Scope and Focus of any Due Diligence of Commercial Real Estate
Are you or your company planning to buy (purchase/finance) or develop commercial or industrial real estate? Here is a list of a few of the different types of commercial property:
- Multi family
- Hi-Rise Apartments
- Corporate Rental Apartments
- Retail Stores
- Strip Center
- Outlet Mall
- Cluster of Shops with restaurants
- Office Complex
- Heavy Manufacturing
- Health Care Park
- Resorts (Golf/Ski)
- Conference, Convention, & Exposition Centers
Depending on your objective and status as a buyer – the scope and focus of your due diligence will vary. The objective will be common though; you want to make sure that you can use the property as planned after acquiring it.
A bank or a financial institution wanting to make sure that the property will be able to generate revenue (i.e. the property can be used as per future plans) to repay the loan.
An individual or entity acquiring the property for a return on investment (ROI). The ROI could be in the form of revenue generation or adding value by changing the use of the property through development.
The property needs to be in compliance with applicable zoning ordinances with respect to usage, parking, setbacks, height, density, coverage requirements and more. There must be no legal restrictions to the property's intended use. Zoning compliance has become a major factor on the closing checklist. The importance of zoning compliance is especially important to the Lender who needs to know that the property can be re-constructed to the same building configuration in the event of massive casualty. Title insurers are especially in need of this information for it enables them to write their Zoning Endorsements (where available). Plus, what Buyer does not need to know how the municipality will treat their property should their property be severely damaged by fire or other natural disaster?