Tuesday, July 31, 2012

Special Guest Blog by Robert Iseppi: Intro to Commercial Property Inspections

Today we have another guest blog post.  Robert Iseppi, Civil Engineering Technologist and Certified Insepctor with Amerispec, servicing the Windsor, Chatham and Sarnia (Ontario) markets, will provide us with an intro to commercial property inspections:

Buyers and users of just about any commercial property can benefit from an inspection conducted by a qualified Inspection Company.  Even new construction can have physical deficiencies that could eventually require costly repairs.  Buildings targeted for renovation or reuse – such as office to residential or warehouse to retail—can also benefit from a review to determine if these facilities and systems function properly.

The goal of a Commercial Property Inspection is to identify and communicate observable, physical deficiencies of the material systems, components, and equipment within a commercial property.

A baseline commercial property inspection relies on a walk-through survey, to determine the property’s condition.  The report includes information about the property as well as opinions on probable cost for suggested remedies.
This information is valuable in helping owners and buyers understand operating and maintenance costs and helps to provide confidence to prospective purchasers that the transaction is solid.  Our professionals work together with clients to determine the scope of inspection services needed, and are committed to providing outstanding client service and satisfaction with the technical experience and knowledge to meet our client’s most specific needs
AmeriSpec’s professionals are experienced in inspecting a variety of commercial properties including:
·        Office Buildings
·        Industrial Buildings
·        Retail Stores and Shopping Centers
·        Apartment Building and Hotels
·        Hospitals, Research Centers
·        Warehouse Buildings
·        Condominiums
The scope of the inspection needed and the specific areas to be inspected are based on various factors.  Age, occupancy and type of construction are considered when determining how the property will be inspected and the performance criteria needed to complete the inspection.  Inspections can vary from a visual examination of the property to a comprehensive inspection of all technical components of the building.
A baseline commercial property inspection includes:
·        Site Characteristics (Paving, Landscaping and Utilities)
·        Structural Frame and Building Envelope
·        Roof Surface Areas
·        Mechanical and Electrical Systems
·        Plumbing Systems
·        Heating Systems
·        Air Conditioning and Ventilation Systems
·        Vertical Transportation
·        Life Safety/Fire Protection
·        Interior Elements
·        Opinions of Probable Costs
·        Recommendations
Additional services that may be available include:
·        Elevator Inspections
·        Fenestration Inspections
·        Fire Safety Inspections
·        Lead-Based Paint Inspections
·        Wood-Destroying Organism Inspections
·        Phase I Environmental Site Assessments
·        Sewage and Treatment Systems Inspections
·        Asbestos Inspections
·        Indoor Air Quality (IAQ) Assessments
·        Radon Inspections
Depending on the type of property and the needs of the client, inspections may require specialists, consultants or a TEAM (Technical Experts and Management) approach.
The TEAM approach allows specialists or consultants to assist in the commercial inspection by providing their expertise in areas where it is required.
The specialists or consultants that can assist in a property inspection include:
·        Structural Engineers
·        Environmental Specialists
·        HVAC (Heating, Ventilation and Air Conditioning) Specialists
·        Electrical Specialists
·        Fire Protection Specialists
·        Elevator Specialists
·        Roof Specialists
·        Paving Specialists
·        Wood-Destroying Organism Specialists
Special thanks to Robert for his contribution.  To learn more about his services or to book your next commercial property inspection, email amerispecwindsor@gmail.com or call (519)739-1010.

Monday, July 23, 2012

Operating Cost Review (Owner-Occupant or Landlord)

Whether you are the prospective Owner-Occupant or Landlord of a commercial property, a review of the operating cost/ft to run the property, is an important analysis to consider.  First to understand the concept, let’s look at the terms which exist within the industry - COMMON AREA MAINTENANCE (CAM), COMMON COSTS (CC), TAX MAINTENANCE INSURANCE (TMI) – all of which commonly are referred to as ‘Additional Rent’ within a typical lease document (to view our related post, from a leasing perspective, click here).

Regardless of how they are labelled, they consist of the cost/ft to operate the property in a given year. Typical costs include – property taxes, building/property insurance, maintenance/repair/management costs etc. They will vary from year to year, as the input costs (ie. taxes) will change on an annual basis.

In the case of an owner occupying a property for his own commercial purposes, this
review will reveal his cost/ft to operate out of this location. Beyond your mortgage
payments and equity contribution (downpayment), this represents the additional cost in operating your business at this property.  You almost look at it from the perspective of a tenant – as in lease terms, this would be viewed as ‘additional rent'.

In the case of a landlord (investor owner), this review will indicate how competitive
this property is against the overall market. Using an example of a typical retail plaza
center with an operating cost/ft of $8.50 – it is easy to see where you might be at a disadvantage in marketing space, when competitive sites reflect operating costs/ft at $7. A word of caution here though, as the “the devil is always in the details” – and more specifically, look closely at the budgets (line by line) provided, overall condition of the plaza, areas of deferred maintenance etc.

Remember that the costs for operating a plaza or business premises are either covered
by the tenants or the owner-occupant of the business. These are real dollar items that
need to be factored in as you analyze any transaction, and a sound per/ft analysis of
operating costs is simply good due diligence.

As always, consult with an experienced commercial broker in your market, to assist
in evaluating the operating costs on commercial properties which you are considering.

Tuesday, July 10, 2012

Closing Costs - Intended for (Ontario) Canada Only

This post is targeted to Ontarians and directed towards Buyers within the Province of Ontario. Those in other jurisdictions should consult with officials within their own markets, to determine all relevant closing costs. Suffice it to say, these costs need to be projected at the outset, to avoid a cash requirement ‘surprise’ come closing date.

Potential Buyer costs summarized as follows:

Land Transfer Tax - Paid at closing and as % of the purchase price (see your lawyer for exact calculation at the time).

Survey/Title Insurance - Lender generally requires this and survey costs can be significant, if it is a larger site. Title insurance may not be an option, depending on the property/lender.  Canvass your lender on whether title insurance is an option.

HST - If applicable, HST is additional to the purchase price.  See earlier blog here on HST – but if due, it becomes closing cost.

Legal Costs/Disbursements Fees for lawyer expenses in preparing the title deed, preparing the mortgage, & conducting title searches.  Disbursements are considered out-of-pocket costs incurred by the lawyer – such as search costs, supplies,
registrations/preparing discharges etc.

Legal Costs (Lender) Depending on the size of the financing, lenders can often require independent counsel to oversee the the mortgage process and look out specifically
for their interests. If necessary, it’s an additional cost.

It is well worthwhile to arrange a meeting with your lawyer in advance of closing,
and request a “Cost to Close’ estimate. Even if its approximate subject to certain
unknowns, it is a budget figure you need to plan for.

As always, consult with an experienced commercial broker in your market to assist you in the Purchase of Commercial Properties.