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DUE DILIGENCE CHECKLIST (EXAMPLE). KEY INFORMATION (1/5) Leasing / covenant strength CHECKEDN/ACOMMENTS  Lease lengths and breaks / notification  Passing.

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Presentation on theme: "DUE DILIGENCE CHECKLIST (EXAMPLE). KEY INFORMATION (1/5) Leasing / covenant strength CHECKEDN/ACOMMENTS  Lease lengths and breaks / notification  Passing."— Presentation transcript:

1 DUE DILIGENCE CHECKLIST (EXAMPLE)

2 KEY INFORMATION (1/5) Leasing / covenant strength CHECKEDN/ACOMMENTS  Lease lengths and breaks / notification  Passing rents  Repairing obligations  User  Alienation  Insurance – responsibility and cover (advise insurers)  Rent review provisions  Servitudes  Rent free periods, other tenant incentives  Calculation of effective rent  Property management / utilities / service charge  Indexation  Leasing / marketing plan  Tenant disputes CHECKEDN/ACOMMENTS Tenant financial statements / credit reports Tenant payment history Rent deposit list VAT status Potential liabilities for investor in case of bankruptcy covered

3 KEY INFORMATION (2/5) Areas and physical / planning and use CHECKEDN/ACOMMENTS Location description Plans of accommodation / site and location Net/gross areas (BGF/NGF/GIF), confirmed by independent measurement Ceiling heights (finished and slab to slab) / eaves height Heating and cooling systems / sun protection / cabling standard Site cover and site density versus building permission Parking and adequacy for use / potential penalties CHECKEDN/ACOMMENTS Permitted use / consents Zoning / development plans Listing / conservation areas Cadastral plan Property registry excerpts

4 KEY INFORMATION (3/5) Expenditure and building management / building survey and environmental reports CHECKEDN/ACOMMENTS EXPENDITURES Service charge statements and capital expenditures Current budgets (service charges and landlord expenses Reserve funds Insurance premiums Rateable values and rates payable MANAGEMENT / STAFF Building staff and employment terms / contracts CHECKEDN/ACOMMENTS Building survey and environmental reports reviewed and any issues addressed (see appendices A and B for a checklist of the items that should be covered in these reports.

5 KEY INFORMATION (4/5) Legal, tax and finance / comparables CHECKEDN/ACOMMENTS LEGAL Legal report reviewed and any issues addressed (see appendix C for a checklist of the items that should be covered in the report. TAX VAT election / status (TOGC) Stamp duty status Corporate tax Trade tax Property tax FINANCE Where applicable, the finance issues listed in appendix D have been considered and addressed. CHECKEDN/ACOMMENTS RENTS Recent open market transactions and reviews Competing supply and quoting terms YIELDS Summary of recent market transactions Comparable transactions

6 KEY INFORMATION (5/5) Projection assumptions CHECKEDN/ACOMMENTS GENERAL Analysis period (minimum five years) Inflation rate assumptions REVENUE Analysis of passing rents Market rents ()ERV analysis) Rental growth rates Parking and other income Service charge shortfall and period Insurance shortfall and period Marketing budget Renewal / relet terms Rent free assumptions Legal and agent fees CAPITAL EXPENDITURE Capital improvement budgets Tenants’ improvement assumptions REVIEW Projection checked by strategy research group

7 BUILDING SURVEY REPORT (1/4) - Appendix A - Structural and Architectural Systems CHECKEDN/ACOMMENTS Foundations Floor construction and loading Roofs Decks / balconies Exterior walls Window systems / skylights Window washing system Cradles, gantries and access systems Site landscaping / topography / drainage Rainwater disposal systems Parking areas / decks / garages / spaces Other paved areas Truck docs / loading areas Lifts / escalators Stairs Lobbies Corridors Plumbing systems Toilet rooms Deleterious materials (asbestos) As built drawings and specs

8 BUILDING SURVEY REPORT (2/4) Mechanical systems / fire protection / warranties and guarantees CHECKEDN/ACOMMENTS Equipment (heating and cooling) Air distribution Temperature control Ventilation Energy management Building management system (and software) Licences and copyright for BMS software CHECKEDN/ACOMMENTS Fire detection and alarm systems Smoke evacuation / stair pressurisation Fire standpipes / hydrants Wet and dry risers Sprinklers Hose reels Fire certificate Ownership of fire escape routes CHECKEDN/ACOMMENTS Warrantees and/or guarantees

9 BUILDING SURVEY REPORT(3/4) Electrical systems / Regulatory compliance & health and safety / Maintenance and building services CHECKEDN/ACOMMENTS Transformers (ownership) Security systems (CCTV) Communications system Fibre optics / broadband CHECKEDN/ACOMMENTS Health and safety compliance / risk assessments Construction (design and management) regulations Emergency procedures manual Accessibility regulations (disability compliance) Pending legislation CHECKEDN/ACOMMENTS Service contracts Maintenance handbooks Maintenance repair logs 5 Year planned maintenance programme

10 BUILDING SURVEY REPORT (4/4) Insurance / overall comments CHECKEDN/ACOMMENTS Replacement cost valuation OVERALL COMMENTS ON THE BUILDING SURVEY REPORT

11 ENVIRONMENTAL REPORT- Appendix B - CHECKEDN/ACOMMENTS Site characteristics and adjoining sites Prior uses Remediation works Surrounding uses / hazards Desk top study Contaminated land register Prior investigation reports Warranties Storage tanks / pipelines Soil contamination Groundwater contamination

12 LEGAL REPORT- Appendix C - CHECKEDN/ACOMMENTS Tenure Title Rights / covenants / encumbrances Searches Pre contract enquiries and replies Leases (head leases and occupational leases) Planning Insurance VAT Construction leases Form of contract

13 FINANCE ISSUES- Appendix D - CHECKEDN/ACOMMENTS DEBT Debt commitment in place Debt examination (if debt assumed in purchase) CURRENCY RISK Hedging programme in place ACCOUNTING / OTHER Structure issues (cash flow guarantees etcetera) Partnership agreements Accounting opinion Corporate review (company purchases)


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