Modelling Recoverable CapEx in Argus - Valuation Expertise Needed!
Curious on what is considered standard practice for modelling a recoverable capital expense in Argus models. 

Lets say you are trying to value a property in Argus. Roof needs to be replaced in January 2023 - $1mm of capex will be modeled for that month. Lets say the tenants lease allows for recovery of that expense, amortized over 10 years. You would recover $100,000/year for 10 years (assuming no interest for simplicity).


No problem - you would just model the recovery income in Argus accordingly, right? However, let’s pretend it is now February of 2023 - the capex has been spent. Do you still include the recovery income? If so, wouldn’t many Argus models be full of multiple lines of capital amortization incomes? 

Curious to what you guys have encountered. Seems like it makes sense to model the expense &amp; recovery income, but in my experience, I haven’t seen models with the recovery income modeled. Do we just ignore recoverable capex in order to keep valuations simple? 

TIA!
[{"id": "iukjfqg", "text": "Yea. There will be multiple capex items that are reference accounts in the expenses tab and then added into each respective tenant recovery.", "replies": [], "depth": 1}, {"id": "iulja5m", "text": "You need to model out the income as a CapEx recovery if it\u2019s any significant amount. \n\nIf you\u2019re modeling a sale of the property while the tenant would still owe that money it will affect the purchase price as the the buyer would be collecting it.", "replies": [{"id": "ium00ey", "text": "Agreed. I would probably model it as a typical cap ex line item (below the line) on the expense side. If the return in recovery is as simple as 10% per year for a given time frame, I\u2019d model it as a detailed other income that ends after the given timeframe (10 years in this case) just for the ease of modeling. If it\u2019s more messy in how that recovery is made, you might need to dig into AE further on best method.", "replies": [], "depth": 2}], "depth": 1}]