ASC Lease Modeling 2 — Questions and Answers
Question 1: In ARGUS Enterprise, what does the 'CPI' rent adjustment method use as its basis?
- Consumer Price Index changes over a defined period (Correct answer)
- Capital Price Index set by the landlord
- Commercial Property Index from CoStar
- Cumulative Principal Increase factor
Correct answer: Consumer Price Index changes over a defined period
CPI adjustments in ARGUS tie rent escalations to the Consumer Price Index, reflecting real-world inflation-linked lease structures.
Question 2: When modeling a lease with a blend-and-extend scenario in ARGUS Enterprise, what typically changes in the cash flow?
- Below-market rent is blended toward market with an extended term (Correct answer)
- Tenant improvements are eliminated entirely
- The lease reverts to a gross lease structure
- Security deposits are refunded immediately
Correct answer: Below-market rent is blended toward market with an extended term
Blend-and-extend combines current below-market rent with market rent into a blended rate while the tenant commits to a longer term.
Question 3: What is the function of the 'Base Year Stop' in a modified gross lease within ARGUS?
- The landlord pays all expenses up to the base year amount; tenant pays increases above it (Correct answer)
- The lease terminates at the end of the base year
- Rent steps stop escalating after the base year
- Tenant receives a free rent period equal to the base year
Correct answer: The landlord pays all expenses up to the base year amount; tenant pays increases above it
A base year stop means the landlord absorbs operating expenses up to the base year level and the tenant pays any expense growth beyond that.
Question 4: In ARGUS Enterprise, which input field controls how much free rent a new tenant receives at lease commencement?
- Months Free Rent (Correct answer)
- Rent Abatement Period
- Concession Credit Line
- Lease Incentive Factor
Correct answer: Months Free Rent
The 'Months Free Rent' field in ARGUS specifies the number of months at the start of the lease where the tenant pays no base rent.
Question 5: When a tenant has a co-tenancy clause, how does ARGUS Enterprise typically model the rent impact if the anchor tenant vacates?
- Rent is reduced to a specified alternative rate or percentage of sales (Correct answer)
- The lease is automatically terminated in the model
- Free rent is granted for the remainder of the term
- Operating expenses are capped at current levels
Correct answer: Rent is reduced to a specified alternative rate or percentage of sales
Co-tenancy provisions often allow a tenant to pay a reduced or percentage-of-sales rent if an anchor tenant leaves, which ARGUS can model as an alternative rent scenario.
Question 6: What does 'market leasing assumptions' (MLA) in ARGUS Enterprise define?
- Default lease terms applied to vacant spaces upon re-leasing (Correct answer)
- The current in-place rent for existing tenants
- Historical average rents from prior years
- Lease terms negotiated directly with individual tenants
Correct answer: Default lease terms applied to vacant spaces upon re-leasing
MLAs set the template terms—market rent, lease duration, TIs, free rent—that ARGUS applies automatically when modeling future re-leasing of vacant or expiring spaces.
Question 7: In ARGUS Enterprise, if a lease is structured with 'percentage rent,' what additional data input is required?
- Tenant sales volume and breakpoint threshold (Correct answer)
- Capitalization rate for the asset
- Square footage of adjacent vacant space
- Landlord's mortgage principal balance
Correct answer: Tenant sales volume and breakpoint threshold
Percentage rent requires entering the tenant's reported sales and the natural or artificial breakpoint above which the percentage rent kicks in.
ASC Lease Modeling 2
In ARGUS Enterprise, what does the 'CPI' rent adjustment method use as its basis?