Top 4 Components of a Property Condition Assessment (PCA)

AllSaints

Photo credit: CBC, LLC – All Saints Episcopal Church in Chevy Chase, Maryland

 

Multi-family, office, and mixed-use properties need a walk-through inspection performed by a commercial real estate inspector annually. Even churches and schools need regular inspections. The American Society for Testing and Materials publishes its guidelines for a Property Condition Assessment (PCA) at ASTM.org. A walk-through PCA assesses the conditions of a commercial building and site. The latest ASTM guideline (E2018-15) outlines a PCA’s four main components in section 5.2 on its website. A few examples of what to expect follow:

I.  DOCUMENTATION REVIEW AND INTERVIEWS

Government records and publicly available documents a building inspector may review: Certificates of Occupancy, building code violations, fire code violations, etc. A pre-survey questionnaire for the owner or property management company is advantageous. Drawings, if available, assist inspectors onsite. Interviews with on site personnel and others familiar with the property also provide valuable information.

II.  WALK-THROUGH SURVEY

A thorough walk-through to document the condition of all building systems, site particulars, exterior and interior, is essential. The ASTM.org website specifies more than fifteen areas, that inspectors should focus upon during a survey. For real life details from an Orlando building inspection team’s walk-through surveys, including plenty of photos from previously performed Property Condition Assessments, in Miami, Atlanta, Newark, Philadelphia, Kansas City, Denver, and San Francisco, check out:  http://www.commercialbuildingconsultants.com/projects/

III.  PREPARATION OF OPINIONS OF COSTS TO REMEDY PHYSICAL DEFICIENCIES

Below is an example chart from a draft Property Condition Report showing the estimated costs for a Florida multi-family property’s recommended renovations and enhancements.

Florida Multi-Family SitePhoto Credit: Commercial Building Consultants, LLC

IV.  PROPERTY CONDITION REPORT

Digital photographs, like the one below, document current on-site conditions needing immediate corrective action. The report includes narrative details of the entire walk-through, including building interior, exterior, mechanical systems, site topography, parking lots, storm water drainage, etc. Two common occurrences are water intrusion and exposed wiring in buildings. Both are hazardous to human health and safety, with increasing potential to harm materials and property the longer these issues go undetected. Often, building and fire code violations exist in commercial buildings. I will address water intrusion and its effects in another article. Exposed wiring is common in Property Condition Reports I have read.

~~HOW FIRE HAZARDS GO UNDETECTED~~

Below is a sample photo of a fire hazard (exposed electrical wires) in the attic of a Florida multi-family property. Without an inspection, a few sparks could create a fire.

FLORIDA MULTIFAMILY 3Photo and caption credit: Draft Property Condition Report prepared by Commercial Building Consultants, LLC.

AND THEN, MOTHER NATURE STRIKES~

With over 1.4 million lightning strikes each year, the Sunshine State is “the lightning capital of the U.S.” (2/3/16 FPL correspondence with citation: www.weather.com/safety/thunderstorms/news/top-5-lightning-prone-states). Florida’s year-round storms pose a threat, creating power surges that cost building owners thousands (www.surgeshield.com). This is a major reason to know the details of all commercial buildings in Florida, inside and out. I have seen photos of old building materials stacked inside buildings and on the roof tops of buildings, creating fire hazards, roofing problems, etc. The owners were completely unaware of the presence of these building materials until they read about it and saw the photographs depicted in the Property Condition Report.

WHY BUILDINGS NEED WORKING SMOKE DETECTORS

In July 2015, eight apartment buildings were evacuated near the University of Central Florida. At the time, the fire department could not determine the cause of the fire that began in Orlando, Florida, where 75 college students were displaced during the middle of the semester (wftv.com). No one was injured in the Florida fire, but a teenager who once lived in Chicago, Illinois wasn’t so lucky last fall when she and a few other teens were in the attic of a two-story building.

The massive blaze killed one. Smoking materials lit old clothing stored in the attic, causing the fire that killed the seventh grader, a 12-year-old girl. Her family is now suing the building owners, because there were no working smoke alarms at the time (chicago.suntimes.com).

 

Regular building inspections expose problem areas, systems needing maintenance or repair, and often hidden issues. Certainly, the lawyer for the family will ask about the smoke detectors. Then, the lawyer will probably ask the building owner:

“Were you aware of the flammable materials stored in the attic of your building?”

 

  *  *  *  *  *  *

What’s in your attic? Anything flammable? 

Don’t wait for a property transfer to have a commercial property inspected. As mentioned earlier, these property condition assessments have standards. To review the ASTM’s guidelines for baseline PCAs, go to: http://www.astm.org.

I regularly highlight the discoveries of a team of building inspectors, who dig deep during walk-through surveys. To learn more about commercial building consulting services and previously published articles, including one strange discovery deep in a dungeon of darkness in downtown Orlando, Florida, read more blog posts at: http://www.commercialbuildingconsultants.com/commercial-building-news/.

Cheers,

Vicki Nelson    

3 Tips for Commercial Due Diligence

Chicora Life Center - Charleston, SC

All buildings require maintenance and repairs. Commercial properties on the market may have hidden issues, especially if they have been vacant for awhile. These properties, especially require the detailed eye of a professional building and site inspector. One cannot always see what lies beneath the surface.

Infill redevelopment is on the rise and older buildings like the former naval hospital in Charleston, South Carolina, are undergoing renovations. New building materials can be damaged before a leaky roof is discovered.

3 Tips for commercial due diligence for potential purchasers:

FIRST TIP:  

Obtain a Property Condition Assessment (PCA) from an experienced, reputable building inspection team. Find a team of experts to rely on, now and in the future.

AS6

SECOND TIP:

Ask that the building systems be thoroughly inspected by a professional, who will climb on the roof and inspect all roofing systems on site (not all PCAs include a rooftop inspection); and

THIRD TIP:

Request that a Phase I Environmental Site Assessment (ESA) also be conducted along with the PCA (this is the only way to detect potential or existing environmental contamination liability). If the Phase I should reveal a contamination issue, decisions can then be made whether to proceed with further investigation with a Phase II ESA, where soil samples are analyzed for hazardous substances.

Hint for Hiring Commercial Building Inspection Team: Check out the work truck and ladders the building inspectors use before hiring. If they don’t carry a couple of tall ladders, they might not walk roofs.

For more information about Property Condition Assessments (including rooftop inspections) and Phase I Environmental Site Assessments, please visit: CommercialBuildingConsultants.com.

Searching for a local building consultant can prove tough.  We can be at your doorstep in some cases the very next day.  Commercial Building Consultants services all of these cities and more!  Contact us today and we’ll tell you how soon we can be at your doorstep. Whether it is a property condition assessment as part of your commercial due diligence or a forensic inspection investigation a problematic roof/structure, Commercial Building Consultants is there to serve you in all of your commercial building consulting needs. Still curious?
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Commercial Building Consultants, LLC provides a variety of services to commercial property owners, prospective purchasers, developers, and lenders. CBC works with its clients wherever their projects take them. Projects have spanned the continental U.S., from Miami to Seattle. For more information concerning each of these services, please review our extended list of services below.

Property Condition Assessment (PCA)

PCAs encompass commercial building inspections of the building structure, systems, and grounds of a commercial real estate site. Our professionals utilize the ASTM 2018-15, "Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process" standard to evaluate the current construction conditions observed.  Others stop once they've met the "standard," but Commercial Building Consultants, LLC is just getting started once the ASTM standard is met.  Our clients count on us to reveal every physical defect and major issue that could potentially impact an acquisition.  We report from the field and there's no time delay in communicating critical information that could effect a transaction.

Phase I Environmental Site Assessment (ESA)

A Phase I Environmental Site Assessment (ESA) is performed in strict accordance with the ASTM E 1527-13 Standard Practice for Environmental Site Assessments. Phase I ESAs are available for multi-family and commercial real estate parcels.  We know how the discovery of possible contamination to a site impacts the owner and potential purchaser, so we communicate with the client immediately.  We do not wait ten days or two weeks to inform our clients when we determine there is an environmental issue present.

Construction Monitoring/Bank Draws

Construction Monitoring/Bank Draws are site inspections that are performed in conjunction with the funding draws on a ground-up or remodeled property. The draws are performed after a General Contractor or Developer requests funding at each phase of the project. The site visit inspection is put into place to monitor the project to ensure that the draw amount requested is in-line with the construction performed on the site as of the date of the draw request and that the construction performed is being performed in a workman-like manner.

 Owner's Representative

An Owner's Representative advises and represents an owner/developer in areas of planning, acquisition, pre-construction, construction monitoring, and the post construction process. These areas include site preparation, design, cost estimates, bid packaging preparation and evaluation for safety, budget adherence, construction oversight/field supervision, and cost control.

 Building Energy Performance Assessment (BEPA)

A Building Energy Performance Assessment (BEPA) begins with an Energy Performance Benchmarking Assessment which is conducted by collecting, compiling, analyzing, and disclosing a building's energy use data to better understand the energy consumption and costs of a particular commercial building, and to indicate whether upgrades or retrofits are necessary.  Buildings which perform at a higher energy efficiency increase their Net Operating Income (NOI).  Download the BEPA Brochure for additional information.  These assessments are also available for multi-family properties.

Construction Estimating

A construction estimation begins with a site visit by a team member of our professional staff.  The Construction Estimate entails the analysis of the planned or proposed project to determine an estimation of the construction costs, time-line and plan.  

 Cost to Completion Analysis

These analyses are warranted when construction is delayed or halted.  The Cost to Completion Analysis consists of an inspection of a project, its progress, and current conditions.  We then determine the remaining cost for completion of the project.

 Forensic Inspection

These inspections take place when an owner identifies a problematic issue that needs resolution.  Inspectors work to reveal physical deficiencies that cause underlying issues and offer solutions for building owners.  Examples of physical deficiencies and problematic issues include:  unidentified water intrusion causes, intrusive odors, litigation support, and defective building materials.

 Stormwater, Erosion and Sedimentation Control Inspection

Commercial Building Consultants, LLC is certified in the State of Florida to monitor and inspect stormwater, erosion and sedimentation controls.  We work with general contractors to adhere to city, state, and national guidelines.  Staying in compliance is key to the permitting process, preventing stormwater pollution, and the completion of a successful project.

 

I have been fortunate enough to work with CBC on a number of projects during my career, ranging from the renovation of a 276 unit multi-family property in Alabama to completion of a high-end Miami condo development. CBC has an extremely critical eye when it comes to sticks and bricks of real estate. In addition to extensive background in construction and engineering, CBC is unbelievably successful in finessing relevant information from any and every source, which makes them a tremendous asset when evaluating a property. CBC catches every physical detail, but is also versatile enough to take a step back and look at the property from the unique perspectives of owners, lenders and investors alike.

Kurt Spring

Managing Director, Asset Management, ERI

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