As the market shifts and loan modifications become more frequent, do you know what condition your collateral is in? No one wants to think about it, but assets that were in acceptable environmental and physical condition three, five, or ten years ago may no longer be satisfactory today. If you’re preparing for loan renewal, modification, or special asset situation, it’s time to re-evaluate your assets, either individually or as a portfolio.
Get an accurate picture of the current physical condition of your building with a Property Condition Assessment. During the Property Condition Assessment, a qualified inspector—sometimes a team of inspectors, which may include architects, engineers, or building specialists—will assess all major systems of the subject property, including:
The inspection culminates in a report that will identify deficiencies as well as systems or components that are approaching the end of their expected useful life (EUL). The most important parts of the Property Condition Report are the Immediate Repairs Table and the Replacement Reserve Table, which help the property owner or lender understand how the condition of the building will impact the asset’s financial performance.
Don’t neglect the environmental side of the picture as conditions may have changed since the property’s last environmental assessment. The level of environmental due diligence required will depend on the history and use of the property.
If your physical or environmental due diligence reveals areas of concern, discuss them with your consultant. Now more than ever, qualified consultants can provide options to remedy the situation or mitigate the associated risk.