What Is Due Diligence For Commercial Real Estate Transactions?

Investing in commercial real estate involves huge sums of money; getting it right means doing a great deal of due diligence in evaluating every aspect of the transaction. In this post, experts share their advice on performing due diligence.

Globest.com writer Carrie Rossenfeld caught up with Cheryl Todd, Senior Vice President (for real estate management) at the Coreland Companies. She emphasizes that you should combine physical due diligence with operational due diligence to get an entire picture of the investment, to “uncover areas of lost value and opportunity that could significantly impact the transaction and ROI”.

She goes on to say:

Good, thorough due diligence validates value, price and the overall underwriting of an asset. It’s the opportunity to uncover the relevant facts, but too often many of the details are uncovered after the transaction has been finalized. The biggest oversight we see is when buyers assume the quality of information in hand is complete and accurate.

Using Your Own Commercial Real Estate Experts

The one thing Todd is unequivocal about is vetting the deal with your own people, stating that:

A buyer should always assemble their own team of professionals to conduct good acquisition analysis, both physical and financial.

And, in terms of ‘operational due diligence’, Todd believes:

To best evaluate value, there should be a finite understanding of all leases, including exclusives and restrictions, black-out provisions, rights to relocate, tenant sales, history and trends; lease options; and reimbursements. Never solely rely on an abstract or legal review.

Todd is a big believer in bringing a great commercial realtor into the conversation. She thinks “…commercial brokers are a great resource to provide a fair evaluation of the market and competition.”

There’s no substitute for the knowledge a commercial real estate professional brings to your team.

Read the full post here.

Thinking of investing in commercial real estate? You need a trusted advisor in your corner. Give René Nelson and her team a call today at (541) 912-6583.