We talk a lot about commercial real estate transactions as they can be very complex and they are our specialty here at Lester and Lester. The CRE process requires technical knowledge in areas such as market analysis, valuation, leasing, sales and due diligence in inspections. Each area can be difficult to navigate owing to the varying degree of service and standards among the types of reports and consulting firms used in investigating the property. Understanding these variances, and the due diligence options available, can help determine the level you want to use to examine each transaction depending upon your company’s needs.
Most lenders only require the standard Property Condition Assessment (PCA); however, the Acquisition Property Condition Assessment (APCA) is a service that goes above and beyond standard expectations. These assessments are due diligence tools used to help alleviate the potential risks all parties (i.e., buyers, investors and other stakeholders) take on with CRE transactions.
Differences in the PCA and APCA
A PCA’s typically requires a building generalist to conduct a visual inspection of the property with only minimal reporting. While the PCA is entirely appropriate for lenders, it does not provide in-depth analysis and/or the more thorough information investors acquiring property can possibly use for leverage in negotiations. Lenders want to see that certain liability standards are met, but stakeholders want to learn of any unique challenges or opportunities of the potential investment.
The APCA expands the standard scope to provide extra detail on many areas, including: facades, systems, roof conditions and structural components. The higher level of analysis provided in an APCA gives stakeholders more insights in a property’s needs, which will help in the planning and negotiation process.
Customizing an APCA
Since the APCA builds on the standard PCA inspection, we can customize which areas to concentrate, providing detailed insights into the property. You can expect comprehensive assessments along with the costs associated with any found liabilities. Some of these special surveys not typically included in the standard PCA follow.
Is the building LEED certified or what potential does the property have for being labeled as an EPA green participant?
These surveys address the property’s compliance with current regulations from ADA and/or FHA and range from a short-form compliance checklist to much more detailed assessments to cover accessible design features in the interior, exterior, signage and public use areas.
This service provides 100% reporting of the overall condition of all interior elements.
Mechanical, Electrical and Plumbing (MEP)
A team of specialists will survey all MEP elements and the inter-relationships of the systems to help find any faults, replacements or deficiencies.
A structural engineer will thoroughly investigate known or potential problems that a general engineer may not notice. The report will include any issues and comprehensive solutions.
We often see several specialists involved in multilevel reviews of exterior systems. When a level 1 review finds an issue, a level 2 review will test and confirm the issues, and the report will include recommendations on repairs and, of course, any associated costs.
We want to know more than just the age of the roof, a visual assessment and a review of warranties. Specialists will inspect roof membranes, insulation and deck sections using infrared thermal scans. The results show the potential issues and recommendations as well as costs for repairs and maintenance.
Specialists assess existing structures, sealants and surfaces to determine the effects of water and corrosives.
These surveys are done through visual observations and may include sampling and lab analysis.
An environmental specialist will conduct this survey following land title survey regulations. One of the top reasons for an ALTA survey is to eliminate the “survey exception” on the title insurance policy.
Drones save time and money to capture accurate data and are used in many of the above surveys.
The APCA Investment
Each service provides a different value to our clients. Having a full understanding of property conditions, and costs needed for repairs and maintenance, helps the buyer plan and budget accordingly. This type of report is an invaluable tool in negotiations. It can help us save our clients tens or even hundreds of thousands off a purchase price. It also helps clients decide if the potential issues and costs for repairs are too high and outside their budgets, causing them to wisely walk away from a deal. We are happy to work with you in finding the right firm to conduct these assessments.
We see the value of having an APCR done as giving a peace of mind that far outweighs the costs of the investigation.
Are you ready to find your new property or already nearing lease negotiations? Be sure to get an experienced advisor. Call us; our team will guide you in receiving the best possible outcomes both in referring you to an expert surveying team and in negotiating your leases.