PCA? What’s that?

22 Dec 2011

Degrading concrete - a ticking cost time bomb?

Here is a guest post from Robert Lambdin at AKT Consultants:

Many real estate transactions today include some level of due diligence to understand the property, its significant features and how its value compares to other similar buildings.  Most buyers are aware of lender requirements of environmental assessments (Phase I, II) and a real estate appraisal. More lenders are asking for a Property Condition Assessment (PCA). A PCA is a systemic evaluation of a building and property to identify conspicuous defects or deferred maintenance of a building’s material systems, components, and equipment.  Usually, a PCA is conducted by performing a walk-through survey; review of readily available documents (building diagrams, municipal records), interviews with knowledgeable individuals, inspecting building components, and condition, and documenting the findings in a Property Condition Report (PCR) which may include information on remedies and costs.

A PCA typically includes:

  • A site visit to observe the current general physical condition of the building and site improvements, interview on-site personnel and review available construction documents regarding the construction, life safety, mechanical, electrical and plumbing systems, and general building environment;
  • A general description of the property and improvements and comment on observed conditions;
  • Identification of components that exhibit deferred maintenance issues and provide estimates for immediate, short-term and modified capital reserve costs based on observed conditions, available maintenance history and industry-standard useful life estimates.  If applicable, this analysis will include the review of any available documents pertaining to capital improvements completed within the last 5 years or currently under contract;
  • A limited statement of observations regarding general accessibility relating to common areas and major means of egress and ingress under Title III of the Americans with Disabilities Act;
  • Inquiry at local building, zoning and fire departments regarding any documented life safety/code violations on record; and
  • Observation and generally comment on the condition of a representative sampling of common areas, interior tenant spaces and accessible vacant units.

While the environmental conditions can be documented in a Phase I ESA and the value of the property detailed in a real estate appraisal, the physical condition of the building and property are often overlooked.  In doing so, a prospective purchaser may require unexpected significant capital improvements and/or upgrades.

The American Standard for Testing and Materials (ASTM) guideline; Designation E 2018-08-Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process, defines good commercial and customary practice for conducting a PCA.  Coupled with the Phase I ESA process and a real estate appraisal, the PCA can provide a prospective purchaser with knowledge of what significant building or property expenses can be expected in the near future.  With this information, a purchaser can evaluate the true cost of owning and operating a building and property.  Here are some items which a buyer can miss which can cause unanticipated expenses that a PCA may avoid.

Badly leaking cooling tower

Older HVAC

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