Freddie Mac Property Condition Report

September 4, 2013

Freddie Mac and its DUS Lenders have specific requirements for their version of the Property Condition Report. The Freddie Mac Property Condition Report scope of work, as specified in the Freddie Mac Multifamily Seller/Servicer Guide and Chapter 15 Engineering and Property Condition Requirements, is similar to an ASTM E2018 Property Condition Assessment, but also has distinct differences.

The DUS Guide currently requires the Lender to provide a termite inspection report or a termite bond or other evidence of adequate coverage. The Lender is not required to submit a termite inspection report or bond if the project construction is steel or concrete and the Lender provides documentation of such fact. If the project construction is not steel or concrete, then in lieu of a termite report or bond the Lender must submit one of the following: –

-A letter from the current pest control company providing regular service to the Property, stating that the Property has been regularly treated to prevent termite and other wood boring insect infestation and, to its knowledge, there is no current infestation, or

-A letter from a qualified engineer (which must be the same engineer performing the physical needs assessment) indicating that there is no evidence of termite or wood boring insect infestation. In order to be a “qualified” engineer, such engineer must have completed termite inspection training and certification and must provide evidence of such.

– See more at: http://www.partneresi.com/fannie-mae-freddie-mac.php

 

See more at: http://www.partneresi.com/fannie-mae-freddie-mac.php

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Fannie Mae Physical Needs Assessment (PNA)

August 21, 2013

Fannie Mae and its DUS Lenders require a Physical Needs Assessment which is their version of the Property Condition Report. The Physical Needs Assessment is defined in the Fannie Mae Delegated Underwriting and Servicing guide, Part 111, Chapter 3, 308. The Physical Needs Assessment is required for Fannie Mae financing on many types of residential properties, including apartment communities, assisted living facilities, skilled nursing facilities, student housing, and manufactured housing communities. The Physical Needs Assessment is similar to an ASTM E2018 Property Condition Assessment in many respects, though there are distinct differences.

Read more about Fannie Mae Physical Needs Assessments.


Property Condition Assessment / Property Condition Report

August 8, 2013

Property Condition Assessment, also called a Property Condition Report, is an evaluation of the capital expenses that will likely be required to maintain an asset in the short- and long-term.

The standard scope of work for the Property Condition Assessment is defined by ASTM E2018 and includes a walk-through survey of the property to assess the condition of building systems, components and other property improvements, and interviews and documents review regarding the age and condition of property improvements. The Property Condition Report includes tables of the short-term capital expenses (Immediate Repairs Table) and long-term capital expenses (Replacement Reserves Table).
PCAs can help lenders or buyers understand how the condition of the building and site improvements will impact the asset’s financial performance.

Learn more about Property Condition Assessments 
Watch a video about Property Condition Assessments


ASTM E2018-08 Standard – Property Condition Assessments

July 10, 2013

The ASTM E2018-08 Standard is the industry standard for baseline Property Condition Assessments. Fully named “ASTM E2018-08 Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process,” the Standard outlines the purpose and scope of the Property Condition Assessment including the walk-through survey, document reviews and interviews, as well as the contents of the Property Condition Report. According to ASTM E2018, the goal of the Property Condition Assessment is to identify and communicate physical deficiencies of the subject property.

The ASTM E2018-08 Standard was created by the American Society for Testing and Materials (now simply ASTM International). The E2018 Standard was originally published in 1999 and updated in 2001 and 2008 (now called E2018-08). The standard is reviewed and revised by the ASTM Committee E50 on Environmental Risk Assessment, Risk Management and Corrective Action.


What Exactly is Probable Maximum Loss?

April 25, 2013

A Probable Maximum Loss report (PML) is an important tool used to evaluate how a building may behave during a seismic event, which in turn helps determine the buildings financial risk. Real estate investors, developers, property owners, and lending institutions need this information to make informed decisions regarding assets, especially in earthquake prone areas.

The methods engineers use to calculate PMLs can vary greatly. The American Society of Testing Materials (ASTM) standards created in 2007, ASTM E2026-07 Standard Guide for Seismic Risk Assessment of Buildings and ASTM E225 Standard Practice for Probable Maximum Loss (PML) Evaluations for Earthquake Due-Diligence Assessments, have helped create consistency but more detailed information about the needs of the client can have a deciding factor in which method an engineer may use to calculate a PML.

Characteristics such as building type, critical connections, local soil conditions and local seismic activity are evaluated and used to calculate the PML value, which is expressed as a percentage of the dollar value of the damage in terms of the building’s replacement cost.  This can be calculated for a 50 year earthquake and a 475 year earthquake (the difference is in magnitude and the analogy of 10 and 100 year floods is often made). These factors, along with statistical data and observed damage to unreinforced buildings, go into widely used and accepted formulas to derive a theoretical model.  The PML report predicts the amount of potential damage a building will sustain when each of these 50 and 475 year earthquakes occur.

It should be noted that the PML estimates the likely cost of damage to a property due to a probable seismic event, not guarantee how the property will perform. The PML report actually reads as such, expressing seismic damage as a percentage intended to represent expected damage of a building divided by the replacement cost of the whole building. Many lenders have a pass or fail type system with the PML percentage. Generally, a building with a PML lower than 20% is acceptable and one with a PML over 20% is considered to have more risk and may require mitigation in the form of insurance or retrofitting, both of which can be expensive.

 

For upcoming webinars on Seismic Risk Assessments, PMLs and commercial real estate due diligence, visit http://www.partneresi.com/partner-webinars.php.


Commercial Real Estate Due Diligence in Philadelphia

April 23, 2013

The Partner Philadelphia office provides Phase I Environmental Site Assessments, Phase II Environmental testing, Property Condition Assessments, and Asbestos Surveys in support of commercial real estate transactions. Partner Philadelphia staff is experienced with the numerous variables and approaches associated with Pennsylvania Act 2 (the Land Recycling Program) and unique environmental issues local to Pennsylvania, such as Marcellus natural gas drilling.

Partner often customizes reports to meet individual client or agency lender’s (Fannie MaeFreddie Mac) requirements and recognizes the complex geology and hydrology of Pennsylvania.

While conducting a Phase I ESA, Partner does a visual evaluation of accessible areas for the presence of Asbestos Containing Materials (ACMs). Should it become evident that ACMs may be present, Partner can perform sampling and testing to evaluate if ACM is in fact present.

Partner performs Phase II Environmental Testing either in support of a financing decision or to meet the requirements of the Pennsylvania Department of Environmental Protection. Most of our reports are performed to meet the standards set by ASTM E1903-27(2002).

A zoning report is a necessary part of many real property transactions because the current owner is responsible for existing zoning violations. Partner’s Zoning Reports take usage regulations, Philadelphia and municipality provisions into consideration as well as other regulations, such as the Americans with Disabilities Act.

Partner has completed engineering assessments on all types of commercial real estate including office, retail, multi-family, industrial, and hospitality. Some recent Pennsylvania projects and experience include:

Partner has completed Phase I Environmental Site Assessments, Phase II Environmental Testing, and radon screening for a portfolio for 23 chain hotels across Pennsylvania (Bethlehem, Danville, Harrisburg, Malvern, Moosic and Shamokin Dam) and several other Northeastern states.

Partner conducted 24 Phase I Environmental site Assessments of medical facilities in Pennsylvania (Bethel Park, Clearfield, Dresher, Greensburg, Hazel Township, Lower Burrell, Monogahela and Norristown) and several other states for US Bank.

 

For more information regarding Partner’s Philadelphia practice, visit http://www.partneresi.com/city/philadelphia.php


Phase I ESAs in Baltimore

April 10, 2013

The Partner Maryland office provides Phase I Environmental Site Assessments, Phase II Environmental testing, Property Condition Assessments, and Asbestos Surveys in support of commercial real estate transactions. The Partner Baltimore staff is familiar with the widely variable geology across the state of Maryland, from the Atlantic Continental Shelf Province to Appalachian Plateaus. Partner also understands the concerns unique to Maryland, such as historical industrial areas and high radon areas.

Partner often customizes Phase I Environmental Site Assessment reports to meet individual client or agency lender’s (Fannie MaeFreddie Mac) requirements and understands the multiple county and municipal regulatory bodies throughout Maryland.

While conducting a Phase I ESA, Partner does a visual evaluation of accessible areas for the presence of Asbestos Containing Materials (ACMs). Should it become evident that Asbestos Containing Materials may be present, Partner can perform sampling and testing to evaluate if Asbestos Containing Material is in fact present.

Partner performs Phase II Environmental Testing either in support of a financing decision or to meet the requirements of the Maryland Department of the Environment (MDE). Most of our reports are performed to meet the standards set by ASTM E1903-27(2002).

Some recent projects and experience that provide insight into our Maryland consulting practice include:

• Partner performed Phase I Environmental Site Assessments for a portfolio of 36 gas stations throughout Maryland (Beltsville, Bladensburg, Bowie, Capitol Heights, Clinton, College Park, District Heights, Fort Washington, Greenbelt, Hyattsville, Landover, Lanham, Laurel, Temple Hills, Riverdale, Suitland and Upper Marlboro).

• A Health Technology center located in Baltimore, MD requested Partner conduct a Phase I Environmental Site Assessment and Property Inspections, including subspecialist inspections of MEP (Mechanical Electrical and Plumbing), roofing, elevator and structure, as well as provides a Property Condition Report.

 

For more information on Partner’s Baltimore practice, visit http://www.partneresi.com/city/baltimore.php


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