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Realogic Finds $4 Million Closing Credit

Situation

Contracted by buyer of 650,000 sq. ft. office bldg to abstract 110 leases, compare results to existing ARGUS® file, and present all reconciling items to buyer for negotiation of potential "credits" at closing.

Solution

Realogic’s responsibilities included:

  • Abstract all leases
  • Compared results to ARGUS
  • Documented 55 reconciling items between ARGUS and the leases.
  • Performed ARGUS sensitivity analysis on reconciling items at the direction of the buyer.

Financial due diligence and ARGUS sensitivity completed on time. One of the reconciled items found $4 million of free rent for an anchor tenant that was not modeled in ARGUS.

$3 Million "Hit"

Situation

Property Manager found deficient Letter of Credit documentation for a new property management assignment.  Previous owner/manager's tracking system allowed expiration of large letter of credit. Item missed during due diligence. Eventual tenant default cost the building $3 million.


Solution

Tracking Letters of Credit added to lease administration process now being performed in ELLIPSIS as a safeguard against this type of oversight. All Letters of Credit expiration dates are now known for each tenant.  Critical date reports highlighting such dates are received by onsite Property Manager via Lease Administration Agreement.

FDIC Portfolio Due Diligence and Underwriting

Situation

A top private equity fund needed due-diligence services on a cross section of a large FDIC pool. The fund was bidding to be a participant in a FDIC structured sale.

The portfolio consisted of both performing and non-performing loans spread across all asset classes and all parts of the nation. The client needed due-diligence on approximately 150 of the loans, originated by mostly small to medium-sized banks.

Solution

With limited information, Realogic:

  • Performed site inspections on 60 of the 150 properties
  • Reviewed all of the contents of the loan files to determine:
    • default status
    • DPO probability and amount
    • cross collateralization with other properties
    • environmental issues
    • correspondence related to loan negotiations and foreclosure
    • title issues
  • Reviewed rent rolls and historic financial information
  • Gathered market reconnaissance to determine property occupancy and current asking rent
  • Compiled market data such as market rent, occupancy and data on absorption & new supply
  • Generated in-place and stabilized values for each property, based on our findings above
  • Delivered an asset summary and site inspection package on each asset that included cash flows, maps, photos and all market data

Quote

"Our work product enabled our client to put together their best and final offer for the portfolio, and the quality of our data allowed them to apply macro level assumptions to smaller assets enabling our client to save time and due-diligence dollars.”
Project Lead