“ARGUS Tracks Change, Like a Clock Watches Time” will begin a series outlining how I have utilized ARGUS DCF while financial modeling complex scenarios found in commercial real estate assets. Perhaps this post, or a scenario found in future posts to this series, will bring value to situations encountered that you will find beneficial and can be shared among your clients and colleagues.Using ARGUS for this financial modeling assignment enhanced my ability to accurately and precisely forecast. Click To Tweet
Recent client assignment requested the need to track actual against previously budgeted expenses for some, not all, operating expenses typically found in a commercial real estate asset. These values were to be shown on the cash flow report and over the term of the analysis. This functionality adds clarity to the history of an asset showing how each operating expense increased or decreased from a result of a controllable effort or non-controllable result. Examples:
Suppose from a facilities management perspective, capital expense upgrading to LED exterior lighting fixtures could be monitored monthly, quarterly, semi-annual and annually as a controllable effort to reduce common area maintenance (CAM) expenses documenting an overall “green” energy consciousness.
Conversely, suppose from that same perspective one could better understand and create a history of a non-controllable result for snow removal and salt usage allowing better forecasting and future predictability of an asset and neighboring assets within portfolio proximity.
ACTUAL MINUS BUDGETED
BUDGETED MINUS ACTUAL
BUDGETED AS A PERCENTAGE OF ACTUAL
ACTUAL AS A PERCENTAGE OF BUDGETED
Building a financial model, using ARGUS, to track specific changes enables timely forecasting future market leasing assumptions of the remaining vacancy so that future costs may be better understood as revenues increase and decrease.
Using ARGUS for this financial modeling assignment enhanced my ability to accurately and precisely forecast yearly, and per month, increases and decreases in leasing activity and tenant turnover and how those changes would impact future assumptions, cash flow and investment values.
Have you ever encountered a scenario similar to this in which Argus tracks change? Please comment, ask questions and share your experience.
Wishing You Great Success!
Brent W. Sears CCIM SIOR