ASC Evaluation Details and Structure 5

Question 1

How does ARGUS handle a lease that begins partway through a calendar year in the cash flow model?

Accepted Answer

ARGUS pro-rates the rental income for the partial year based on the actual lease commencement date

Answer

ARGUS ignores partial-year leases and starts income on January 1 of the following year

Answer

Partial-year leases default to a full year of income for simplicity

Answer

Only calendar-year leases are supported in ARGUS Enterprise

Question 2

What is a 'blended cap rate' in a multi-tenant ARGUS evaluation?

Accepted Answer

A weighted average cap rate reflecting the different implied yields across each tenant's lease, used to characterize the overall portfolio yield

Answer

The average of the going-in and terminal cap rates

Answer

A cap rate mandated by lenders that blends debt and equity returns

Answer

The cap rate applied to below-grade or secondary space within a building

Question 3

In ARGUS, property management fees are typically modeled as:

Accepted Answer

A percentage of Effective Gross Income (EGI) collected each year

Answer

A flat annual dollar amount that never changes

Answer

A one-time fee paid at the beginning of the analysis period

Answer

Management fees are excluded because they are landlord expenses paid outside the property

Question 4

What does a Debt Service Coverage Ratio (DSCR) below 1.0 indicate in an ARGUS levered analysis?

Accepted Answer

Net Operating Income is insufficient to cover the annual debt service, meaning the property cannot service its mortgage from operations alone

Answer

The property is generating more than enough cash flow to cover loan payments — the lender is very secure

Answer

The loan has been fully amortized and no more payments are required

Answer

A DSCR below 1.0 is the standard target for value-add acquisitions in ARGUS

Question 5

When modeling a mixed-use property with retail and office tenants in ARGUS, how are different lease structures handled?

Accepted Answer

Each tenant space can be assigned its own lease type (gross, net, modified gross) and corresponding recovery structure independently

Answer

ARGUS forces all tenants onto a single lease structure selected at the property level

Answer

Mixed-use properties require a separate ARGUS file for each use type

Answer

Only the dominant use type is modeled; secondary uses are ignored

Question 6

In ARGUS, what is the key distinction between an 'unlevered' and a 'levered' return?

Accepted Answer

Unlevered return is based on property-level cash flows before debt service; levered return reflects cash flows to the equity investor after loan payments

Answer

Unlevered return includes financing costs; levered return excludes them

Answer

Levered returns are always higher than unlevered returns regardless of leverage amount

Answer

There is no distinction — both terms describe the same cash flow line

Question 7

How are capital expenditure (CapEx) reserves modeled in a standard ARGUS evaluation?

Accepted Answer

As an annual reserve amount (often expressed as a per-square-foot allowance) deducted from NOI to reflect future capital replacement needs

Answer

CapEx reserves are excluded because they are considered financing activities under GAAP

Answer

CapEx is added to gross potential rent as a recovery item charged back to tenants

Answer

ARGUS models CapEx only in the year of the terminal sale, not during the holding period