Aug 29

Property Condition Assessment (PCA)

A property condition assessments (also known as a PCA) is an evaluation of a commercial building’s major systems and components aimed at providing an owner, lessee, investor or lender an economic perspective of the properties overall physical condition, what immediate repairs should be made to the property and what systems will need to be replaced within the next ten years.

Property condition assessments (PCAs) are commercial inspections performed around guidelines established by Standard & Poors during the 1990’s which were intended to standardize the process and scope for commercial inspections. Over the years these standard operating procedures have formalized into a recognized standard known at ASTM E2018.

ASTM International is an international standards organization what develops and publishes technical standards for a wide range of materials, products, systems and services. The organization maintains over 12,000 technical standards and the specific standard established for property condition assessment is the E2018 thus the name ASTM E2018 Standard Guide for Property Condition Assessments.

ASTM Standards Worldwide

The scope of a typical Property Condition Assessment includes the following major areas:

  • Building Site
  • Foundation and Structure
  • Building Envelope
  • Roof System
  • Mechanical Systems (Including Heating, Ventilation, and Air Conditioning)
  • Plumbing
  • Electrical
  • Interior

Once the inspection, or Property Condition Assessment (PCA), is completed the formal written report is known as Property Condition Report (PCR). The Property Condition Report will include a general description of the property, recommendations for repairs or further consideration, likely costs to remedy the repairs and costs of future capital repairs.

Feb 26

Top 8 Commercial Inspection Defects

Most commercial inspections (aka property condition assessments) will uncover systems or components which are deteriorated, missing or damaged with recommendations for repair or replacement. In addition to these routine findings, a commercial inspection should identify any of the following 8 common areas of risk to a buyer.

  1. Grading and Drainage –  Your property’s surface water should have a path which easily allows water to drain away from the structure without accumulating around the foundation.
  2. Structural Problems – A commercial inspection should not show visual signs of movement with flooring, walls, ceiling and attic framing. A crack with more than 1/4 inch in width should be given further consideration.
  3. Roof Deficiencies – Your property inspection should include where the roof covering is in its expected service life and should call out accumulating or pooling on the roof.
  4. Mechanical Issues – Your commercial inspection report should identify the buildings heating, cooling and ventilation system components, how they systems are controlled and where the appliances are in their life cycles.
  5. Plumbing Defects – Your inspection assessment should identify if galvanized plumbing supply pipes are still in use and budget for replacement when possible in addition to any obvious active leaks or plumbing fixtures which have outlived their expected service life.
  6. Health and Safety Hazards – Your inspection report should identify trip hazards, exposed walkways and loose or unsafe conditions
  7. Electrical System – A good commercial assessment will size the electrical system according to current use of building and any components which have been in service over 50 years.
  8. Exterior Covering – The exterior envelope of the commercial building should be weather resistance including no areas of current moisture intrusion.

Commercial Building

Jan 19

“Debt” versus “Equity” Style Property Condition Assessments

A property condition assessment can be tailored in scope of work to either an investor-buyer or investor-lender report format. The investor-buyer format, also known as “Equity” style, is thought of to be focused on protecting the buyer’s financial interests. Alternatively, your investor-lender format, known at the “Debt” style report, will typically be written to protect the lender’s financial interests. In either scenario, a good case can be made which assumes protecting the lender’s equity is by nature protecting the buyer’s stake in the project. However, an equity type property condition assessment is typically thought to be more granular with an emphasis on the current state of the building wheres a debt style property condition assessment would be presented more as a forecast of future anticipated building investments over the life of the loan. In summary, a property condition assessment is a general overview of the buildings condition and then can be formatted to accommodate the different potential audiences.