Annualized NOI Waterfall Report (as of 2026-04-12)

Based on 6 of 12 leases (6 excluded due to 'Expired' status).

Key Takeaways

• Total Estimated NOI: $1,433,843.38 (USD) and $46,617.98 (CAD).
• GPR Contribution: Verbex Learning, Inc. is the largest contributor to USD GPR ($1,022,271.72/year).
• Data Coverage Gap: Escalation and recovery data were available for fewer than 50% of active leases. Actual NOI figures may be materially higher.
• Portfolio Status: 50% of the portfolio (6 leases) is currently classified as 'Expired' and excluded from this NOI analysis.

Portfolio NOI Waterfall

The following waterfall analysis breaks down the transition from Gross Potential Rent to Estimated Net Operating Income, grouped by currency.

USD Portfolio Waterfall

CAD Portfolio Waterfall

Supporting Lease Data (GPR Contribution)

The table below lists the active leases contributing to the Gross Potential Rent (GPR) used in the waterfall analysis.

Excluded Leases

The following 6 leases were excluded from the NOI analysis as their status is 'Expired'.

Validation: 6 Included + 6 Excluded = 12 Total Portfolio Leases.

Caveats & Methodology

• GPR: Based on the annualized base rent in effect as of 2026-04-12.
• Escalations: Only includes incremental annualized deltas for rent steps occurring between 2026-01-01 and 2026-12-31.
• Recoveries: Includes only explicit dollar amounts extracted for CAM, Taxes, Insurance, and Utilities. Estimated or percentage-based recoveries are excluded per instructions.
• Coverage Gap: Recovery data was available for only 33.3% of active leases, and no 2026 escalations were identified in the timeline. Actual figures may be materially higher than these extracted minimums.

For the VERBEX LEARNING, INC. VERBEX LEARNING, INC. lease, specific dollar amounts for recoveries were not extracted.

The lease is classified as Triple Net (NNN) Rent Structure, meaning the tenant is responsible for their pro-rata share of operating expenses, taxes, and insurance. However, the document does not specify fixed or estimated dollar amounts for these charges that could be included in the "Extracted Expense Recoveries" line of the NOI waterfall.

Recovery Data Summary

Because this is a Triple Net lease, the actual NOI would likely be higher if these pass-through expenses were quantified, as they would offset the landlord's operating costs.

Portfolio NOI Waterfall Analysis

Effective Date: 2026-04-12
Coverage: Based on 6 of 12 leases (6 excluded due to 'Expired' status).

Key Takeaways

• Total Estimated NOI: $1,433,843.38 (USD) and $46,617.98 (CAD).
• Data Coverage Gap: Escalation and recovery data is available for less than 20% of active leases. Actual NOI may be materially higher if Triple Net (NNN) recoveries were fully quantified.
• Portfolio Stability: The portfolio is currently 50% active by lease count, with the remaining 50% in 'Expired' status.

Conceptual Overview: GPR vs. NOI

Gross Potential Rent (GPR) is your "top-line" potential—the total base rent you would collect if every active lease paid their current rate.

Net Operating Income (NOI) is your "bottom-line" operating profit. The "gap" between them is created by:

1. Additions: Scheduled rent escalations and expense recoveries (tenants paying their share of taxes/CAM).
2. Subtractions: Vacancy loss (unoccupied space) and credit loss (uncollected rent).

Why the gap is so big here: In this model, the gap is primarily driven by the 6% combined haircut for vacancy and credit loss, and a lack of extracted recovery data. For example, VERBEX LEARNING, INC. is a Triple Net lease, but because specific recovery dollar amounts weren't extracted, the model shows the landlord bearing those costs without the offsetting income, which artificially suppresses the estimated NOI.

Annualized NOI Waterfall (USD)

Annualized NOI Waterfall (CAD)

Supporting Rent Roll (Active Leases)

The following leases contribute to the Gross Potential Rent (GPR) figures above.

Excluded Leases

The following 6 leases were excluded from the NOI waterfall as they are no longer active.

Validation: 6 Included + 6 Excluded = 12 Total Portfolio Leases.

Caveats & Methodology:

• Escalations: Calculated as the annualized delta for rent increases occurring between 2026-01-01 and 2026-12-31.
• Recoveries: Includes only explicit dollar amounts for CAM, Insurance, Taxes, and Utilities. Many leases in the portfolio (e.g., Verbex Learning) are NNN but do not specify fixed recovery amounts in the document, leading to an underestimation of total recoveries.
• Loss Factors: Vacancy (5%) and Credit Loss (1%) are applied as standard portfolio-wide assumptions.

The single most important finding is the "Hidden NOI" opportunity caused by a massive gap in expense recovery data.

The Finding:

While your estimated NOI is $1.43M, this figure is likely a significant underestimate because 66% of your active NNN (Triple Net) tenants are currently showing $0 in recoveries.

Why You Should Care:

In a Triple Net lease, the tenant is responsible for their share of taxes, insurance, and CAM. However, for major tenants like VERBEX LEARNING, INC. and RIDGEWAY LOGISTICS INC., the model shows $0 in recovery income.

This matters for two reasons:

1. Valuation Understatement: If these tenants are meant to reimburse $5–$10/SF in expenses that aren't being captured here, your "true" NOI could be $100k–$200k higher. At a 6% cap rate, that's a $1.6M–$3.3M swing in property value that is currently invisible.
2. Operational Leakage: If your accounting team isn't actually billing these recoveries (or if the data is simply missing from the system), the landlord is effectively paying the tenants' bills, directly eroding your profit margin.

The Secondary Risk: 50% Expiration

Beyond the data gap, 50% of your total portfolio (6 of 12 leases) is currently expired. This represents a critical "fork in the road":

• The Risk: If these tenants have vacated without being updated in the system, your actual income will drop sharply.
• The Opportunity: If they are still in possession as holdovers, you likely have the right to charge 125%–150% of base rent (standard holdover rates), or the opportunity to reset these leases to current market rates.

Recommendation: Prioritize a "Recovery Audit" for Verbex Learning and Ridgeway Logistics to quantify their NNN obligations and verify the status of the 6 expired leases to secure your cash flow.

Based on an analysis of 6 active or expiring leases (6 expired leases excluded), the portfolio's expense recovery profile is bifurcated between Full Recovery (NNN) and No Recovery (Gross) structures. Approximately 72% of total annualized rent is protected by NNN structures, while 28% remains exposed to operating expense fluctuations under Gross lease terms.

Key Takeaways

• High Concentration in NNN: The majority of portfolio revenue ($1.13M) is derived from NNN leases, primarily driven by the Verbex Learning, Inc. lease.
• Significant Gross Exposure: Three leases (28% of rent) are structured as Gross, where the landlord absorbs all utilities and property taxes, creating a direct hit to NOI as costs rise.
• CapEx & Base Year Lag: The largest lease (Verbex Learning) utilizes a 2016 Base Year, which may create a recovery lag if current expenses have significantly outpaced the 2016 baseline.
• Improvement Opportunity: Transitioning the Vesper Biolabs, Inc. Gross leases to NNN or Modified Gross could recover an estimated $137k+ in annual operating expenses.

Portfolio Recovery Summary

The following chart illustrates the distribution of annualized rent across recovery classifications.

Specific Provisions Limiting Recovery

While NNN leases generally provide full passthrough, specific language in the portfolio creates recovery leakage:

• CapEx Exclusions & Amortization Caps:
  • Verbex Learning, Inc.: Capital improvements intended to reduce expenses are amortized over their useful life, but annual recovery is strictly capped at the actual savings achieved by the improvement in that year Page 15, blk_205.
• Base Year Lag:
  • Verbex Learning, Inc.: Recovery is based on a 2016 Base Year Page 14, blk_199. If current operating expenses are significantly higher than 2016 levels, the landlord is absorbing the baseline cost.
• Landlord-Paid Utilities (Gross Leases):
  • Vesper Biolabs, Inc.: The landlord pays for all gas, electric, water, and sewer, which are included in the Gross Rent. There is no provision for overage passthroughs.
• Missing Admin/Management Fee Caps:
  • Most leases in the portfolio (including Ridgeway Logistics and Marcela Quintero-Vargas) do not specify a cap on management fees, which is favorable for the landlord, though Helion Genomics (expired) explicitly included administrative and management fees in its project management overhead Page 47, blk_834.

Recovery Improvement Opportunities

The following leases represent the greatest financial impact if recovery language were improved (calculated by rent size × estimated recovery gap).

1. VESPER BIOLABS, INC. ($360,000/year): Currently Gross. Landlord absorbs all utilities (gas, electric, water, sewer).
2. Kettlewater Foods Inc. ($49,593.60/year): Currently Gross. No expense passthrough provisions identified.
3. Vesper Biolabs, Inc. ($31,824/year): Currently Gross. Landlord responsible for all Property Tax, Building Insurance, and Utilities.

Expense Recovery Provisions by Lease

The table below details the specific recovery structures and categories for all active leases.

Excluded Leases

The following leases were excluded from this analysis because their status is Expired:

• ACRETIS THERAPEUTICS, INC.
• EASTON APPAREL GROUP, INC.
• Caldwell & Park, LLC
• Beacon Premium Finance Mgmt., LLC
• Marigold Fashion Co.
• Helion Genomics

Caveats & Methodology:

• Recovery Classification: Derived from the rent_structure field. "Full Recovery" corresponds to NNN/Absolute Net; "No Recovery" corresponds to Gross/Percentage.
• Recovery Gap Proxy: Estimated as 35% of annual rent for Gross leases and 15% for Modified Gross/Partial leases to represent unrecovered expense exposure.
• Currency: Portfolio totals include mixed currencies (USD and CAD). CAD values were summed without conversion.

The total estimated dollar value of the recovery gap for the Gross leases in the portfolio is $137,138.40 (USD) and 17,357.76 CAD.

This estimate is based on the "No Recovery" proxy (35% of annual rent), representing the operating expenses currently absorbed by the landlord that would typically be recoverable under a NNN structure.

Breakdown by Tenant

Note: These figures represent estimated exposure based on the 35% recovery gap assumption for Gross leases. Actual unrecovered expenses may vary based on specific property operating costs.

In commercial real estate, these terms describe how operating expenses (taxes, insurance, and maintenance) are split between you and the tenant.

1. Full Recovery (NNN / Triple Net)

• What it means: The tenant pays a base rent plus their pro-rata share of all operating expenses.
• Your Position: You are protected. If property taxes or utility costs double, the tenant pays the increase. Your "Net" income remains stable regardless of how expensive it is to run the building.
• Portfolio Status: 72% of your portfolio rent follows this structure.

2. No Recovery (Gross / Full Service)

• What it means: The tenant pays one flat "Gross" rent. You, as the landlord, are responsible for paying all taxes, insurance, and maintenance out of that single check.
• Your Position: You are exposed to inflation. If operating expenses rise, your profit margin shrinks because you cannot pass those costs through to the tenant.
• Portfolio Status: 28% of your portfolio rent (primarily VESPER BIOLABS, INC. and Kettlewater Foods Inc.) is in this category.

Are you "losing money" on the No Recovery leases?

Technically, you are "losing" the opportunity to recover expenses that are standard in the market. Whether you are losing money in absolute terms depends on your original underwriting, but here is the current impact:

1. Margin Erosion: For Kettlewater Foods Inc. Kettlewater Foods Inc., the lease is flagged as Elevated Risk Analysis specifically because you absorb all costs. Every dollar spent on HVAC repairs or property tax increases at this location comes directly out of your pocket.
2. The "Recovery Gap": Based on a standard 35% expense ratio, you are currently absorbing approximately $137,138.40 USD and 17,357.76 CAD in annual expenses for these Gross leases. In a "Full Recovery" scenario, this amount would be additional revenue paid by the tenants.
3. Inflation Risk: Because VESPER BIOLABS, INC. VESPER BIOLABS, INC. pays a flat $30,000/month Initial Base Rent, any spike in Salt Lake City property taxes or utility rates this year will directly reduce your net operating income (NOI) for that asset.

Summary: You aren't necessarily "writing a check" to keep the building open, but you are carrying the full financial burden of the building's operations, which makes these leases significantly less profitable and more volatile than your NNN leases.

The single most important finding is that your portfolio is currently "leaking" approximately $137,138 USD and 17,357 CAD every year due to inefficient expense recovery structures.

Why you should care: The $2.28 Million Valuation Hit

In commercial real estate, property value is a multiple of your Net Operating Income (NOI). Every dollar of expense you absorb instead of recovering from a tenant is a dollar of lost NOI.

If you were to sell these assets today at a 6% cap rate, that $137,138 in unrecovered expenses would reduce your total property valuation by approximately $2,285,640. By simply converting these leases to a standard NNN (Full Recovery) structure at renewal, you could potentially "unlock" over $2M in asset value without increasing the base rent by a single cent.

The Two Primary Drivers of This Risk:

1. The "Gross" Leakage (Vesper Biolabs): VESPER BIOLABS, INC. VESPER BIOLABS, INC. is the largest contributor, representing $126,000/year of that gap. Because they pay a flat $30,000/month Initial Base Rent, you are 100% exposed to any spikes in property taxes or utility costs for their 30,000+ SF facility.

2. The "Stealth" Inflation Lag (Verbex Learning): While VERBEX LEARNING, INC. VERBEX LEARNING, INC. is technically a recovery-based lease, it uses a 2016 Base Year Base Year.

   • The Problem: It is now 2026. You are paying for 10 years of inflation on property taxes, insurance, and labor before Verbex Learning is required to pay their first dollar of "increases."
   • The Impact: For a 15,989 RSF space Square Footage (RSF), even a modest $2.00/SF increase in operating costs since 2016 means you are absorbing ~$32,000/year in costs that a modern lease (with a 2025 or 2026 Base Year) would have passed through to the tenant.

Key Takeaway: Your portfolio's "Full Recovery" headline (72%) masks a significant concentration of inflation risk in your largest tenants. Prioritizing "Base Year Resets" or "NNN Conversions" during the next round of renewals for these three tenants should be your top strategic priority to protect your asset value.

This report identifies critical provision gaps across the portfolio's active leases, quantifying the financial exposure ("Revenue at Risk") where standard tenant protections are absent.

Based on 6 of 12 analyzed leases (6 excluded as Expired).

Key Takeaways

• Systemic Gaps: 100% of the active portfolio lacks Operating Expense Caps and CAM Audit Rights, exposing over $1.4M in annual rent to uncontrolled expense pass-throughs.
• SNDA Exposure: 66% of active leases (by count) lack Non-Disturbance Agreements (SNDA), creating significant risk of lease termination in the event of landlord foreclosure.
• Relocation Risk: Only VERBEX LEARNING, INC. has explicit relocation protections; all other tenants are vulnerable to landlord-mandated moves without supported cost reimbursement.
• Revenue at Risk: The highest financial exposure is concentrated in the VERBEX LEARNING, INC. and VESPER BIOLABS, INC. leases, which represent ~90% of the active portfolio's annualized revenue.

Provision Gap Matrix (Active Leases)

The following matrix tracks the presence of 14 key provisions across the active portfolio. Leases are sorted by annual rent (descending).

Legend: ✓ Present | ✗ Not found in document | — Not extracted | *Converted from CAD

Summary Metrics & Risk Analysis

Most Commonly Missing Provisions

1. Operating Expense Cap / CAM Audit Rights: Missing in 100% of active leases.
2. Force Majeure: Missing in 100% of active leases.
3. Expansion / ROFR / ROFO: Missing in 100% of active leases.
4. Relocation Protections: Missing in 83% of active leases.

Revenue at Risk (Annualized)

Top 3 Impactful Gaps & Benchmark Exemplars

1. SNDA / Non-Disturbance Protections

• Risk: Without an SNDA, a lender can terminate the lease upon foreclosure, regardless of the tenant's compliance.
• Benchmark Exemplar: VERBEX LEARNING, INC. Page 7, blk_101
  • Language: "Landlord shall deliver to Tenant a consent, subordination, non-disturbance and attornment... in form and substance reasonably satisfactory to Tenant." View Source
• Suggested Improvement: Require the landlord to provide a commercially reasonable SNDA from any current or future mortgagee as a condition of subordination.

2. Relocation Right Protections

• Risk: Landlords can move tenants to inferior space, disrupting operations and incurring significant costs.
• Benchmark Exemplar: Helion Genomics Page 38, blk_704
  • Language: "Landlord reserves the right... to substitute other space... provided the Rentable Area... is approximately the same... and all other out-of-pocket costs directly incurred by Tenant [are reimbursed]." View Source
• Suggested Improvement: Limit relocation to space of equal or better quality/visibility and mandate full reimbursement for all moving, IT, and stationery costs.

3. Renewal Options

• Risk: Tenants lack long-term security and may be forced to vacate or renegotiate at unfavorable rates.
• Benchmark Exemplar: Kettlewater Foods Inc. Number of Renewal Options
  • Language: Provides for explicit renewal terms with defined notice windows. View Source
• Suggested Improvement: Standardize a 5-year renewal option at 95% of Fair Market Value (FMV) with a 6-9 month notice period.

Excluded Leases

The following 6 leases were excluded from this analysis as their status is Expired:

• ACRETIS THERAPEUTICS, INC. View
• EASTON APPAREL GROUP, INC. View
• Caldwell & Park, LLC View
• Beacon Premium Finance Mgmt., LLC View
• Marigold Fashion Co. View
• Helion Genomics View

Caveats & Methodology: Revenue at risk is calculated using the initial base rent annualized for active leases. "Not found in document" indicates the provision was not identified during extraction; verification via full-text search is recommended for critical decisions.

A specific dollar amount for Operating Expenses (OpEx) is not stated in the VERBEX LEARNING, INC. lease or its six amendments. This is standard for commercial leases using a Base Year structure, where the actual dollar amount is provided by the landlord in annual reconciliation statements rather than being fixed in the lease text.

However, based on the lease terms, here is the methodology and the variables required to calculate the potential savings from a 5% OpEx cap:

1. Lease Variables

• Rent Structure: Base Year (Tenant pays increases over the Base Year) Rent Structure
• Base Year: 2016 Base Year
• Current Square Footage: 37,328 RSF (as of the Sixth Amendment) Page 4, blk_29
• Tenant's Proportionate Share: 78.66% (as of the Fifth Amendment) Page 5, blk_73

2. Calculation Methodology

In a Base Year lease, a 5% cap typically limits the year-over-year increase in "controllable" operating expenses.

Formula for Potential Savings: $$\text{Potential Savings} = (\text{Actual OpEx Increase} - \text{Capped OpEx Increase}) \times \text{Proportionate Share}$$

• Scenario: If the total Building OpEx increased by 10% ($100,000) over the prior year, but a 5% cap were in place:
  • Uncapped Increase: $100,000
  • Capped Increase (5%): $50,000
  • Building-wide Savings: $50,000
  • Verbex Learning Potential Savings: $50,000 \times 78.66% = \mathbf{$39,330}$

3. Key Findings on Expense Protections

• Current Status: The lease currently has no cap on Operating Expenses or Taxes Page 18, blk_218.
• Capital Expenditures: The lease does include a protection for "Included Capital Expenditures," stating that the annual cost amortized to the tenant cannot exceed the actual savings achieved by that expenditure in that year Page 15, blk_205.

To calculate an exact dollar figure, you would need the 2025 Operating Expense Statement from the landlord to establish the current baseline.

In commercial real estate, the absence of a provision does not necessarily mean you have "no protection," but it significantly shifts the burden of proof and often defaults to state law or landlord-favorable standards.

Here is how "missing" provisions are typically handled:

1. The "Entire Agreement" (Merger) Clause

Most commercial leases, including the VERBEX LEARNING, INC. lease, contain an "Entire Agreement" clause. This provision states that the written lease contains the entire agreement between the parties and supersedes all prior oral or written understandings Page 46, blk_418.

• The Risk: If a protection (like an OpEx cap) was discussed during negotiations but not written into the final signed document, it generally cannot be enforced.

2. Default to State Law

If a lease is silent on a specific issue, the "default" is often governed by the laws of the state where the property is located. For the Verbex Learning lease, this is the Commonwealth of Pennsylvania Page 43, blk_399.

• Statutory Protections: Some states have laws that protect tenants even if the lease is silent (e.g., requirements for how security deposits are held or limits on self-help evictions).
• Common Law: Principles like the "Covenant of Quiet Enjoyment" are often implied in a lease even if not explicitly stated, meaning the landlord cannot substantially interfere with your use of the space.

3. "Four Corners" Doctrine

Commercial leases are generally interpreted within the "four corners" of the document.

• Missing Tenant Rights: If the lease doesn't grant you a specific right (like a Right of First Refusal or an Early Termination Option), you generally do not have that right. You would have to negotiate with the landlord for a new amendment to obtain it.
• Missing Landlord Obligations: If the lease doesn't explicitly say the landlord must provide a certain service (like 24/7 security), they are generally not contractually obligated to do so, even if they currently provide it.

4. Gap Analysis Summary

The "Gap Analysis" provided earlier identifies areas where your lease is silent compared to market-standard "best-in-class" protections.

• Example: The absence of a CAM Audit Right means you have no contractual mechanism to verify the landlord's expense billings. While you might still have a common-law right to challenge a fraudulent bill, it is much harder and more expensive to enforce than a simple contractual audit clause.

Conclusion: While you may have some baseline protections under state law, commercial real estate is largely "buyer beware." The most robust protections are those explicitly negotiated and written into the lease.

Disclaimer: I am an AI analytics engine, not an attorney. This information is for analytical purposes and does not constitute legal advice. You should consult with legal counsel regarding the specific application of law to your lease.

The single most important finding is that 100% of your active leases lack both Operating Expense (OpEx) caps and CAM audit rights.

Why you should care:

In commercial real estate, this combination creates a "Blank Check" risk that directly impacts your bottom line and portfolio valuation.

1. Uncapped Financial Exposure: Without an OpEx cap, you have no protection against sudden spikes in building costs. If the landlord’s insurance premiums double or utility rates soar, those costs are passed directly to you with no limit. In the current inflationary environment, this is a major budget volatility risk.
2. Zero Transparency: Without audit rights, you are contractually required to pay whatever the landlord bills you for "Common Area Maintenance" (CAM) without any mechanism to verify the math. You cannot confirm if you are being overcharged, if the landlord is including capital expenses that should be excluded, or if you are paying for expenses that belong to other tenants.
3. Structural Portfolio Weakness: This isn't a one-off oversight; it is a systemic gap across your entire portfolio. If you were to sell these lease assets or the properties, a sophisticated buyer would "haircut" the value because of the lack of these standard institutional-grade protections.

The "Tail Risk" Warning:

While the OpEx/Audit gap hits your cash flow every month, the missing SNDA (Subordination, Non-Disturbance, and Attornment) protections represent an existential risk to your operations. With $440k in annual rent currently unprotected, a foreclosure by your landlord’s lender could technically allow the bank to terminate your leases and evict you—even if you have never missed a rent payment.

Recommendation: Your next round of renewals or amendments should prioritize "Financial Hygiene" (Audit Rights and OpEx Caps) and "Occupancy Security" (SNDA) to bring these leases up to market standard.