Long Term Forecasting (LTF)

Alert: All Long Term Forecasting functionality needs to be active in your organization's environment before creating a LTF budget; it is not on by default and when active, Client Admin: Roles & Permissions need to updated as well in order to view and use all LTF functionality. Please submit a support ticket before attempting to create a LTF budget.

Overview

Long Term Forecasting: The affect of leases rolling multiple times

• The addition of weighted average auto-generated leases at the expiration of a lease.
• Budgets are typically specific lease by lease stay/go decisions for a 1 to 3 year period.

Info: Typically, short-term budgets do not need weighted average speculative renewals because the result is a budget with smoothed-out revenue, occupancy, and tenant capital. Short-term budgets are better off with suite by suite decisions of who stays and goes. After a couple of years, a weighted average may be needed.

Budget & LTF Process Options:

1. At what point would you start using weighted average speculative renewals versus making space-by-space stay/go assumptions?
2. During reforecasts does the window of making stay/go decisions vs. weighted average speculative renewals change?
3. How many years of direct input of expenses and miscellaneous income do you anticipate entering prior to using inflation?
4. Is there an expectation or requirement that the first years of the 12-year budget be more accurate than the later years?
5. Are there some items which are relevant to a short-term budget but not a valuation or vice versa that may complicate matters?
6. Are there budget accounting adjustments that should be excluded from the valuation cash flows?

Creation

Directions to Create a LTF Budget:

1. At Client Admin: Budgets, click the "Budget Wizard" button on the toolbar; the "Budget Wizard" window appears.
   • Copy/New: Copy
   • Source Budget: Budget to copy
   • Budget Name: Unique budget title. Duplicates are disallowed.
   • Budget Type: LTF
   • Begin Month: 1
   • Begin Year:
   • Term (years): 15 year max
2. Apply the following parameters in the Budget Wizard:
   • Default Inflation if missing: (on the 2. Budget Detail Override tab)
     • Apply an Inflation to Expense, Income, and other budgeting tabs that do not have one already in effect.
     • List of Active Client level Inflation. Client level Inflation must exist prior to creating the new/copied budget.
     • Upon budget creation, the applied Client level Inflation is inserted at the Budget level.
   • Default Market Inflation (if missing): (on the 3. Rent Roll Override tab)
     • Apply an Inflation to named charges that do not already have one in affect (named).
     • List of Active Client level Inflation. Client level Inflation must exist prior to creating the new/copied budget.
     • Upon budget creation, the applied Client level Inflation is inserted at the Budget level.
     • Note: rSquared recommends individual Inflation(s) for market rent growth (usually regional), general CPI, expenses, taxes, and insurance.
3. Assign/apply all other parameters.
4. Click the "Create Budget" button; the user is then prompted with a 'Message from webpage': "Creation of budget: X is in progress. An email will be sent to: user's email address when the task is complete."

Alert: If using LTF for the first time, update your organization's Client Admin: Roles & Permissions and turn on LTF related tree permissions and nodes/sub-nodes after rSquared activates all LTF functionality in your organization's environment.

Renewal Type Options

Info: Renewal Type is assigned in the Building Admin: Suites section and on the Rent Roll tab in budgets of Budget Type = LTF.

• Speculative applies weighted average renewal based on Market Lease Assumptions.
• Renew assumes current tenant renews, no downtime, then applies MLA renewal assumptions.
• Vacate assumes current tenant vacates, uses full downtime period in MLA, then applies MLA new lease assumptions.
• None assumes no lease-up after current tenant expires; space goes vacant.

Calc Progression (Steps)

Order of the Calc process:

1. Non-Tenant Budget Details for Named Item/Inflation Changes
2. Distributions
3. Rent Roll pre-Recoveries (Charges, Capital, % Rent, Vacancy, S-Line, etc.)
4. Recoveries

Reporting

Financial Report Template - LTF Yearly - Columnar yearly totals.