OCC Handbook/ Commercial Real Estate Booklet

September 10, 2013

The Office of the Comptroller of the Currency (“OCC”) oversees a system of national banks and federal savings associations involved in Commercial Real Estate and Construction Lending, assuring that these institutions are safe, sound, competitive, and capable of providing for the banking needs of customers as best as possible.

The OCC issues a handbook, which according to the OCC Handbook itself,” The Office of the Comptroller of the Currency’s (OCC) Comptroller’s Handbook booklet, “Commercial Real Estate Lending,” provides guidance for bank examiners and bankers on commercial real estate (CRE) lending activities.”

It specifically cites risk, “The booklet addresses the risks inherent in CRE lending as well as risks unique to specific lending activities and property types. Also discussed are supervisory expectations and regulatory requirements for prudent risk management. “

The Comptroller’s Handbook was updated in August of 2013. For further information regarding the  updates, visit

http://www.partneresi.com/resources/occ-handbook-commercial-real-estate-booklet.php


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


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.


All Appropriate Inquiry – AAI

May 14, 2013

All Appropriate Inquiry or “AAI” is defined by ASTM and EPA (through CERCLA) as the process of conducting inquiry “into the previous ownership and uses of the property consistent with good commercial or customary practice…that will qualify a party to a commercial real estate transaction for one of the threshold criteria for satisfying the LLPs to CERCLA liability.” Essentially, conducting all appropriate inquiry consists of environmental due diligence conducted prior to a property transaction to determine whether a property may have been contaminated by past or current activities, in order for a user (for example, the prospective purchaser) to be exempt from liability for contamination that existed on a property prior to the property transaction.

The AAI requirement began with the CERCLA or “Superfund” law of 1980, and was refined by several later laws: the Superfund Amendment and Reauthorization Act (SARA) in 1986; the Asset Conservation, Lender Liability and Deposit Insurance Protection Act in 1996; and the Small Business Liability Relief and Brownfields Revitalization Act (“Brownfields Amendments”) in 2002. The most recent ruling regarding what composes AAI was decided in 2005 by the EPA’s Final Rule on All Appropriate Inquiries.


Phoenix Commercial Real Estate Due Diligence

January 29, 2013

From drywells to fluctuating groundwater, it is important to have an environmental professional who has regional knowledge of Arizona’s unique challenges to environmental due diligence. Our Phoenix staff is familiar with the many environmental conditions that distinguish Arizona from other parts of the country. The Partner Phoenix 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 provides Property Condition Assessments and Commercial Building Inspections for a wide variety of clients, including; CMBS lenders, Fannie Mae/Freddie Mac lenders, and equity clients. Most of our reports are performed to meet the standards set within ASTM E2018-08 guidelines.

Our Phoenix environmental professionals are knowledgeable of local history and agencies, such as historical fueling stations, the requirements of the Arizona Department of Environmental Quality (ADEQ), and the Water Quality Assurance Fund (WQARF) through the Remedial Projects Section of ADEQ.

Partner has the experience of over 900 projects in Arizona since 2010. Some recent projects and experience that provide insight into our Arizona consulting practice include:

­­-Partner conducted Phase I Environmental Site Assessments and Property Condition Reports, including Roofing, MEP (Mechanical, Electrical, Plumbing), and structural subspecialist inspections, for five medical research facilities throughout Arizona (Glendale, North Scottsdale, Peoria, and Phoenix).

-Partner completed an equity-level Property Condition Assessment (PCA), Phase I Environmental Site Assessment (ESA), and a Geotechnical Peer Review on a two-building medical campus in Phoenix, Arizona. The buildings consisted of 120,380 square feet and three stories, with an additional two-story parking garage. The Equity PCA included specialist inspectors to evaluate the structural, roofing, mechanical and elevator systems.

For more information on Partner’s Phoenix practice visit http://www.partneresi.com/city/phoenix.php


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