Argus troubleshooting

[josephdifranco]

Hello,

I'm looking over an argus run. During some of the years in which leases are expiring, no TI or LC is getting triggered. The calculation looks off in other years.

Anyone have insight as to why this would happen?

If a lease expires, would TI trigger if that lease has an option?

Thanks.

 

[Financially Feasible]

Hello,

I'm looking over an argus run. During some of the years in which leases are expiring, no TI or LC is getting triggered. The calculation looks off in other years.

Anyone have insight as to why this would happen?

If a lease expires, would TI trigger if that lease has an option?

Thanks.

Did you build a market leasing assumption for that tenant for TI and LC? You may have built it in the master MLA screen but not for that individual tenant. As far as the calculation being off, not sure off of the top of my head...

 

[Howard Klahr]

During some of the years in which leases are expiring, no TI or LC is getting triggered. Anyone have insight as to why this would happen?

It appears based on your question than 1) there are multiple tenants in your analysis. Does the TI and LC occur for any of the tenants, or does it appear for only some tenets? As Ed stated, it is likely not entered correctly on the tenant renewal assumptions part of the rent roll.

If a lease expires, would TI trigger if that lease has an option?

It depends on how you modeled the information in the tenant input. Options are treated differently than market renewals.

It may be helpful if you run reports for individual tenants and you can see exactly how the information is being treated.

 

[josephdifranco]

It appears based on your question than 1) there are multiple tenants in your analysis. Does the TI and LC occur for any of the tenants, or does it appear for only some tenets? As Ed stated, it is likely not entered correctly on the tenant renewal assumptions part of the rent roll.


It depends on how you modeled the information in the tenant input. Options are treated differently than market renewals.

It may be helpful if you run reports for individual tenants and you can see exactly how the information is being treated.

The TI and LC occurs for only some tenants. It looks definitely like if there is an option, no TI or LC is triggered. Is that an argus default setting?

I guess I'm not sure if that would be the way the market would typically model a shopping center. Seems like an option would not be a sure thing and that some ti or lc might be appropriate. Any opinions?

Thanks again.

 

[Howard Klahr]

The TI and LC occurs for only some tenants. It looks definitely like if there is an option, no TI or LC is triggered. Is that an argus default setting?

No

I guess I'm not sure if that would be the way the market would typically model a shopping center. Seems like an option would not be a sure thing and that some ti or lc might be appropriate. Any opinions?

While an option is not a sure thing there are factors that are considered in the analysis to make a determination on how to structure the model. Have you read the narrative? What does it say about lease expirations and renewals? What are you basing your opinions on? What type of retail tenants are these? How long have they been there? Is this the first lease term or have there been prior leases with this tenant? What is the option rent based on, market or a contracted scheduled rate? How foes that compare to market rent?

I could go on, but I'm sure you get the idea.

 

[josephdifranco]

No



While an option is not a sure thing there are factors that are considered in the analysis to make a determination on how to structure the model. Have you read the narrative? What does it say about lease expirations and renewals? What are you basing your opinions on? What type of retail tenants are these? How long have they been there? Is this the first lease term or have there been prior leases with this tenant? What is the option rent based on, market or a contracted scheduled rate? How foes that compare to market rent?

I could go on, but I'm sure you get the idea.

Thanks Howard.

 

[Semi Pro]

The TI and LC occurs for only some tenants. It looks definitely like if there is an option, no TI or LC is triggered. Is that an argus default setting?

I guess I'm not sure if that would be the way the market would typically model a shopping center. Seems like an option would not be a sure thing and that some ti or lc might be appropriate. Any opinions?

Thanks again.

If you want to reflect TIs and LC in the option, on the option line of the rent roll, you need to select yes under Leasing Costs and input the TIs and LC under the option there. You are projecting a 100% probability of the option being taken when you put in the option on the rent roll.

If you want some other probability of that option renewal, you have to build it as a separate market leasing assumption and you would input the TI and LC projections there.

My general rule is that if the option rental is below my market rent projection at renewal, I project the option to be taken as negotiated... that typically means no TI allowance but sometimes a contracted leasing commission. Otherwise, I go to market leasing. The tenant will either negotiate renewal at market rates (with leasing commissions and maybe TIs) or will vacate (with a new tenant having leasing commissions and usually TIs).

 

[Lost Cause]

It may be helpful if you run reports for individual tenants and you can see exactly how the information is being treated.

Howard's advice is excellent. Single tenant projections are the best way to see where something may be awry in Argus.