Video : Lease Structure Deep Dive: The Triple Net Lease using ARGUS Enterprise
ARGUS Training Manager – Americas, Jessica Leal, shares her insight about Triple Net Leases and how they affect commercial real estate rent roll, and then she will walk through how this is modeled in ARGUS Enterprise. Watch the video and read the entire transcript below.
“Lease Structure Deep Dive: The Triple Net Lease ,” Transcript
Hello, everyone, my name is Jessica, the training manager for our Americas region here at Altus Group. And today we’re going to talk about lease structures within Argus Enterprise and how to model them. And this video is really following up our insights article, Lease Stricture Deep Dive: The Triple Net Lease.
And this article is great because it talks about some of the different types of leases, so percentage rent, single net, gross lease, double net lease and triple net lease. But then, it takes a little bit of a deeper dive into the triple net lease. And what’s great about this article and what’s great about ARGUS Enterprise (AE) is that any type of lease that you’re really going to run across in the commercial real estate industry, you can also model within ARGUS Enterprise. Today we’re going to really talk about just a few of them, and see some of these options on the rent roll and how to model them.
So, let’s go ahead and let’s get into the solution and see how to do this. So, I currently already have a property open within ARGUS Enterprise and I’m going to go ahead and navigate to the tenants parent tab, rent roll subtask. Now, if you did have a triple net lease, what that means is that they’re going to be paying their initial base rent and you can model that. So, you model the area that the tenant is taking up and then you can model their initial base rent in that base rent field. And then on top of this, the tenants also going to be paying their pro-rata share and operating expenses, such as CAM and insurance and real estate taxes.
And so if we move on over to the recoveries section, we can see that in the recovery structure, we have the ability to model triple net leases by choosing net in that recovery structure. We also have the ability to pick-and-choose from other structures, depending on what type of lease we are trying to model. So we can do a base year stop, manually enter in a stop amount. We can enter in a fixed amount if a tenant is reimbursing us a fixed amount every single year, and we can even model a fixed amount per area if it’s on a per square foot basis.
Now, if you’re working in a retail property or a mixed use property with retail tenants in them, and you need to model those percentage rent leases where maybe the tenants are paying a little bit less in base rent, however, they’re also paying a percentage of their retail sales each year. ARGUS (Enterprise) also gives you the option to do that as well, where you can enter in the sales percentage, what are you taking and retail sales you can enter and the average sales amount that you’re expecting. And if you need to get a little bit more detailed in this field, you can even detail It out and change that amount each year if you’re expecting it to grow quite a bit and then you can enter in the breakpoint. So typically, if you’re going to be taking a percentage of the retail sales, you’re taking a percentage of anything over a certain amount. So, you can either manually enter that in, use a natural breakpoint, or if you’re taking 3% of everything, you can even use a zero breakpoint.
So, no matter what lease you’re really going to come across when you’re modeling a particular property, you have the ability to model that lease in ARGUS Enterprise. So that is actually it for our video today. We hope that you enjoyed it. And remember, if you have any questions or need any additional training options, please reach out and let us know.
Now that is actually all we have to show in this video. We hope you enjoyed it. And remember, if you have any questions or you would like additional training, please feel free to reach out and let us know. Thank you.