Due Diligence

To clients interested in buying a property we offer the opportunity to have the object undergo a complete financial and technical inspection (due diligence) by us. The offer pertains especially to buyers of multiple-family dwellings, commercial property or housing developments.

Due diligence is divided into a general (screening) and subsequent, detailed analysis. Within the scope of general analysis, the most important property data are explored and the property itself is checked for any existing construction defects and needed repairs. Once the general analysis turns out to be positive, a detailed analysis will follow. It includes intensive conversations with the owner, participating companies, tenants, and users as well as inspections on location.

General analysis:

• inspection of all the owner’s available property records, partly from archives or from public authorities
• review of ownership the structure, title search, and the plat map
• review of all rental contracts, lease contracts and terms of use
• review of rental income flow and collateral or reserves on deposit
• examination of all supply and maintenance contracts; all repairs and maintenance procedures over the last years
• inspection of the property’s structural state concerning construction defects, dampness and moisture penetration, lack of maintenance and wear-and-tear
• photo-documentation of all steps taken

Upon completion of the general analysis, a detailed analysis will take place.

Detailed analysis:

• detailed non-invasive examination of the structure regarding defects, damages, wear-and-tear, technical facilities and standards
• financial due diligence concerning all income and costs for the period under consideration
• analysis of all location characteristics, micro structures and location quality
• analysis of tenant profiles and, in the case of commercial objects, tenants’ credit worthiness, staging and indexing of the rental contracts as well as a comparative competition analysis
• analysis of the profitability of the property investment
• examination of shifts in occupancy based on current and former vacancies, time lapsed between leases, and returns
• analysis of ongoing operating costs in comparison with similar properties; investigation if these can be assigned to tenants
• description of current and future marketability
• identification of indirect and direct additional claims according to tax law
• examination of obvious and hidden risks, mainly concerning liability as set forth in the schedule of building code violations
• compilation of a comprehensive summary

The results of due diligence are listed in a summary of findings. Due diligence includes the review of all aspects concerning the investment and is divided into three parts: information, analysis and fiduciary responsibility.

During the disclosure phase, crucial information is collected and sorted. The process addresses the market at large as well as the property itself. The seller makes the relevant property information available to a potential buyer, with additional information forthcoming if deemed essential. It is intended to close the knowledge gap existing between the two sides as to the property. Ideally, both sides should be privy to all the facts pertaining to a potential transaction.

In the analysis phase, the disclosed information will be verified leading to a determination as to whether the property’s purchase is compatible with its defined goals. The final decision is based on a strategic or purely monetary assessment of the property.

Institutional buyers intending to market properties in the form of mortgage-backed securities or REITs (real estate investment trusts) are subject to stringent reporting requirements. A thoroughly performed due diligence process, measuring up to generally accepted market standards, will protect the issuer from damage claims by investors in the event of sub-par or non-performance of the instruments. It will also hold them harmless pursuant to an “exculpatory function”.

For compilation of a comprehensive due diligence report, Concabral charges a fee of 1.00% of the purchase price plus the statutory VAT. If a property should fail to pass the general analysis test, only the worked hours (€60.00/hour) accumulated up to such point by the building services engineer, plus statutory VAT and travel expenses, must be reimbursed.

Concabral is available at short notice to effectively satisfy the needs of our clients in a timely manner by exclusively using our in-house staff. In the event of special requirements, Concabral would be happy to retain appropriate surveyors, law offices, translators, tax advisers and specialist companies for you.