When acquiring new real estate or managing an existing property portfolio, it is essential to have the critical information needed to make smart decisions. Xpera has been assisting clients with the physical aspects of due diligence with property condition assessments (PCAs) for years. Our construction experts are able to tap into their extensive forensic experience to help evaluate and identify deficiencies and performance issues.
Now, as part of The Vertex Companies, Inc. (VERTEX), we have expanded our PCA service capabilities even further. This service is led by Eric Nelson PE, LEED®AP, CEA, VERTEX’s National Technical Lead and Vice President of Property Condition Assessment and Energy Savings Investigation Services.
Nelson has performed, reviewed and managed PCA services since 1997. Under his leadership, we can perform a broader range of PCA services, based on the unique requirements of each client and transaction.
That means beyond standard baseline PCA (ASTM E2018), we can also offer multiple levels of commercial building investigations, tapping into both Xpera and VERTEX’s deep bench of specialists and construction experts.
During a typical PCA, VERTEX performs the following steps:
- Conducts interviews with current ownership, site personnel and maintenance contractors
- Reviews construction plans, records of capital expenditures and historical repairs, budgets for improvements, and other relevant documents Contacts municipal authorities to determine if any open violations or unresolved safety issues are on file at the building, zoning or fire departments
- Performs order-of-magnitude cost estimating for identified deficiencies and long-term capital projections
- Authors a concise, easy-to-understand report detailing the issues most relevant to the property transaction
The assessment will generally include a visual review of these features:
- Site improvements, landscaping, pavements and drainage Structural components, connections and support materials Roof coverings, flashing, drainage and skylights
- Utility service, sewer, water, gas and electric HVAC, heating, cooling, ventilation and controls
- Electrical, transformers, switchgear, distribution and lighting Plumbing, drainage, wastewater and domestic water
- Fire protection sprinklers, standpipes and alarms Elevators, escalators and lift equipment
The PCAs completed under ASTM standards provide estimates of probable costs for changes or repairs that require immediate attention. VERTEX’s PCA reports take cost estimating and long-range budget forecasting a step further by including an additional Capital Needs estimate for longer term evaluation. The reports provide opinions concerning probable costs to remedy physical deficiencies that need to be made in the near future, usually within the first year or two. These estimated renovation costs are based on current market rates and enable stakeholders to project reasonable budget figures when considering property values.
Using PCAs to Create Opportunities
While PCAs can clearly help the client avoid potential challenges with a property, they can also help uncover valuable opportunities.
Here is an interesting project that Nelson and his team were involved with that illustrates this point.
The client was trying to acquire a hospitality property in Massachusetts and called on VERTEX to assist them in the due diligence process. When the inspector performed a detailed review of the building envelope, they found evidence of a potential issue. They then compared their field observations with the reports and plans provided to them in the document review phase. They discovered there was a much larger problem that had only been given a minor “Band-Aid” repair.
After making this keen observation, the team was able to get approval from the seller to perform destructive testing. From these findings, VERTEX developed three repair solutions, along with their associated costs. As a result of this thorough PCA process, the buyer was able to negotiate a $4 million credit on the purchase.
“This was an issue discovered during the PCA that spilled over into forensic investigation and then supervision of the repair design,” said Nelson. “This is an excellent example of how having a broad depth of expertise within our larger team really allowed us to provide a resounding win for the client.”
Beyond the PCA
Alongside PCAs, our expanded team under VERTEX is able offer variety of other related investigations to bring greater value to clients. One offering that is pertinent to California owners in particular is Probable Maximum Loss (PML) investigations, which is becoming increasingly important to risk- carrying stakeholders concerned about damages and losses stemming from earthquakes.