Facilities Check List
Practical, step-by-step guides for the busy FM
April 1999
Buy that Building — Fast!
Just as you’re unearthing your desk for the first timein weeks, your boss pokes his head in your doorway and says, “We’re thinkingseriously about buying the Acme building on the other side of town. I’m having ameeting after lunch with our Board about it. Can you give me a few pointers onwhat we should check out before we negotiate?”
Be glad he asked. Following are some memory joggers presented in the BOMIInstitute text, Asset Management. They comprise two due diligence checklists –preliminary and summary. They are intended to provide a starting point forcareful consideration of any commercial real estate acquisition. Since eachproperty is unique, expect to add a few items of your own. Due diligence caninclude legal matters. The first draft of the final purchase and sale agreementshould be written only if due diligence proves beneficial to the buyer.Developing an SFP requires the following items:
Preliminary Due Diligence Checklist
- Verification of the exact identity and ownership type of the current owner
- Current income and expense statement
- Historical operating statement for the previous 12 or more months
- Cash-flow statements for the previous 12 or more months
- Current property budget and budget for the upcoming fiscal year
- Current occupancy statistics, tenant rent roll, and roll-up report
- Project sales and rental information (if applicable)
- Comparable property sales information (from a broker or agent)
- Physical plant expense information and expense ledger (if available)
- Broker’s or appraiser’s price opinion of value, with documentation of comparable sales properties to justifythe opinion of value
- Map identifying the location of the subject property and comparable sold properties
- Preliminary title report
- Maintenance history for the previous 12 or more months, disclosing general repairs in excess of an amountspecified by the buyer
- Environmental report (at least Phase I; Phase II if any potential problems exist)
- Other information your company deems necessary
Summary Due Diligence List
- Monthly operating history for at least three precedingyears
- Income and expense statements for at least three preceding years
- Any leases, books, records, or other documents associated with the property held bythe management company or owner
- Title commitment or title binder, with verification of legal description of property and any exceptions to title orclouds on title noted
- Current appraisal (less than a year old, if available)
- Updated broker’s price opinion of value
- Payment histories from local utility companies
- Copies of all tenant leases
- Copy of current hazard insurance binder
- Phase I (or II) environmental survey
- Floor plans and specifications (as-builts, if available)
- Zoning compliance records
- Certificate of occupancy
- All property tax assessments for at least three years, including any appeals or abatements granted
- All maintenance and other service contracts in place, including whether they canbe assigned or canceled by the new owner)
- Any bids from contractors, engineers,or consultants for pending work
This installment of FM Check List is adapted from BOMI Institute’s Asset Management course, (www.bomi-edu.org/11101.html), an elective in BOMI Institute’s Real Property Administrator (RPA) program.
