Technical Due Diligence

Technical Due Diligence is the process of systematic review, analysis and investigation in which a prospective purchaser, resident or financier of a specific property gathers information about the physical characteristics of a property in order to have a clear assessment of the risks associated with the property and any possible transaction.

At Frank E. Basil, we understand the property industry’s need for a quality Technical Due Diligence report and realize the impact it could have, regarding risk assessment, on a future investment. Our detailed report gives our clients a complete overview of the current condition, the facilities and design of a property and goes even further by analyzing and evaluating potential risks.

The investigation, collected data evaluation and reporting is carried out by Basil’s engineers. In several cases, when further investigation and analysis is needed, Basil associates with qualified professionals from a variety of sectors like specialized engineers, legal and financial consultants in order to achieve the best outcome and protect its client’s assets and investments.

Basil’s Technical Duel Diligence Report consists of a number of individual reports, each addressing a different area of a project. Depending on the project’s needs, the report includes our investigation and analysis findings on any, or all of the following subjects:

Property Description

Description of the property including name, address, orientation, surrounding areas usage and infrastructure, description of buildings and structures within the property, age of the buildings as well as details of any extensions or refurbishments of the building area.

Inspection Access Limitations

In order for the inspection to be properly carried out, there should be sufficient physical access to all areas of the building(s). Therefore, every possible measure is taken in order to gain the maximum level of access needed.

Building Structure

The overall suitability of the structural elements needed to perform their intended purpose is examined. The primary structural components of the property are identified through visual inspection. In cases where deterioration or other defects are revealed, qualified structural engineers proceed with further, intrusive investigations.

Building Fabric

The description of the elements of the building fabric (roofs, facades & interiors), includes the location of each, as well as opinion on the fitness of the property for its intended use, with regard to factors such as design, condition and workmanship, recommended repairs or replacement due to damages / maintenance shortfalls and of course consideration of the lifecycle expectations of each element of the building fabric.

External Areas

Description of the condition of the hard landscaped surfaces and their suitability for current or intended use, the condition of retaining walls, including any evidence of structural distress, the size and relative proximity of mature trees to buildings, structures and infrastructure and any evidence of damage caused by the trees.

Building Services

Description of the condition of the building services including mechanical, electrical, communications, security, BMS, hydraulics, fire protection, emergency services, and vertical transportation. The inspection evaluation will include design intent, capacity and redundancy, age, condition and life expectancy, compliance with current codes, standards and practices, standard of maintenance, apparent defects and deficiencies and operational efficiency of the equipment.

Environmental Issues

Several types of investigations could be carried out here regarding environmental issues.

The reports include the Preliminary Site Investigation (which includes a review of historical aerial photos of the site, historical property title review, review of available Council Development Applications and site inspection to assess the likelihood for imported fill, underground storage tanks and other operations that could result in land contamination), the Detailed Site Investigation (in case of signs of contamination, a detailed investigation is carried out which includes drilling boreholes to allow collection of soil and groundwater samples and send them for lab testing), a Hazardous Materials Audit (inspection to identify hazardous materials such as asbestos, polychlorinated biphenyls, synthetic mineral fibers, chlorofluorocarbons and lead based paints), a Geotechnical Report (several soil samples to be taken for lab analysis in order to review the suitability of the structure), an Acoustics Report (testing for impact and airborne sound insulation), an Air Quality Report (mostly for office use environments, measurements for carbon dioxide, carbon monoxide, temperature and humidity).

Sustainability

Review of the building performance includes structure design efficiency, energy consumption efficiency, water consumption efficiency, material efficiency, waste and toxic reduction of dangerous wastes as well as the storage of such dangerous materials and finally the indoor environmental quality enhancement.

Town Planning

Visual Inspection of the property and surrounding area taking into account the planning applications and permits, review of the planning controls affecting the site (local, regional and state), review of local planning files, investigation on possible area development studies and assessment of future development opportunities.

Floor Space Ratio, Car Parking Ratio and Efficiency

Determination of the Floor Space and Car Parking ratios in order to assess the highest and best use of a property for the number of the permitted car parking bays. This provides and indication of the ability of the building to provide maximum commercial value.

Statutory Compliance Review

This investigates the building adherence to the Building Code as well as Accessibility issues. The Building Code Compliance report contains: information on the role of the applicable building code in relation to the property, a statement on the need for, or exemption from, retrospective compliance, any applicable annual periodic certifications which are required (as well as information for certifications on essential services), sprinkler system annual flow tests, cooling tower registration, backflow prevention testing certification, lift registration, trade waste agreement and thermostatic mixing valve certification.

The report assists in evaluating the risks arising from any compliance issues, the quantification of the costs needed to rectify the non-compliances as well as the timeframe within which these non-compliances should be rectified and the various priorities recommended for the rectification or upgrade. The Accessibility report comments on the property compliance with the applicable access legislation. The audit focuses on infrastructure for people with sight and hearing disabilities, people using a wheelchair and ambulant persons with mobility impairment. Finally, information on external and internal paths of travel, parking, building entry points, disabled toilets and lifts, stairs and ramps are included.

Heritage Significance

The investigation of the Heritage Significance of a property includes visual inspection of the property and its surrounding area, research for the property’s status on the heritage register, review of the level of cultural significance and heritage attributed to the property, address implications for future use and occupancy or possible redevelopment that will form the basis for policies and management structures implemented by the owner.

Tax Depreciation / Capital Allowances

Report on depreciating assets. A depreciating asset is one whose effective life is limited, and that can reasonably be expected to decrease in value over its useful life. Understanding, of both the legislation of tax depreciation/capital allowance as well as its application to various property assets, depending on age, condition, cost or classification is the key to attaining the maximum benefit available.

Identification Surveys

The purpose of this report is to identify/verify the position of the building(s) and other improvements on the property and to identify easements, right of way, encroachments and other issues that either burden or favor the property. A site survey will be conducted to verify the boundary dimensions, whether the building(s) or other improvements constructed have been built entirely on the property and whether neighboring buildings, fences etc. encroach onto the property.

Reinstatement Cost Assessment

This report contains the results of the study for the estimation of the total cost to rebuild a property which has been subject to a major incident of damage eg. fire or explosion. The cost assessment should take into account demolition, rebuilding the improvements to the same or similar specifications as the existing building, re-documentation, consultants, statutory approvals and cost escalation as well as loss of rent incurred during the reinstatement process based on rental information provided by the client.

Capital Expenditure Forecasts

The CAPEX forecasts associated with due diligence are cost estimates, normally reflecting a 5 or 10 year planning period. The CAPEX should include details of preliminaries, builders’ margins, overheads or contingencies negotiated, staged or other special forms of contract, approval, consents or compliance orders, costs associated with further investigations, professional/consultant fees for further investigation and testing, design, documentation and management of rectification works, or any resulting charge in the scope of rectification works, costs associated with the relocation, temporary accommodation, disruption to business or loss of profit of the building owner or tenants, work outside boundaries, goods and services taxes, future escalation, out of hours working, VAT and inflation.

 The client may also have specific requirements for proposed expenditure which may include refurbishment of the property in order to reposition it in the market, sustainability improvements such as replacement of building services equipment with more energy efficient equipment, remodeling or extensions/additions to a building and redevelopment of the property for a different use.

Operational Expenditure Assessment

This report typically includes both statutory charges (such as municipal rates, water and sewage rates, land taxes and other miscellaneous charges), and operating costs (such as insurance premiums, cleaning, energy costs associated with operating the base building services installations, repairs and maintenance, management administration, security and other miscellaneous expenses).

The main difference between OPEX and CAPEX is that the first can ordinarily be recovered in part from the tenants of a building, or can be offset as a deduction against rental income for taxation purposes.

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