Investor Benefits from Lower Purchase Price Thanks to Financial Due Diligence
The Service
Financial Due Diligence/Office building Acquisition
The Situation
The client owns and operates a substantial real estate portfolio comprising of numerous office buildings and shopping malls throughout United States. The client approached Complete Legal Outsourcing for assistance in evaluating the merits of acquiring a big multi-tenant office building in North Carolina
The Problem
Complete Legal Outsourcing’s meticulous review of the leases uncovered vagaries within the seller’s CAN structure. Comprehensive research and financial analysis were required to uncover the true picture. Complete Legal Outsourcing accepted the challenge and began an exhaustive process of financial due diligence. What emerged were numerous discrepancies between the seller’s income and the actual terms of the leases. Among those discrepancies were:
- A complicated amendment subtly overrode a tenant’s liability to contribute towards the real estate taxes
- A tenant was being billed for excess CAM that his proportionate share
- A tenant’s CAM obligations was based upon incorrect base year amount
The Solution
Complete Legal Outsourcing’s analysis of the seller’s base year figures. Current expenses and Tenant obligations made it clear that there were significant discrepancies in the building’s stated value. That would substantially lower reimbursement income. Complete Legal Outsourcing was instructed to share its findings with the seller.
The Result
With Complete Legal Outsourcing’s clear and concise summation of the building’s CAM discrepancies, the buyer was able to successfully negotiate a reduction of building’s purchase price by 7.3% , resulting in significant savings.
The Takeaway
By utilizing Complete Legal Outsourcing’s expertise with both leases and financial due diligence, the real estate investor was able to identify discrepancies that revealed the true value of the property. By validating all information, Complete Legal Outsourcing saved the buyer from potential CAM audits and surprises after purchase.