By John W. Colagrande Jr., P.E.,Vice President of Engineering, Whitman
When it comes to purchasing a commercial property, there are definite benefits to performing a pre-purchase assessment of the property. Commercial property investors have two potential tools available to them. A Property Condition Assessment (PCA), which can provide information on the condition of an existing building, and an Environmental Phase I, to evaluate potential environmental risks associated with the property.
PCA’s can assist buyers of commercial real estate by providing information on the physical condition of the building and internal components prior to acquisition. This information allows the purchaser to factor the existing conditions of the building into their evaluation and may also provide an opportunity to further negotiate with the seller. This is accomplished by having a PCA conductor observe the physical features of the property as outlined in the American Society for Testing and Materials Standard. Depending on the complexity of the project and the size of the structure, a typical PCA can take a few days or several weeks and consists of four parts:
- Documentation review and interview
- A walk through
- The preparation of opinions of probable costs to remedy any physical deficiencies
- The property conditions report
A PCA is not necessary for all commercial property purchases, but can be a valuable asset when considering investing in or buying a commercial structure that is more than a few years old or if the use of the structure is going to be changed or modified. A PCA conductor will provide background information on the building and any available documents that pertain to its previous use, including drawings, appraisals and building records. A walk through of the site allows for a visual observation of the structure, including pavement and landscaping, plumbing and heating systems and fire protection systems.
The PCA also includes the projected cost to repair or replace observed deficiencies and provide potential costs to upgrade existing systems that may be near the end of their useful life. The final component of the PCA is the property conditions report, which contains a description of the property and a summary of the scope of services performed. This report usually contains photo documentation of deficiencies to ensure that the purchaser understands any issues, which may be of concern.
While the PCA is an important tool for knowing the existing deficiencies of a building, a Phase I Environmental Assessment is an industry-accepted tool for evaluating environmental conditions and evaluating potential environmental risks associated with the property. Whitman is unique in that we can perform both PCA’s and Phase 1’s and thus we have the ability and in house experience to bundle these services together. Phase 1’s and PCA’s are both due diligence tools and together can provide the purchaser of a commercial property with the necessary information to evaluate potential risks and costs associated with the “entire property.”
Commercial real estate can be a tricky and risky business. However, knowing the true condition of the property and structure at the onset of the transaction process can end up saving thousands of dollars.
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Whitman is a New Jersey-based engineering, environmental, and management firm, offering expertise in brownfield redevelopment, civil, structural and geotechnical engineering, site assessment, remediation cost recovery, groundwater contamination and recovery, indoor air quality solutions, industrial hygiene and innovative remediation technologies.