As I grow older, I pay less attention to what men say. I just watch what they do.
~Andrew Carnegie (1835-1919)
Richard West | Apr 6, 2015 Richard West |
IVI/CBRE is currently seeing an unprecedented trend in how fast due diligence needs to be performed. This is especially true in core gateway markets such as New York, Los Angeles, San Francisco, Seattle and Chicago to some extent. There is an increased appetite by investors to deploy capital into real estate that is putting pressure on them to do deals more quickly. This increasing “need for speed” creates a greater chance of investors being burned on real estate deals, as when times are good in the industry investors are sometimes blind to past failings.
There is no doubt investors have a decreasingly short period to make investments, as right now these gateway markets are hot and more and more equity is available for deployment, causing prices to rise as demand outstrips supply. The fear is that in order to meet expected returns, investors will be required to either move up the risk spectrum or to diverge from their usual investment strategy while on the hunt for attractive assets. Some investors may also face additional risk by moving away from their core property strengths and taking on assets they are less experienced in managing.
In past years it was not uncommon for an investor to have anywhere between 30 to 45 days to complete their due diligence. However, we are seeing timelines as short as five to seven days for a buyer to either complete their due diligence or waive contingencies. We have heard of several cases where our client released hundreds of thousands of dollars in order for the seller to allow them the opportunity to sign the purchase and sale agreement. The drive for these expedited timelines and deal constraints is simply the competitive nature of the market for these core cities and the class-B+ to class-A quality assets within these markets.
We are seeing this trend in assets of varying sizes. As the number of potential buyers increases, so does the market demand for fast “go hard” decisions. While the trend is most evident on larger assets in the $100-million-plus range, it is becoming increasingly common on $10 million to $100 million properties. For these properties, it is extremely difficult to get exclusive due diligence periods without leaving some “walk away” money on the table.
There is an obvious, inherent risk with these deal structures, but aligned with a qualified and experienced consulting team a client can often offset this risk.
We are often asked, “How quickly can you prepare a report for my acquisition?” This approach is flawed from the outset. Only after a clients’ risk profile is assessed can an appropriate due diligence scope of work and schedule be established, provided a report is actually even required.
The purchaser’s familiarity with an asset type and market help establish the baseline for review. Flexibility in reporting and communicating findings is essential—oftentimes enhanced post-site visit debriefings, detailed conference calls with the team, and preparation of complete summaries with opinions of probable costs may be all that is needed to give meaningful guidance to clients.
Qualified consultants respond to this need for increased speed in due diligence with condensed deliverables, prepared by skilled architects and engineers. The focus is a “get to the point,” numbers-driven analysis tailored to a client’s needs, which provides them with the critical data they need to make the best business decision possible.
Creative report delivery strategies must be explored, but nothing can replace the trained eye of a highly experienced due diligence advisor supported by a network of seasoned experts. Having a well-rounded generalist who is a registered architect or professional engineer lead the process is invaluable, especially when specialists are added to the team to review specific building systems and components. And when there is time pressure surrounding the review of real estate, this makes all of the difference.
Richard West is senior managing director of CBRE valuation & advisory services; Robert Occhiogrossi is managing director of IVI Assessment Services, a CBRE company.
Phoenix Commercial Real Estate and Investment Real Estate: investors and Owner / Users need to really know the market today before making a move in Commercial Properties or Investment Properties in Phoenix / Tucson / Arizona, as the market has a lot of moving parts today. What is going on socio-economically, what is going on demographically, what is going on with location, with competing businesses, with public policy in general — all of these things affect the quality of selling or purchasing your Commercial Properties, Commercial Investment Properties and Commercial and large tracts of Residential Land in Phoenix / Tucson / Arizona. Therefore, you need a broker, a CCIM (Certified Commercial Investment Member) who is a recognized expert in the commercial and investment real estate industry and who understands Commercial Properties and Investment Properties.
I am marketing my listings on Costar, Loop-net CCIM, Kasten Long Commercial Group. I also sold hundreds millions of dollars’ worth of Investment Properties / Owner User Properties in Retail, Office Industrial, Multi-family and Land in Arizona and therefore I am working with brokers, Investors and Developers. I am also a CCIM and through this origination ( www.ccim.com ) I have access to marketing not only in the United States, but also international. Click here to find out what is a CCIM: https://en.wikipedia.org/wiki/CCIM
Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Properties in Phoenix, Tucson, Arizona.
Kasten Long Commercial Group tracks all advertised apartment communities, including those advertised by other brokerages. The interactive map shows the location of each community (10+ units) and each location is color coded by the size (number of total units).
Walter Unger CCIM, CCSS, CCLS
I am a successful Commercial / Investment Real Estate Broker in Arizona now for 20 years. If you have any questions about Commercial / Investment Properties in Phoenix or Commercial / Investment Properties in Arizona, I will gladly sit down with you and share my expertise and my professional opinion with you. I am also in this to make money therefore it will be a win-win situation for all of us.
Please reply by e-mail firstname.lastname@example.org or call me on my cell 520-975-5207
Walter Unger CCIM
Senior Associate Broker
Kasten Long Commercial Group
2821 E. Camelback Rd. Suite 600
Phoenix , AZ 85016
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