ASC Evaluation Details and Structure 3

Question 1

How does a full-service (gross) lease differ from a triple-net (NNN) lease in ARGUS modeling?

Accepted Answer

In a gross lease the landlord pays most operating expenses; in a NNN lease tenants pay taxes, insurance, and maintenance directly

Answer

Gross leases require tenants to pay all operating expenses; NNN leases do not

Answer

ARGUS cannot model gross leases; only NNN structures are supported

Answer

Both lease types produce identical NOI because expenses always cancel out

Question 2

What is an 'expense stop' in the context of an ARGUS lease model?

Accepted Answer

A base amount of operating expenses the landlord pays; costs above that threshold are passed through to the tenant

Answer

The maximum allowable annual increase in operating expenses

Answer

A cap on the tenant's total liability for the entire lease term

Answer

The date at which expense recovery calculations terminate

Question 3

In ARGUS, tenant improvement (TI) allowances are classified as:

Accepted Answer

Capital leasing costs that appear as cash outflows in the period the lease commences

Answer

Operating expenses that reduce NOI each year of the lease

Answer

Income offsets that reduce gross potential rent

Answer

Loan proceeds credited against the purchase price

Question 4

What does 'market leasing assumptions' in ARGUS define for vacant or expiring space?

Accepted Answer

The projected lease terms, market rent, renewal probability, TI, and downtime applied to space that is not yet committed under a signed lease

Answer

The legal rent control limits imposed by local municipalities

Answer

Only the square footage available for leasing in the current year

Answer

The historical average rent collected from all existing tenants

Question 5

In ARGUS, base rent escalations for existing leases can be modeled as:

Accepted Answer

Fixed dollar steps, percentage steps, or CPI-indexed increases depending on the lease structure

Answer

Fixed dollar increases only — percentage increases are not supported

Answer

A single lump-sum payment at lease expiration

Answer

Escalations tied exclusively to the going-in cap rate

Question 6

Which metric in ARGUS represents gross potential rent minus vacancy and credit loss?

Accepted Answer

Effective Gross Income (EGI)

Answer

Net Operating Income (NOI)

Answer

Cash Flow Before Debt Service (CFBDS)

Answer

Total Recoverable Income

Question 7

How does ARGUS treat leasing commissions in the evaluation cash flow model?

Accepted Answer

As a leasing capital cost paid when a lease is signed or commences, similar to TI allowances

Answer

As an annual overhead expense spread evenly across all years

Answer

As a deduction directly from gross potential rent each year

Answer

Leasing commissions are excluded from ARGUS models by default