Building Condition Assessments
A Building condition assessment is an integral part of any Industrial, Commercial and Investment Real Estate transaction.
Typically the buyer will borrow money from a financial institution (lender) for funding the purchase – a mortgage on the property is hence established. The underwriting of the loan if often based upon an appraisal, environmental reports and building inspection.
However there are many situations where a deal fails to materialize as the lender is not satisfied that the building condition meets their lending criteria, so in order to approve the loan, they may request repairs to the building or lower the amount they are prepared to lend.
The challenges in completing the transaction can be frustrating for the seller, buyer and the real estate brokerage involved in the transaction. Another issue that emerges is the property listing becomes “Stale” – i.e. the property is on the market for a long time and many would be buyers shy away from the property.
Consulting Engineering companies are sometimes engaged to offer expert opinion of the building which can be detailed study of the mechanicals, electrical and structure of the building. The scope of work is a detailed study of all or some the building aspects mentioned above. This is different from a general building inspector who often represents the interests of the financial institution. The detailed building condition assessment is given by a licenced Professional Engineer and is a detailed study versus a high level report.
This situation may be alleviated by engaging engineering consulting firm that can evaluate the building before it is listed for sale. This helps in eliminating any “surprises” with the report pinpointing areas of concern. The owner has a choice of resolving the issues in the report which in some cases can be funded by Government grants (such as energy efficient grants).
The following is an example of work that was done recently in alleviating some of the challenges above:
Type of Property: Investment
High Rise Condominium - CHILLER RETROFIT
Problem : The existing system was at the end of the life cycle, having frequent break-downs. The maintenance cost was high.
Solution : HVAC – Heating, Ventilation and Air Conditioning Replacement.
Calculated the heat gain and loss. Replaced the existing water cooled chiller with high efficiency air cooled chiller. Replaced atmospheric boiler with 98% efficient condensing boiler.
Applied for the energy grant from through SaveON energy program. Reduced 25% of energy consumption.
Result : Improvement is asset value, energy grant paid for some of the Capital Expenditure. The energy savings ROI paid for rest of the costs, hence increasing the Asset value. Also when buildings are running efficiently, there is an inherent value in providing enhanced comfort to the occupants not to mention the environmental value.
MapleTherm Engineering Inc. is a multidisciplinary engineering company helping in improving asset value and help real estate transactions. They are often engaged by municipalities for consulting serves.
Any building challenges – they can help alleviate the problems
Saroj Acharya, P. Eng, LEED AP, CEM MapleTherm Engineering Inc. www.mapletherm.ca