ASC Expense Modeling 2

Question 1

In ARGUS Enterprise, what does 'grossing up' operating expenses mean when calculating tenant CAM reimbursements?

Accepted Answer

Adjusting expenses to reflect what they would be at a specified occupancy level (e.g., 95%) so tenants pay a fair share even when the building is partially vacant

Answer

Increasing stated expenses by a fixed 10% administrative fee

Answer

Adding capital expenditures into the CAM pool for reimbursement

Answer

Rounding all expense figures up to the nearest thousand dollars

Question 2

How are capital expenditure reserves (replacement reserves) typically modeled in ARGUS Enterprise?

Accepted Answer

As an annual per-square-foot reserve entered in the CapEx or capital expenditure section, reducing cash flow below NOI

Answer

As a percentage of gross revenue added to operating expenses each year

Answer

As a lump-sum entered only in the reversion year

Answer

As part of debt service coverage calculations only

Question 3

What is an 'expense pool' in ARGUS Enterprise, and what is its primary purpose?

Accepted Answer

A grouping of specific expense line items that are allocated to tenants for reimbursement purposes, allowing precise control over which costs are recoverable

Answer

A summary table of all debt-related expenses for a portfolio

Answer

A reserve account funded by tenant security deposits

Answer

An automated blending of market and in-place expenses

Question 4

In ARGUS Enterprise, how does the software calculate a tenant's CAM reimbursement using the pro rata share method?

Accepted Answer

By dividing the tenant's leased square footage by total building square footage and multiplying by the recoverable expense pool total

Answer

By averaging the per-square-foot costs across all occupied suites equally

Answer

By using the tenant's revenue as a percentage of property gross income

Answer

By applying a fixed CAM rate established at lease signing regardless of actual costs

Question 5

When modeling real estate taxes in ARGUS Enterprise, which approach most accurately reflects the risk of a reassessment upon sale?

Accepted Answer

Modeling taxes to step up in the year following a sale event based on the projected sale price and local assessment ratio

Answer

Holding taxes flat at the current assessed value for the entire hold period

Answer

Excluding taxes from the model because they are always passed through to tenants

Answer

Using a single blended tax rate applied to effective gross income

Question 6

What is the difference between 'controllable' and 'non-controllable' expenses in ARGUS Enterprise expense reimbursement modeling?

Accepted Answer

Controllable expenses (e.g., management, maintenance) can be capped by lease provisions; non-controllable expenses (e.g., taxes, insurance) are typically excluded from tenant caps

Answer

Controllable expenses are fixed by lease; non-controllable change with inflation only

Answer

Non-controllable expenses are entered manually; controllable expenses are auto-calculated

Answer

Controllable expenses reduce NOI; non-controllable expenses do not affect NOI

Question 7

In ARGUS Enterprise, what impact does a high vacancy assumption have on expense recoveries in a building with NNN leases?

Accepted Answer

Higher vacancy reduces total expense recoveries because vacant space does not generate tenant reimbursements, leaving the landlord to absorb those costs

Answer

Higher vacancy increases total expense recoveries because more space requires maintenance

Answer

Vacancy has no effect on expense recoveries under NNN leases

Answer

Higher vacancy automatically triggers a gross-up that keeps recoveries constant