +58 pts
Recoveries billed against what the leases allow
- Before
- 97.6%
- After
- 98.6%
- Change
- +1 pt
Cost per tenant statement
- Before
- $560
- After
- $220
- Change
- 61% lower
| Before | After | Change | |
|---|---|---|---|
| Process steps | 19 | 7 | 63% fewer |
| Year end to final tenant statement | 31 weeks | 13 weeks | 58% shorter |
| Leases whose Yardi terms match the signed lease | 86% | 98% | +12 pts |
| Statements issued with no analyst correction | 16% | 74% | +58 pts |
| Recoveries billed against what the leases allow | 97.6% | 98.6% | +1 pt |
| Cost per tenant statement | $560 | $220 | 61% lower |
4 weeks of discovery, then 4 weeks of deployment
- Weeks 1 to 4, discovery: the pilot above maps the process, interviews the team, and sets the baseline for every figure on this page.
- Week 5, build: the agents are built on the redesigned process, the 64-point checklist, and the cost pools in Yardi.
- Week 6, shadow: the agents redo last year's statements for 40 properties and review the leases of 2 live purchases with read-only access. Their work is compared with what was actually sent.
- Week 7, validate: the agents are tested against those 1,400 statements and 6 closed deals, and the general counsel, the controller, and lease administration sign off.
- Week 8, deploy: live in Yardi and iManage, with every action logged.
- From week 8, train: the engineers stay on with the lawyers, paralegals, and accountants whose work changed. Diligence and tenant audits follow, 4 weeks each.
What the agent does
- When a tenant signs a lease amendment, the agent reads it in full against the original lease.
- It finds every term that changes what the tenant pays, such as a new base year or a cap on expenses.
- At year end it applies those terms to the tenant's statement, with the clause behind each line attached.
- The lease administrator and the property accountant approve. Then the statement goes to the tenant.
Results
Every lease is now read in full, and sellers get the issues list 9 days after the data room opens instead of 26. Closing credits rose from $0.9M to $2.1M a year. First drafts of new leases come back the next business day instead of after 6.4 days. Tenant audit claims fell from 190 a year to 60, and reissued statements fell from 11% to 3%. Every figure is measured against the pilot baseline. Disputes after closing are not counted, because they take years to resolve.
| Source | Annual value | How |
|---|---|---|
| Recoveries billed | $5.6M | From 97.6% to 98.6% of the $560M a year the leases allow, including statements no longer forfeited to a lease deadline |
| Tenant audit costs avoided | $2.7M | Settlements and owner-paid audit fees, down from $4.1M to $1.4M a year |
| Outside counsel reduced | $5.0M | Diligence bills down from $88,000 to $51,000 a closing on 46 closings, and leasing overflow down from $5.7M to $2.4M a year |
| Closing credits won | $1.2M | Credits and price adjustments before closing, up from $0.9M to $2.1M a year |
| Cash brought forward | $1.1M | $53.0M of year-end recovery billings collected 18 weeks earlier, at the funds' 6% cost of borrowing |
| Capacity released | $4.7M | 9,600 counsel and paralegal hours at $141 and 46,500 property accounting hours at $72, 26,600 of them in year-end reconciliations |
| Total | $20.3M | Against the $53.7M a year it costs to run the workflows in scope: about 44 in-house lawyers and paralegals at $141 and 180 property accountants, CAM analysts, and lease administrators at $72, plus $9.7M of outside counsel and $4.1M of tenant audit settlements |
What stays with people
Agents read, compare, and draft. Named people make every decision. Lawyers and lease administrators own every issue raised with a seller, every lease the firm signs, and every change to a billing term. Accountants and the controller approve every tenant statement and audit settlement. The investment committee approves every purchase. Every agent action records the lease page it relied on, and a wrong statement is reversed and reissued in Yardi.
