MS Excel Alternative to ARGUS DCF
It is little secret among our readers that I view ARGUS DCF as a necessary evil. On the one hand, it is the industry standard for underwriting real estate. Virtually every broker package for institutional quality deals comes with an ARGUS run, and most real estate shops use the software in their analysis. On the other hand, it’s a black box, where assumptions go in one end and cash flows spit out the other and relative to Excel, it’s cumbersome to learn and use. As a result, most CRE professionals I know model to NOI in ARGUS – more out of necessity than anything – and then export the data to their proprietary Excel models for the remainder of analysis.
Update February 19, 2017: Check out the model I built and track my progress on this project: the All-in-One Underwriting Model for Real Estate Development and Acquisition
Can it not be done in Excel?
So why not model the entire deal in Excel? I’ve asked this question many times, and the answer seems to always be: it’s too difficult to model all of the complexities (reimbursements, rent increases, concessions, percentage rent, etc) of office, retail, and industrial leases in Excel. I’ve heard stories of real estate professionals building Excel alternatives, but I’ve never actually seen one nor do I know of one used in practice.
And so to the point of this post. I’m interested in taking a crack at this challenge. In my spare time in the coming months, I’m going to begin work on a fully functional, real estate discounted cash flow model that can do most everything ARGUS DCF can do. I’d appreciate your thoughts, feedback, and support along the way. If you have an Excel model you’d like to share that might help with this endeavor, I’d love to take a look at it. And from time to time, I’ll update you on my progress.
As always, you can reach out to me by visiting my contact page at: www.spencerburton.org.
UPDATE 9/19/2015: It was recently announced that ARGUS will stop selling ARGUS DCF at the end of this year and stop supporting the software all together in 2017. It seems the company is pushing for their customers to transition to their more comprehensive real estate toolkit known as Enterprise (AE). This is another reason to look for an Excel alternative to ARGUS DCF – at least for the smaller real estate shops who don’t have the financial wherewithal to purchase Enterprise.
Frequently Asked Questions about MS Excel as an Alternative to ARGUS DCF
Why is ARGUS DCF still widely used in real estate underwriting?
Because it’s the industry standard. “Virtually every broker package for institutional quality deals comes with an ARGUS run, and most real estate shops use the software in their analysis.”
What are the main drawbacks of using ARGUS DCF?
It functions like a “black box,” with limited transparency. It’s also “cumbersome to learn and use” compared to Excel. Many professionals model to NOI in ARGUS and then export to Excel for the rest.
Why consider building an Excel alternative to ARGUS DCF?
Because Excel allows greater transparency, customization, and control. The author notes: “I’m interested in taking a crack at this challenge… to build a fully functional, real estate discounted cash flow model that can do most everything ARGUS DCF can do.”
What complexities make Excel modeling challenging?
Complex lease structures like reimbursements, rent escalations, concessions, and percentage rent. As the author notes: “It’s too difficult to model all of the complexities… in Excel.”
Has a working Excel alternative been shared?
Yes. The author refers readers to the “All-in-One Underwriting Model for Real Estate Development and Acquisition” as a developing solution. (“Check out the model I built and track my progress…”)
What recent change increased the urgency for an Excel alternative?
ARGUS announced it would stop selling ARGUS DCF by the end of the year and end support in 2017. (“It was recently announced that ARGUS will stop selling ARGUS DCF…”) This creates a need for smaller shops to find alternatives like Excel.
Where can users share feedback or contribute to the Excel project?
The author invites feedback and model contributions via his contact page: “I’d appreciate your thoughts, feedback, and support along the way… visit my contact page at: www.spencerburton.org.”
