How do I fix this issue in Argus? (expense reimbursements)

In my Argus model, I am modeling tenants to reimburse real estate taxes above their base year amounts. However, the property is subject to real estate tax abatements that phase out over the course of the cash flow, resulting in disproportionately high expense increases year-over-year. This would place an unfair expense reimbursement burden on the tenants. Therefore, I tried setting an 3% annual cap to the reimbursement increases, which seems to work, except for the first year of a given lease term. In other words, it applies the full increase in the RE taxes as a reimbursement for the first year in which a tenant would reimburse expenses, then 3% increases thereafter.  

What I think is happening is that the 3% increase cap can only apply if there is a previous year's expense to reference, so it's just applying the full increase in the corresponding expense initially. Is there any way to resolve this?

One possible workaround I am contemplating is creating a reference-only expense that is based upon the unabated taxes, which increases at the market inflation rate, and then modeling the reimbursement to be based upon this instead. 

Just wondering if anyone has dealt with this before. Thanks! 

Comments (1)

Jan 12, 2022 - 9:13pm

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