Operating Expenses

Adding expenses to operate the property and how they will be recovered

Operating expenses (OpEx) are the periodic expenditures required to operate and maintain a property such as property maintenance, utilities and real estate taxes. They are often the main sources of cash outflows for a property.

Adding an expense

Add expenses that exist for the property. Add an operating expense by selecting the "Add operating expense" button at the bottom of the expense list. It is possible to stack expenses and use a similar naming convention to represent complex expense that cannot be described using the provided fields, such as an elaborate management agreement.

Collapsing an expense will show a high-level description of its attributes. Expenses must be expanded to edit.

Operating expenses can be removed using the trash icon on the top right of each entry and can be reordered using the scrubber on the top left. The order of expenses is the order they will appear in reports.

Expense name

The name as it will appear for selection in the model and reports. It must be unique and should be short and descriptive, ideally describing its function.

Vendor identification

An optional identifier that can be used to group cash flows when reporting.

Expense description

An optional, longer description of the expense providing further identification or the source of information.

Expense type

Determines how the expenses should be input. Any amount or rate should be entered as the maximum expected amount.

An inflation schedule should be selected to adjust the expense to reflect the value of the currency in the future.

Expense types:

One-Time Amount

The expense will be collected only once. Variability cannot be chosen. The amount will be paid on a specific date or over a period of time.

Amount per Recurrence

The specified amount will be paid on each occurrence of the payment frequency.

Amount per Month / Year

The specified amount will be prorated to the payment frequency. The rate will be prorated by the payment frequency using the Actual/Actual day count convention.

Amount per Rentable Area per Month / Year

The specified rate will be calculated against the property's rentable area and prorated to the payment frequency. The rate will be prorated by the payment frequency using the Actual/Actual day count convention.

Percentage of Effective Gross Revenue

A percentage of the EGR calculated between and paid at the payment frequency. This is commonly used in management agreements.

One-time expenses

Expenses input as one-time events are not affected by any variability. While the event occurs only once, payment to be received can be spread over a schedule.

Paid on

The date or dates a one-time expense is paid.

Paid on options:

Specific Date

The date the full amount is paid.

Payment Schedule

A schedule of partial payments and their dates specific to the one-time event.

Property Acquisition

The date the property is acquired. If the purchase date is not specified in the model, then the analysis start is used.

Property Disposal

The date the property is disposed. If the disposal date is not specified in the model, then the analysis end is used as it is implicitly assumed to be the reversion date.

Analysis Start

The first day of the analysis period. This is not recommended because it is possible to unintentionally move the expected date when overriding the analysis period in reports and portfolios.

Analysis End

The last day of the analysis period. This is not recommended because it is possible to unintentionally move the expected date when overriding the analysis period in reports and portfolios.

Recoverability

Expenses are often recovered from the tenants by the property owner. Expenses can be marked with varying amounts recoverable, with each tenant paying their proportionate share.

Recurring expenses

Operating expenses input as recurring events require a duration and payment frequency. Variability can adjust a percentage of the expense in relation to the occupancy of the property.

Variability

Determines how the expense source should vary to the property's occupancy. Any amount or rate should be entered as the maximum expected amount.

Variability options:

Fixed

The amount will not vary.

Percentage Occupied

A percentage of the amount will correlate directly with the property's occupancy percentage.

Percentage Unoccupied

A percentage of the amount will correlate directly with one minus the property's occupancy percentage.

Recoverability

Expenses are often recovered from the tenants by the property owner. Expenses can be marked with varying amounts recoverable, with each tenant paying their proportionate share.

Expense start

The date the expense begins. The first payment will be made on the selected payment frequency after the expense start date. No proration will occur in regard to the initial period.

Start options:

Specific Date

Begins on the specified date. This anchors the expense to a specific point in time. Changing your analysis period or acquisition date will not change the start of the expense.

Property Acquisition

Begins on the property acquisition date of the analysis start date when a purchase date has not been specified.

Analysis Start

Begins on the analysis start date.

Expense end

Defines when the expense will stop. No proration will occur in regard to the duration of the end period.

End options:

Specific Date

Ends on the specified date. Changing your analysis period or disposal date will not change the end of the expense.

Property Disposal

Ends on the property disposal date or analysis end when it has not been specified.

Analysis End

Ends on the analysis end date.

Payment frequency

The frequency that the expense is paid to the vendor.

Frequency options:

Yearly / Semiyearly / Quarterly

The payments will be aligned to the selected month and day of month.

Every Two Months / Monthly

The payments will be aligned to the selected day of the month.

Semimonthly

The payments will recur on the two dates of the month. Both payments will be equal amounts regardless of the span between them (ex. 1st and 15th in a month with 31 days.)

Every Two Weeks / Weekly

The payments will be aligned to the selected day of the week. Amounts entered as rates will be prorated using the Actual/Actual day-count convention. This means that a yearly rate will produce differing payment amounts when weekly frequency is selected and the number of weeks in the year is either 52 or 53. If this does not reflect the agreement, it is recommended that amounts paid weekly or every two weeks are entered as amount per recurrence.