Lender RET Escrow - Closing Cost?
For those of you who actually handle the modeling at your firms, how do you guys treat the lender-required RET escrows in your models? Do you have it listed in your capitalization the same way you would legal, 3rd parties, origination fees, etc?
Because the lender always wants to "stay ahead" via the monthly escrows, do you show the escrow amount "coming back" to you at the end of the loan?
I realize this is a very specific question, but I traditionally have not carried this anywhere in my capitalizations (if there was a deal where we capitalized carry costs, I would make the argument it is in there). For cash flowing deals, I've always viewed the RET Escrow as a pre-pay of an operating expense that the tenant will ultimately pay for under a NNN lease deal.
Basically, am I wrong to not carry RET Escrow as a line item in my closing costs? How do you guys treat this in your models? Seems that I rarely see this in people's model when I get sent them, but I do wonder if this therefore understates equity needs.