You own a piece of property, or are about to acquire one. You are told the bank or any other lender will require “due diligence” to assess the value of the property. On one hand, the financial due diligence team arrives, pours through rent rolls, accounts payable, receivables, and a variety of paper provided by the seller; rarely do they look up to see the ceiling stains indicative of trouble on the roof or with HVAC duct sweat, nor do they smell the sweet musk of mold when using the on site facilities.
What we do is look beyond the numbers at the buildings in place, or being placed. “What to do?” Diligence.
The process of examining buildings has been given its own standard by the American Society of Testing and Materials, ASTM for short, which defines such diverse processes as testing steel for strength to measuring the consistency of ice cream. The Standard for real property is number 2018-15, “Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process”; the -15 refers to the last revision made in 2015 and consistently updated every 7 years. Baseline, because it establishes the condition of the property right now and can be used to evaluate management and care when updated in the future. Key components of the report generated using this standard are the immediate needs and capital reserve requirements. Immediate needs are ranked in order of life safety, first; local code compliance, second; conditions which left uncorrected would accelerate the deterioration of the building or its systems, third; and finally, improvements which will improve the building’s aesthetics or marketability.
