ASC Lease Modeling 3 — Questions and Answers
Question 1: In ARGUS Enterprise, what is the purpose of the 'Holdover' period setting on a lease?
- Models the tenant occupying space month-to-month after lease expiration before a new lease begins (Correct answer)
- Freezes rent at the last contracted amount indefinitely
- Triggers automatic lease renewal at market rate
- Applies a penalty fee to the tenant for overstaying
Correct answer: Models the tenant occupying space month-to-month after lease expiration before a new lease begins
The holdover setting lets ARGUS model a gap period where the tenant stays at a holdover rent rate after the lease expires but before a new lease or vacancy is assumed.
Question 2: Which ARGUS Enterprise setting determines whether tenant improvement costs are amortized or expensed in a single period?
- Capital expenditure timing and amortization schedule in the TI input (Correct answer)
- The lease commencement date field
- Operating expense recovery type selection
- Vacancy loss percentage setting
Correct answer: Capital expenditure timing and amortization schedule in the TI input
ARGUS allows TI costs to be modeled as a lump-sum cash outflow at lease commencement or amortized over the lease term depending on the input methodology chosen.
Question 3: When modeling a lease with an 'expense stop' in ARGUS Enterprise, the tenant pays:
- All operating expenses exceeding the stop amount per square foot (Correct answer)
- A fixed gross rent with no expense participation
- Only utilities regardless of total building expenses
- Half of all operating expenses up to the stop
Correct answer: All operating expenses exceeding the stop amount per square foot
An expense stop means the landlord pays operating expenses up to the stop threshold per square foot, and the tenant reimburses all amounts above that level.
Question 4: What effect does a 'contraction option' exercise have on ARGUS Enterprise lease modeling?
- Reduces the leased area by a defined amount, decreasing revenue from that tenant (Correct answer)
- Extends the lease term at the tenant's election
- Converts the lease from net to gross structure
- Triggers an immediate re-leasing assumption for the full space
Correct answer: Reduces the leased area by a defined amount, decreasing revenue from that tenant
A contraction option lets a tenant give back a portion of their space, which ARGUS models as a reduction in rentable area and corresponding revenue.
Question 5: In ARGUS Enterprise, how is 'absorption and turnover vacancy' different from 'general vacancy'?
- Absorption/turnover vacancy applies to specific leasing events; general vacancy is a portfolio-wide stabilized rate (Correct answer)
- General vacancy only affects retail properties; absorption applies to office
- Absorption vacancy is set by the appraiser externally
- They are identical inputs labeled differently in different software versions
Correct answer: Absorption/turnover vacancy applies to specific leasing events; general vacancy is a portfolio-wide stabilized rate
Absorption and turnover vacancy captures the downtime between leases for specific spaces, while general vacancy is a blended market-level adjustment applied to total revenue.
Question 6: When a lease in ARGUS Enterprise is flagged as 'speculative,' what does the model assume?
- The space is currently vacant and will be leased under market leasing assumptions at a future date (Correct answer)
- The tenant has signed a letter of intent but not a binding lease
- Rent for that space will grow at a speculative above-market rate
- The lease will be terminated within 12 months
Correct answer: The space is currently vacant and will be leased under market leasing assumptions at a future date
A speculative lease flag tells ARGUS to treat that space as unleased and apply MLAs starting at the assumed lease-up date.
Question 7: What is the impact of entering a 'rent abatement' mid-lease in ARGUS Enterprise rather than at commencement?
- Revenue drops to zero or a reduced amount during the abatement months within the existing lease term (Correct answer)
- The lease term is automatically extended to compensate
- Operating expense recoveries continue uninterrupted during the abatement
- The abatement is added to the end of the lease as additional free rent
Correct answer: Revenue drops to zero or a reduced amount during the abatement months within the existing lease term
Mid-lease rent abatements reduce or eliminate revenue for specified months during the lease term without affecting the lease end date or recovery structure.
ASC Lease Modeling 3
In ARGUS Enterprise, what is the purpose of the 'Holdover' period setting on a lease?