Property due diligence can sometimes feel like a hindrance to real estate transactions, a necessary evil on the long road to a done-deal. With the internet at your fingertips and much information about the history of real estate in most major cites publicly available, third-party due diligence can be mistaken for bureaucratic red-tape, offering little benefit to the Commercial Real Estate (CRE) investor or lender. Of course you know you need Environmental and Engineering Assessments (such as a Phase I Environmental Site Assessment and a Property Condition Assessment) before closing a deal. What you may not recognize is the plethora of reasons you should actually want them.
ASTM provides generalized national standards for performing a baseline Phase I ESAs (ASTM E1527-13), Phase II Environmental Site Assessments (ASTM E1903-11) and Property Condition Assessments (ASTM E2018-15). But when it comes to property due diligence, location is everything! The due diligence process must consider local specifics in order to comprehensively understand and manage risk. This is particularly true in a city like New York which, in addition to being the home of some of the country’s oldest and most iconic properties, has some of the country’s most stringent and complex regulations. Combine this with a CRE industry that truly never sleeps, it is of the upmost importance that lenders, investors, and sellers alike understand the impacts that the local CRE landscape will have on a prospective property, not only during the real estate transaction, but for the future life of the asset.
Why Due Diligence Matters in New York
Engaging a consulting firm during due diligence can pay off for anyone involved in commercial real estate transactions in New York, saving them time, money, stress, and endless head-scratching. In a city as well-established as New York, where environmental/engineering risk is a likelihood, a knowledgeable, qualified due diligence firm can help you pivot the focus from risk avoidance to proactive risk management. What are some of the New York-specific things that a thorough due diligence process will ensure?
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