Building Engineer Blog

Real estate investors routinely order a Property Condition Report in order to understand the condition of the asset that they are purchasing.    The Property Condition Report should illuminate any immediate repairs or deferred maintenance issues and should provide a schedule of capital replacement reserves.   But the Property Condition Report only addresses what is broken and what will need to be replaced.   What about the opportunity to save money?

An Energy Audit in conjunction with a Property Condition Report will illuminate how a building should be performing.    Often the Energy Audit will discover multiple aspects of a buildings energy management program that are suboptimal and can easily be corrected.     Energy Audit will also give the user a list of potential energy efficiency investments and will rank these investments in terms of payback period—often several opportunities with sub-3-year payback periods are indentified.

The Energy Audit and Property Condition Report go well together as they are addressing the same systems.   The Property Condition Report may schedule the replacement of a roof mounted HVAC system in year 8 of the replacement reserve as that is the end of its useful life; however, the Energy Audit may make a case for not using an old inefficient system until it fails; rather, the building owner may receive an positive return by replacing it sooner.

My company, Partner Engineering Science, and our sister company Partner Energy routinely provide these services in tandem.

Energy Audit, Real Estate Due Diligence , Energy Audit, PCR Energy, Property Condition Assessment, Property Condition Report

When investing in commercial buildings, real estate investors are need a high quality commercial building inspection, often called a Property Condition Assessments.  

When asked to do a Commercial Building Inspection, I start by trying to understand the client’s goals.  Are they ordering the report for a lender?   Do they want a 100% detailed inspection or a walk through?   Has the seller made any significant disclosures?  Are there other stakeholders such as equity sources or partner who need to understand the condition of the building?  Once I understand the goals I propose the appropriate level of diligences, which can range from a walk-through inspection by a senior building inspector to a team of engineers and specialist digging into every aspect of the building.

Either way, the Property Condition Assessment Report which includes a discussion of the following building systems:

-          Structure;

-          Building Envelope;

-     Roof;

-         HVAC Equipment

-          Mechanical, Electrical, and Plumbing;

-         Paving, Drainage, Landscaping;

-          Fire Suppression and Security Systems;

-          Elevators;

-          ADA Compliance.

A PCA report typically includes two important tables: an Immediate Repairs Table; and a Replacement Reserves Table.   The Immediate Repairs Table is a schedule of all failing or worn out systems requiring attention in the next 90 days.   The Replacement Reserve table will typically estimate the building’s capital replacement schedule for the next twelve years.  

When I dispatch a team of engineers and building systems specialists, I call the report a Property Condition Evaluation.  These reports typically range between $5,000 and $25,000 and are appropriate for large complex assets.   The most common specialist to add is that of a structural engineer.  The structural engineer will produce a structural report or a Probable Maximum Loss Report, when in seismic zone 3 or 4.  

Other specialists that add great value are an HVAC specialist, an elevator specialist and a roof specialist.  The specialist typically produces reports that are ultimately included in the appendix of the master PCE report. 

The specialist does thing that are beyond the scope of our building inspectors.  For example, the HVAC specialist will turn on the air conditioning system in the dead of winter.  The specialist opens up the systems being inspected and collects parametric data.  The result of the more detailed inspection is a very detailed report with specialty reports in the appendices.  Partner Engineering’s project manager and field inspector is almost always a registered engineer or very senior building inspector. 

Our Property Condition Evaluations save the client significant money in most engagements.  Often clients are able to negotiate price reduction or other consideration that is 10 times our fee.  Our work typically pays for itself!

Commercial Building Inspection, Real Estate, Real Estate Due Diligence, Structural Engineering Commercial Building Inspection, PCA, PML, Probable Maximum Loss, Property Condition Assessment, Property Condition Report