Technical Due Diligence

Technical Due Diligence

Our Transaction & Asset Advisory professionals cover the core disciplines involved in the physical analysis of cost, risk and return of property acquisition, ownership and disposal.

We align our clients’ thoughts with our own and provide user friendly, accurate, meaningful and timely advice that is oriented to the commercial imperatives that actually matter.

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Strategy with the Sales Process

Those in the business of selling commercial property can achieve the best price within a short period of time through a staged approach to technical due diligence. 

The old adage of ‘buyer beware’ typically means that purchasers conduct their own technical due diligence which can uncover late in the day surprises relating to condition, deferred maintenance, non compliances with statutory obligations or capital expenditure needs. These may include deal breakers or points of negotiation on price and contractual conditions. 

These late in the day uncertainties can be mitigated by vendors who take a staged approach to technical due diligence and where the end result, the technical due diligence report, can be assigned to the purchaser.  Continue reading

Project Monitoring With Continued Due Diligence

With the complexity and size of current new developments as well as their varying funding & delivery arrangements, our National Building Consulting team is undertaking an increasing number of Project Monitoring commissions for a variety of clients.

We are seeing a current trend of acquisitions of development property from international investors partnering with local developers – and more lately, from local property companies and superannuation funds. This is coupled with major corporates wanting anchor tenancies in new developments.

Project Monitoring is distinct from both Project Management and Construction Monitoring. Its primary role is to protect the Client’s interests by identifying and advising on the risks associated with acquiring an interest in a development that is not under the client’s direct control.

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Strategic Asset Management

Property owners are now emerging from survival mode and searching for opportunities. 

One of the first steps is evaluation and gaining a better understanding of their existing portfolios, to make the best of what they’ve got – given constraints on availability of finance.  Typically the portfolios are older, B grade and ripe for opportunity.

 Strategic Asset Planning provides short, medium and long term views on minimising cost, managing risk and maximising returns through continued due diligence.

There is a positive trend towards this approach starting with understanding baseline data in terms of condition, performance and environmental and regulatory compliance in such a way that is cost effective, meaningful, useable and enduring.  It is vital to know what data needs to be collected and how it should be best used and managed for maximum effect. Continue reading

Buyers Beware… Investigate or Reach for your Wallet

In the last year Napier & Blakeley have undertaken more than 100 physical due diligence and capital expenditure forecast exercises with a combined value in excess of $10billion.

It’s rare to find nothing that would be considered problematic for an incoming owner, but the last few years there have been a few issues that have become commonplace through either lack of ongoing investment and maintenance or as a result of new market legislation.

The GFC brought substantial financial constraints to the entire economy but for property owners it brought pressures through loan to value ratios (LVR’s), reductions in value and rental income. This created a catch 22 situation where many knew they had to keep maintaining and spending capital to keep their assets compliant, relevant and therefore rentable, but were unable to directly fund or borrow funds to do so.

We recently re-analysed an asset that we had prepared due diligence and capex forecasts for a few years ago, and the list of items that we identified in our initial report were almost completely the same as now. Nothing had been fixed, maintained or repositioned. So, many years down the track the asset has fallen deeper into redundancy and therefore costs more to rectify. Continue reading

R & M Diminished

Is your ‘too good to be true’ property deal rally sustainable?
According to Napier & Blakeley managing director Alastair Walker, lack of capital post GFC has lead to a significant neglect of repair and maintenance (R&M) and Capex spend.  Having worked on property due diligence valued at plus $10B since the GFC, Napier & Blakeley has seen only nominal spend on upkeep compared with previous years.

Reduced Life Expectancy and Premature Capex
Recent technical due diligence and condition assessments have also found that the lack of R&M and Capex budgets for economic life driven plant and equipment overhauls and refurbishments has resulted in increased short and medium term Capex.

To put this in context, without appropriate R&M, major plant items may have an economic expected life of (say) 25 years, however the reduction of removal of maintenance can result in a major shortfall in expected life to around 15 years.

The Reaction
Astute purchasers have become aware of this risk and look for these patterns in their technical due diligence reporting to ensure that appropriate Capex costs are factored into the purchase price to account for a vendor’s R&M expenditure shortfalls. 

Condition assessments, maintenance reviews, energy assessments and risk weighted strategic Capex forecasts have become 2010’s essential tools for good asset and facility management and sustainable property solutions.  Continue reading

Recent Trends in Technical Due Diligence

Is your ‘too good to be true’ deal really sustainable ?

Lack of Capital post GFC has lead to a significant neglect of R&M and Capex spend.

Having worked on property due diligence valued over $10B since the GFC, Napier & Blakeley have seen only nominal spend on upkeep compared with previous years.   

Risk of Non-Compliance (i)

During this period the increasing trend has been a notable reduction of Repair and Maintenance (R&M) and Capital Expenditure (Capex)  budgets. Whilst this strategy may have been necessary in some circumstances e.g. postponement of non-essential Capex, we have found too commonly evidence of non-compliance regarding statutory maintenance such as testing, auditing and reporting of essential safety measures and fire safety systems.

Reduced Life Expectancy and Premature Capex 

Recent technical due diligence and condition assessments have also found that the lack of R&M and Capex budgets for economic life driven plant and equipment overhauls and refurbishments has resulted in increased short and medium term Capex.

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