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Q&A with EBI's David Stewart

Everyone knows careful due diligence is critical for any real estate deal. But there's much more to it. EBI's David Stewart, who for almost two decades has served as National Program Director of Equity & Special Services at the firm, tells us Equity Property Condition Reports (EPCRs) are a vital step in the process.


Bisnow: Please explain what EBI's Equity Group is and what it does.

Stewart: The main focus of the Equity Group is to provide acquisition property due diligence services to clients who are either considering or already in the process of a commercial real estate property acquisition.

These properties can include office buildings, shopping centers, multifamily and warehouse/industrial properties, to name a few. The team completes an overall investigation of the physical aspects of the asset called Equity Property Condition Reports (EPCRs). The equity team then evaluates systems like roofs, HVAC, plumbing, electrical and elevators.

Sometimes we provide ancillary services that take a deeper dive into specific systems. In most cases, our analysis is used to either negotiate the sale price of the asset, or help our client understand their capital expenditures during their period of ownership. Often, environmental site assessments are included along with EPCRs.

Bisnow: What services does EBI provide to this group?

Stewart: Our clients seek us out to have a property professionally assessed before they buy or invest in it, to gauge the costs associated with repairing and maintaining it.

We look at our clients’ investment strategy and risk tolerance to determine the recommended services. Whether the property is designated to be improved and then sold—a short-term goal, or kept in their portfolio to appreciate while collecting rent—a long-term hold, will be factored into our recommendation.

Bisnow: How often should an EPCR be completed?

Stewart: EPCRs should be completed prior to the transaction. If you are a seller, doing this before marketing may better position the property, as buyers feel more confident when deficiencies have been detected, disclosed and/or repaired.

Bisnow: Why should future owners have a new one completed even if one was done previously, say less than five years ago?

Stewart: A lot can happen within five years at a property if it is not maintained. Alternatively, the property could have been significantly renovated and improved.

The recommendations in an old report will likely be outdated. In addition, obtaining a fresh, third-party opinion gives the user an objective view of the property, providing important information for valuation and formulating a strategy for it.

Bisnow: Are there any major risks in not having an EPCR done?

Stewart: Absolutely. To the untrained eye, there could be hidden defects. These could have a significant detrimental impact on the occupancy or on operating income from a property later on.

An EPCR can be a powerful bargaining chip when negotiating price, in addition to giving a sense of what the operating and maintenance costs for the property could be.

Bisnow: How does someone obtain an EPCR and how long does it take?

Stewart: This is EBI’s specialty, so I’d first encourage people to call us! We’ll ask you to provide an Offering Memo for the property with all salient information regarding location, size, age and pertinent building system information and forward it to us for review.

Then we can sit down to discuss the use and purpose of the EPCR, your time frame and any special needs. EPCRs are usually completed within 15 to 20 business days.

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