Is standard to assume a base-year reset upon renewal for RE tax reimbursements?
Suppose you are modeling out an office building in Argus, and there are some modified gross leases with the tenants paying taxes above a base year amount. The lease is rolling within the analysis period and the tenants have the option to renew at FMR or whatever the case may be. Is it standard to assume that the base year resets upon the start of the option period, such that the tax reimbursement is reset to 0?
Sometimes I have to model these and I either don't have the leases or the lease doesn't make it clear what happens.
Depends on the market and the specific tenant, but generally I would assume that it does reset.
If you are plugging in an existing rent roll, and an existing tenant has a larger base year expense stop than the current year's expenses, then I would not assume that the base year resets. However, if your question is more geared towards general lease up assumptions, I would say that the standard is to assume a reset of the base year.
It's ultimately lease-dependent, but generally base years do reset upon renewal.
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