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

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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.


Environmental and Engineering Due Diligence in Denver

April 2, 2013

Since 2010 Partner has completed 749 projects across Colorado with 165 in Denver. The Partner Colorado 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 is the national leader in Phase I Environmental Site Assessments by volume. Most reports are performed to meet the standards of ASTM E1527-05. Partner often customizes reports to meet individual client or agency lender’s (Fannie MaeFreddie Mac) requirements.

In addition to providing Phase I ESAs, 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.

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

Colorado has their own Hazardous Waste Act (CHWA) separate from federal laws with independent authority to regulate and enforce cleanup. Partner Denver staff is familiar with CHWA specifications and can navigate Colorado clients through the process if needed.

Partner performs radon testing and consulting services for a variety of commercial and multi-family residential properties. The Partner Denver staff recognizes that many Colorado counties fall within the EPA’s Radon Zone 1 and could potentially have high levels of radon, representing a concern to indoor air quality.

For recent projects and experience that provide insight into our Colorado consulting practice visit http://www.partneresi.com/city/denver.php


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


Property Condition Assessments

December 18, 2012

 

A Property Condition Assessment (PCA) is a survey of a property by an architect, engineer, or commercial building inspector in order to understand the condition of the building. A Property Condition Assessment Report (PCR) is generated and discusses each building system and its condition. Different lenders can have varying requirements regarding a PCR, but a common guide is the ASTM E2018 Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process.

The most important part of the Property Condition Assessment Report is the Immediate Repairs table and the Replacement Reserve Table, which helps the client understand how the condition of the building will impact the assets financial performance. Safety concerns usually show up in the Immediate Repairs Table along with failing or damaged building systems, while maintenance issues that can be deferred will be in the Replacement Reserve Table.

Scope

  • Site Assessment
  • Interviews
  • City Building Department

Building Systems Evaluated

  • HVAC Systems
  • Elevators
  • Plumbing
  • Data and Telephone
  • Boilers
  • Electrical
  • Fire Suppression Systems

 

Building Evaluation

  • Foundation
  • Structure
  • Roof Diaphragm
  • Interior Finishes
  • Building Envelope

 

Site Improvements Evaluated


Probable Maximum Loss Reports

December 11, 2012

The United States is divided into four zones depending on seismic hazard risk. Typically, real estate investors, developers, property owners, and lending institutions are all concerned about assets in seismic zones 3 and 4. Obviously, the areas more prone to earthquakes have a higher risk of loss to lending institutions. To assist in the underwriting transaction, Partner performs Seismic Damageability Assessment/Probable Maximum Loss reports.

The Probable Maximum Loss, PML, is the tool used most by real estate investors and lenders to evaluate how buildings will react to a seismic event. A PML evaluates the likely costs incurred from seismic damage to structures on a given site, taking into consideration building types, critical connections, local soil conditions, and local seismic activity. The PML is intended to suggest how the property will be affected by a probable seismic event, not guarantee how the property will perform during seismic occurrence.

PMLS can be calculated for 50 years and/or 500 years and can be expressed as a “Scenario Loss” estimate. The Scenario Upper Loss (SUL) is the scenario loss that has a 10% probability of exceedance due to the specified earthquake scenario as identified in the ASTM E2026-07 Standard Guide for Seismic Risk Assessment of Buildings (the Standard), and the Scenario Expected Loss (SEL) is the expected loss value due to the specified earthquake scenario. Therefore, the SUL represents an upper loss estimate, and the SEL represents an average or expected estimate.


What is a Property Condition Assessment Anyway?

October 6, 2011

Chances are if you have been in the industry awhile, Property Condition Assessments (PCAs), Property Condition Reports (PCRs), or Commercial Building Inspections, are an everyday procedure. If you had to explain what they were to someone outside of real estate or engineering, how would you break it down in common terms?

 A real estate investor wants to obtain financing for a commercial building from a lender. Said lender wants to know exactly what the condition of the building is since this can impact the financial performance of the asset as a whole. Both the real estate investor and lender want the reassurance regarding their investment that a due diligence tool such as the Property Condition Report provides.  Different lenders can have varying requirements regarding a PCR, but the industry standard is the ASTM E2018 Guide for Property Condition Assessments; Baseline Property Conition Assessment Process.  This is a walk through survey of the property by an architect, engineer, or a commercial building inspector who prepares a narrative report (this is the Property Condition Assessment, Property Condition report, or Commercial Building Inspection).  Evaluations of systems such as HVAC, plumbing, electrical, and fire suppression as well as the structure, foundation, roof, and other building characteristics are included in the report.

What is in a Property Condition Report

The PCA discusses each building system, and will describe all of the significant concerns or defects that were found during the inspection.   Each report will include a table of Immediate Repairs and a table of Replacement Reserves over the desired reserve period.   Significant concerns are generally considered those that are costly or present safety issues.  Logically, safety concerns usually show up in the Immediate Repairs Table along with failing or damaged building systems and maintenance issues that have been deferred. Capital expenses that will be required in the longer term, such as HVAC system replacements, will be in the Replacement Reserve Table.  The estimated cost for repairs and replacements are included in the tables.

The details or extent of a report can vary depending on who is using the information from the report and how.  Familiar entities that have specific requirements and even separate titles regarding a requested PCR are: Standard & Poor’s, Freddie Mac, Fannie Mae (called a Physical Needs Assessment), and Housing and Urban Development (HUD)/ Federal Housing Authorities(FHA) (called a  Project Capital Need Assessment).

A Green Property Condition Assessment  is a version of the PCA that includes assessment of a building’s energy and / or water consumption and efficiency, and possibly other sustainability issues with the property. The “green” element can take many forms but is often an Energy Audit in conjunction with the PCA, or possibly an LEED- style checklist.


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