Evaluation Details and Structure Flashcards
7 cards from real ASC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Evaluation Details and Structure flashcards as text
How does a full-service (gross) lease differ from a triple-net (NNN) lease in ARGUS modeling?
Answer: In a gross lease the landlord pays most operating expenses; in a NNN lease tenants pay taxes, insurance, and maintenance directly
Under a gross lease the landlord absorbs operating costs (up to any expense stop), while under a NNN structure tenants reimburse the landlord for taxes, insurance, and CAM costs separately.
What is an 'expense stop' in the context of an ARGUS lease model?
Answer: A base amount of operating expenses the landlord pays; costs above that threshold are passed through to the tenant
An expense stop is a per-square-foot threshold below which the landlord absorbs expenses; any operating costs exceeding the stop are recovered from the tenant.
In ARGUS, tenant improvement (TI) allowances are classified as:
Answer: Capital leasing costs that appear as cash outflows in the period the lease commences
TI allowances are leasing capital expenditures modeled as lump-sum cash outflows when a new or renewal lease begins, reducing free cash flow in that period.
What does 'market leasing assumptions' in ARGUS define for vacant or expiring space?
Answer: The projected lease terms, market rent, renewal probability, TI, and downtime applied to space that is not yet committed under a signed lease
Market leasing assumptions tell ARGUS how to model unleased or re-leasing space by specifying hypothetical future lease terms, market rent levels, downtime between leases, and tenant improvement costs.
In ARGUS, base rent escalations for existing leases can be modeled as:
Answer: Fixed dollar steps, percentage steps, or CPI-indexed increases depending on the lease structure
ARGUS supports multiple rent escalation types including fixed-dollar bumps, percentage increases, and index-linked (e.g., CPI) adjustments to match actual lease provisions.
Which metric in ARGUS represents gross potential rent minus vacancy and credit loss?
Answer: Effective Gross Income (EGI)
Effective Gross Income equals Gross Potential Rent minus vacancy allowance and credit loss, representing the income actually expected to be collected from tenants.
How does ARGUS treat leasing commissions in the evaluation cash flow model?
Answer: As a leasing capital cost paid when a lease is signed or commences, similar to TI allowances
Leasing commissions, like TI allowances, are modeled as leasing capital expenditures that reduce cash flow in the year a new or renewal lease is executed.