Financial Modeling

How To Grow Buildings using ARGUS DCF

Financial modeling using ARGUS DCF & ARGUS Enterprise; to better understand a commercial real estates’ investment performance, is my format preference.  I believe institutional buyers, astute and savvy investors prefers this format as modeling in ARGUS is often specified for their commercial real estate disposition and acquisition considerations.

Recently a client of mine had the need to increase leaseable square footage within a building footprint. The office building was recently re-measured, using newer BOMA standards, subsequently the additional square footage gained was in need of capture.

This particular financial modeling assignment was more than calculating cashflows, projecting market leasing assumptions, debt notes etc., rather one of the main objectives was to model this additional leaseable square footage, manage vacancy and absorption and timing the increased NOI accurately. ARGUS made this piece of the assignment very manageable by allowing to model these criteria’s simplistically.

In my opinion this could not have been accomplished by simply increasing the square footage by keying in a new property size unless of course the building was vacant and every lease moving forward would be new from day one of the analysis.  Since there where current tenants in the building, the suites containing the modified square footages could not be captured until the respective leases of those tenant suites expired completely.

Detailing the newly sized suites at lease-up, and exactly upon tenant rollover, maintaining current and projecting future vacancy and absorption accuracy, and projecting NOI with precision throughout the holding period, was successfully identified during the analysis.  Using this method of capturing new leaseable areas, based on various lease timing, over a period of analysis years was accomplished with ease using ARGUS.

Each series of this blog moving forward; I will highlight means and methods I use strategically when successfully modeling complex investment solutions, simplistically and with powerful results, using ARGUS DCF and ARGUS Enterprise.

What format do you use when financial modeling becomes your necessity?

Wishing you great success,

Brent W. Sears, CCIM SIOR

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