When Buying or Selling, These May Make or Break the Deal!
Have you ever had a sale fall apart at the last minute because you failed to do proper due diligence in advance of taking it to market?
Over 25 years of representing landlords and investors, I’ve noticed this pattern over and over again. In order to maintain control over the disposition of an asset, we’ve had to ensure that every property or piece of land goes through a specific, repeatable process.
Without this, you expose yourself to the market.
Yet by running through the steps, you can not only nip any potential issues in the bud, but you can:
- uncover better ways to position or market the building,
- truly understand the highest and best use cases,
- compress the overall sales cycle, and
- leverage more and higher quality interest from buyers.
So, if you are considering selling or purchasing an industrial property, I would strongly advise that you complete a thorough pre-due-diligence so that you will know if there are any issues with the building or the site itself that need to be addressed before the property is taken to the market.
Over the next several weeks, we will be diving into the different types of due diligence, case studies of successful assessment and remediation, and what exactly to look out for when preparing your property for sale.
To kick things off, here is a list of Due Diligence items that should be performed…
Due Diligence Checklist for Industrial Real Estate Transactions
Site Due Diligence Material:
- Legal Description
- Property Survey
- Topographic Survey
- Site Plan
Building Due Diligence Material:
- As built architectural plans and drawings (including mechanical, electrical and structural)
- BOMA certified plans
- CAD drawings
- Property Condition Assessment Report (to include structural, mechanical, code compliance, etc)
- Environmental Report Phase I
- Environmental Report Phase II
- Environmental Report Phase III, if applicable
- Controlled Substance Report
- Air Quality Report, if applicable
- Underground Storage Tank Removal Report, if applicable
- Geotechnical Report (to determine the quality of soil compaction to enable improvement using cost-effective methods of construction)
Other Important Reports:
- Planning Report – Highest and Best Use Study
- Zoning and Permitted Uses
- Zoning Compliance Certificate and all Zoning Approvals, including any Rezoning & Minor Variance Applications if applicable, as well as any pending applications
- Property Appraisals if applicable
If the Property is Leased:
- Lease Agreements, true copies with any amendments & lease renewals, if applicable
- Rent Roll showing correct names of all tenants, area occupied, previous rent, the term of occupancy, lease commencement date and lease expiry date, security deposits and any delinquencies, if applicable
- Income and Expense Statements for the last three years with a complete accounting of all rent and other income (parking, sign, etc), common area maintenance, realty taxes, etc, reflecting income and expenses of operations, including cost and timing of scheduled capital improvements
- Current year and next year budget
- Tenant Recovery Schedule, if applicable
- Realty Taxes for the last three years, any special assessments together with details of any realty tax appeals, with all correspondence if applicable
- Utility bills for the last two years
- Audited Financial Statements for the last three years
- Copy of service contracts and all other contracts and agreements relating to the operation, maintenance and repair of the property
- A list of all personal property, if any, owned by the seller, located at the property, and used in connection with its operation and maintenance
- A list of all permits, certificates of occupancy, certificates of occupancy, warranties, government notices, special assessments, code violations and unexpired guaranties and copies of same in seller’s possession or control
- A copy of existing insurance policies and certificates and any pending claims against the property
- A schedule of pending litigation, if any, affecting the property or seller’s ability to convey the property
- Estoppel Certificates executed by tenants confirming the existence and form of the lease, absence of defaults, absence of non written obligations of the landlord, and other items of concern
- Title search
- Any and all other matters as the purchaser may deem reasonably necessary to satisfy itself, in its sole discretion, concerning the property and the status of the property’s title.
Disclaimer: The information provided is intended for general educational and informative purposes ONLY, and is NOT intended to be taken as legal, environmental, or tax advice.
Talk to your lawyer, accountant, attorney, or environmental or planning consultant before taking action.
Next week, we will begin examining how Environmental Site Assessments, Remediation, and Site Management processes work, as well as their importance in ensuring the quick and straightforward execution of a disposition.
Goran Brelih and his team have been servicing Investors and Occupiers of Industrial properties in Toronto Central and Toronto North markets for the past 25 years.
Goran Brelih is a Senior Vice President for Cushman & Wakefield ULC in the Greater Toronto Area.
Over the past 27 years, he has been involved in the lease or sale of approximately 25.7 million square feet of industrial space, valued in excess of $1.6 billion dollars while averaging between 40 and 50 transactions per year and achieving the highest level of sales, from the President’s Round Table to Top Ten in GTA and the National Top Ten.
Goran is currently serving as President of the SIOR ‐ Society of Industrial and Office Realtors, Central Canadian Chapter and on the Board of Directors of Muki Baum Accessibility Centre, a Toronto‐based NGO which provides support to children and adults with complex disabilities.
Industrial Real Estate Sales and Leasing, Investment Sales, Design Build and Land Development
About Cushman & Wakefield ULC.
Cushman & Wakefield is a leading global real estate services firm that delivers exceptional value by putting ideas into action for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with 48,000 employees in approximately 400 offices and 70 countries.
In 2017, the firm had revenue of $6.9 billion across core services of property, facilities and project management, leasing, capital markets, advisory, and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.
For more information on GTA Industrial Real Estate Market or to discuss how they can assist you with your real estate needs please contact Goran at 416-756-5456, email at firstname.lastname@example.org, or visit www.goranbrelih.com.