Property Condition Assessment Services
AEI is a leading provider of property condition assessments throughout North America. Known for responsive and thorough service, our experienced team assists clients during acquisition due diligence, financing, asset management, and disposition of commercial real estate assets.
AEI’s Building Assessment team is highly skilled in providing a holistic view of a building’s condition through Property Condition Assessments (PCAs), seismic risk evaluations, energy efficiency and building energy performance assessments, structural and retrofit assessments, climate risk and resilience assessments, and more.
What is a Property Condition Assessment?
A Property Condition Assessment (PCA) is the visual assessment of a building that is performed to evaluate its physical condition. It is a critical step in understanding costs, risks, and opportunities related to a commercial real estate transaction. Typically written to the most current ASTM standard, the scope can go as in-depth as necessary to fit your needs.
Once a PCA is completed, it will generate a Property Condition Assessment Report of the building and its condition. This includes an Immediate Repairs Table and Replacement Reserve Table, which will help you understand how the building’s condition will impact the financial performance.
What is Included in a Property Condition Assessment?
The typical scope of a PCA includes a visual inspection of the property by a professional and provides a report with documentation outlining the findings of the inspection, including any physical deficiencies or needed maintenance.
A Site Assessment includes the evaluation of pavement, drainage, signage, and lighting, as well as interviews with anyone who may provide additional information on the property or surrounding properties.
A Building Assessment, or Building Condition Assessment, includes evaluation of foundations facades, structural framing, roofs, interior finishes, and building envelope.
A Systems Assessment includes evaluation of HVAC, elevators, plumbing, electrical, boilers, data and telephone, fire protection and safety, and ADA compliance.
The scope will determine the cost of the PCA as well as several other factors including the type of building, its age, and its location as it relates to travel and accessibility. Costs range from less than a thousand dollars for a small property to thousands of dollars for a large and complex property.
AEI offers customized Property Condition Assessments with scopes of work including:
- Fannie Mae
- Freddie Mac
- Housing and Urban Development (HUD)
- Lender-specific and CMBS-specific scopes
- Acquisition Scopes for Prospective Purchasers including Fortune 500 and REIT clients
- Client-Specific and Customized Scopes of Work
Who Orders a Property Condition Assessment?
PCAs are generally ordered by the lender during a real estate property transaction in order to understand the risks involved. Any stakeholders can request a PCA specific to their needs, including buyers, owners, facility managers, investors, or developers.
Why Do I Need a Property Condition Assessment?
Property due diligence is required by the vast majority of lenders before approving a commercial loan. A PCA gives buyers and stakeholders peace of mind by providing a comprehensive understanding of the costs, obstacles, and potential issues which can help reduce delays and eliminate surprises.
Property Condition Assessments
AEI offers several types of Property Condition Assessments (PCAs) to meet the needs of our clients. These inspections are important for clients seeking to understand the condition of real estate they may be purchasing, leasing, financing, managing, or selling.
Debt Property Condition Assessments
Debt PCAs focus mainly on maintenance and repair costs and are usually performed to support financing activities. During a Debt PCA (also known as a Baseline PCA), AEI evaluates the physical condition of the subject property and provides recommendations regarding potential future costs that will be incurred during the maintenance of the building.
AEI’s Debt PCA is conducted in accordance with the most current ASTM Standard and can be customized to meet our clients’ unique needs. Our team of experienced and reliable professionals provide high quality reports for any site location or asset type.
We carefully examine major structural, electrical, plumbing, and HVAC components of a property, as well as site improvements, for overall condition, general code conformance, life-cycle costs, expected useful life, and identification of immediate repairs.
AEI’s team interviews site personnel, performs document reviews, and conducts walk-through surveys, noting the physical condition of the building systems.
Systems surveyed in a Debt PCA include:
- Site and Grounds
- Structural Systems
- Building Envelope
- Interior Building Components
- Mechanical Systems
- General regulatory compliance including Americans with Disabilities Act (ADA) and review of any outstanding building or fire code violations
The PCA report describes the building condition and identifies deferred maintenance, deficiencies, or violations observed.
Immediate repairs and costs that will be incurred during the life of a loan are then provided. AEI additionally develops a capital reserves schedule that approximates repairs and replacement costs most likely to occur over the evaluation period. This schedule allows the client to plan for large expenditures to support lender underwriting.
Equity Property Condition Assessments
Equity PCAs are utilized by buyers and sellers to identify existing conditions and deferred maintenance that may impact the value of the property. AEI’s Equity PCA is conducted in accordance with the most current ASTM Standard and can be customized to meet our clients’ unique needs. Our team of experienced and reliable professionals provide high quality reports for any site location or asset type.
Our experienced engineers, architects, and construction professionals regularly perform Equity PCAs throughout the country on behalf of buyers and sellers during the acquisition and disposition of commercial real estate properties.
Equity PCAs identify significant deferred maintenance and/or major building component systems that may need to be replaced in the near and long-term, potentially impacting the overall value of the asset.
We pride ourselves on the ability to recognize and effectively communicate the risks for buyers and sellers. We ensure our clients receive the utmost insight from our team when considering commercial real estate acquisitions.
Depending on client needs and requirements, Equity PCAs may also include specialist evaluations such as:
- MEP/FLS Assessment (mechanical, electrical, plumbing and fire/life/safety)
- HVAC Assessment
- ADA Compliance
- Roofing Assessment
- Vertical Transportation Assessment (including elevators and/or escalators)
- Façade/Curtainwall Assessment (ground level, lift or swing stage)
- Structural Engineering Assessment
- Parking Garage Assessment
Cost estimates are included in Equity PCAs and are separated and prioritized by:
- Immediate Repairs (primarily fire/life/safety, and items that, if not corrected, could cause further harm and/or increase the estimated cost of the repair)
- Deferred Maintenance (overdue property repairs and equipment replacements)
- Capital Reserves
Green Property Condition Assessments
AEI’s experienced professionals assist our clients achieve their energy efficiency goals by offering performance assessments and energy saving recommendations. Energy performance improvements lead to bottom-line savings.
AEI’s Green PCA is conducted in accordance with the most current ASTM Standard and can be customized to meet our clients’ unique needs. Our team of experienced and reliable professionals provide high quality reports for any site location or asset type.
These services are provided independently or as a supplemental service to a Debt PCA or Equity PCA.
We can assist clients in optimizing energy performance by:
- Determining how and where energy is being consumed
- Reducing energy consumption and operating cost
- Complying with new laws and regulations
- Promoting social responsibility by reducing greenhouse gas emissions
- Increasing tenant satisfaction, productivity, and health
Energy Efficiency Assessments
AEI provides energy efficiency assessments to help our clients estimate the costs and benefits of sustainable investments and determine where to focus investments for the greatest performance, cost, and green impacts. AEI’s experienced professionals assist our clients in achieving their energy efficiency goals by offering performance assessments and energy saving recommendations.
We help building owners and managers understand their property’s energy use and savings potential. This identifies opportunities for upgrades and mitigation to improve energy efficiency and reduce operating expenses.
- ASHRAE Level 1 establishes a baseline with respect to comparison to like buildings. The Level-1 audit is intended to help the energy team understand where the building performs relative to its peers; establish a baseline for measuring improvements; and decide whether further evaluation is warranted.
- ASHRAE Level 2 evaluates building energy systems in detail to define potential improvements and outline financial government incentives. The Level-2 projects build on the findings of the Level-1 audit and evaluate building energy systems in detail to define a variety of potential energy-efficiency improvements. The Level-2 also will outline the range of potential financial incentives available from Federal, State, Local, and Utility sources.
- ASHRAE Level 3 details a cost-benefit analysis to prepare owners and managers for significant capital investments. Should the Level-2 Audit reveal necessary system upgrades or retrofits, the Level-3 audit will provide clients a thorough and detailed understanding of the benefits, costs and performance expectations prior to making significant investments of capital and personnel. The Level-3 audit focuses on a “whole-building computer simulation”, where a computer program is used to accurately model the way the brick-and-mortar building would respond to changes in the energy systems and whether those are major HVAC retrofits or architectural modifications to walls, windows, and roof.
Energy Star Benchmarking
Benchmarking is the measurement and tracking of a building’s energy performance as compared to similar properties under like conditions.
A significant portion of a company’s operating expenses goes toward energy bills. The goal of energy benchmarking is to understand the sustainability of a building’s systems and reduce energy costs, which increases overall asset value.
Many state and local governments, as well as associations and other organizations across the country, are passing legislation and running voluntary programs to encourage energy benchmarking in a property’s sale, lease, or refinance.
AEI is well-versed in these programs and can help clients identify and evaluate any incentives that are available to them.
Building Energy Performance Audits (BEPA)
The Building Energy Performance Audit documents historical energy performance, identifies the range of building energy uses and costs, and provides a pro forma energy use and a pro forma energy cost for the building.
A BEPA Study has five components:
- Site Visits: This involves observing the building during a walk-through and documenting characteristics (property type, building age, last major renovation, number of floors, square footage, occupancy, heating system, air conditioning system, energy sources etc.)
- Interviews: These are conducted with the present owner, operator, and/or key site manager at the building.
- Records Collection: The collection and compilation of necessary records (energy consumption, energy costs, weather data, hours of operation, occupancy rates etc.)
- Records Review and Analysis: A search of public and private records.
- Report: This will detail the findings related to building energy use and energy cost.
A BEPA is appropriate for properties where utility/energy costs are centralized and paid by the property owner, manager, or operator. These may include, but are not limited to: office, retail, hospitality, and industrial properties.
During this assessment, the AEI team collects information in standardized performance metrics and adjusts for occupancy, degree days, and other variables.
A BEPA can be further expanded by utilizing the Energy Star program to include benchmarking of the building.
FREDDIE MAC GREEN ADVANTAGE PROGRAM
Green Advantage rewards borrowers who improve their properties to save energy — or who already have green certified properties and are looking for new financing. Choose from Green Up or Green Up Plus. When you commit to reduce energy or water consumption by at least 15%, in accordance with a Green Assessment or a Green Assessment Plus, you may get better pricing and more funding to make these enhancements.
AEI Consultants is pre-approved by Freddie Mac to perform ASHRAE Level I and Level II assessments for these programs.
FANNIE MAE HIGH PERFORMANCE BUILDING MODULE PROGRAMS
The Fannie Mae HPBM is an energy audit that follows the ASHRAE Level II Guidelines and Fannie Mae Energy Audit Guidelines. The HPBM is a “module” that is an add-on to a Fannie Mae Property Condition Assessment. The purpose of the energy audit is to establish a utility baseline for the property’s energy and water use and identify energy and water efficiencies that will reduce either energy or water use by a minimum of 15% of the overall baseline.
FANNIE MAE GREEN REWARDS PROGRAM
A Green Mortgage Loan is a mortgage loan secured by a property that:
has been awarded a current Fannie Mae-recognized Green Building Certification;
qualifies as a Green Rewards Mortgage Loan; or
qualifies as a Green Preservation Plus Mortgage Loan, as described in Part IIIB, Chapter 7 of the Guide.
Existing and newly constructed buildings can achieve a Green Building Certification based on established energy efficiency guidelines published by various organizations such as Earthcraft, Energy Star, Green Globes, Greenpoint Rated, LEED and National Green Building Standard.
GREEN REWARDS MORTGAGE LOAN
Energy – or water – efficiency property improvements must project at least a 20% reduction in annual energy or water consumption based on the entire property’s historical annual energy or water consumption.
GREEN PRESERVATION PLUS
The Borrower must use at least 5% of the original principal balance of the Mortgage Loan for either renovations recommended by a Property Conditions Assessment (PCA) with a High Performance Building Module (HPB Module); or energy and water efficiency improvements recommended by a PCA with an HPB Module.
HUD MIP REDUCTION PROGRAM
HUD offers lower interest rates and a reduction in MIP for existing and newly constructed buildings that have earned or can achieve a Green Building Certification based on established energy efficiency guidelines published by various organizations such as Earthcraft, Energy Star, Green Globes, Greenpoint Rated, LEED and National Green Building Standard.
Premium reductions allow developers to renovate housing, providing families with better quality places to live. The reductions will allow owners of affordable housing developments to free up the capital needed to support higher levels of rehabilitation or increase the number of affordable units.
Seismic Risk Analysis
AEI assists lenders, owners, and insurers with understanding a property’s seismic risk and managing mitigation to limit damage and loss.
Seismic Risk Analysis
AEI assists lenders, owners, and insurers with understanding a property’s seismic risk and managing mitigation to limit damage and loss.
Properties in seismically active areas have a higher risk of suffering significant damage in the event of an earthquake. While building age affects the level of structural damage sustained, new buildings are also not free of risk in these regions.
Knowing the current level of seismic risk of a property, and implementing preventative retrofitting or strengthening of the vulnerable elements of a property, is important in limiting future damage and expenditures.
A Seismic Risk Analysis (SRA) is a critical tool to better inform owners, lenders, and insurers of property seismic damage risk.
Some municipalities have passed ordinances requiring certain vulnerable structures be assessed, and in some cases, retrofitted.
During an SRA, AEI summarizes the risk of structural damage of a building due to the vibratory motion from a maximum probable earthquake based on site-specific and regional conditions.
Probable Maximum Loss (PML) is commonly used by lenders to determine if a property’s seismic risk conforms to lender standards required to fund a loan.
The PML considers various key factors of the property including the location, proximity to active fault zones, construction type, building code in effect at the time of construction, site soil conditions, the physical condition of the building, and lateral force resisting system.
While specific methodologies are governed by the lender, all our team’s SRA reports that conform to the current ASTM Standards for Seismic Risk Assessments will include the following:
- A site reconnaissance by a Licensed Civil, Professional or Structural Engineer.
- Review of available site documentation to obtain a brief overview regarding geologic conditions.
- Review the regional seismicity.
- Note the soil conditions.
- Determine the Scenario Expected Loss (SEL) and Scenario Upper Loss (SUL) based on the site assessment and review of the available data.
Seismic Risk Analysis with USRC Rating
AEI offers additional SRA services to include a rating by the U.S. Resiliency Council (USRC) which further refines reliable seismic risk assessment reports utilized for making well-informed property investment decisions and managing risk exposure,
The USRC is modeled after the US Green Buildings Council (USGBC®), which, through its LEED® rating system, has successfully engrained environmental sustainability into the public consciousness. The USRC rating system delivers information on the expected safety, damage and recovery of the buildings we use and occupy.
Call 800.801.3224 to speak with an AEI Property Condition Assessment consultant today.