When buying a building, you usually hire your go-to PCA consultant to review the building for you. But what about when you sell a building? Let’s say you’ve owned it for five years. You know everything about it, right? You know what is good, you know
what needs to be fixed, and you also know that it is up to the buyers to find the problems on their own. But what you don’t have is the eyes of the PCA consultant and you don’t necessarily know what the buyer’s PCA consultant will make an issue of. You don’t know what that little crack in the wall will mean to the PCA consultant or you don’t know what the PCA consultant will decide is the problem because you have two or three roof leaks per year. You don’t know if the PCA consultant will decide that the small, isolated mold issue you have in a few guestrooms is somehow a much larger and involved issue than it really is. You don’t know how the PCA consultant will interpret what your property engineer tells them,which sometimes can be an exaggeration.
What if you could know this in advance?
Would it help you better prepare your property for sale? Would it help you decide what to fix now or what to leave for the seller to fix?
Could it get you a better price for the building?
The answer is most likely “yes”. By not getting a PCA when you sell a property, you actually run the risk of letting the buyer’s PCA consultant draw unnecessary attention to some of those grey areas rather than mitigating them or addressing them before they impact your transaction. As PCA consultants to many large CRE investors, sellers often hire us to perform PCAs and we’ve come across issues that would have gone undetected or unaddressed until we reviewed the property. Let’s consider a few scenarios:
- $300,000 Savings on Fan Coil Units: You have old noisy fan coil units in guestrooms that break down all the time. The buyer’s PCA will most likely recommend to “Replace all in Year 1 at $2,500 each”. But what if you can actually refurbish them for $1,500 each and end up with like-new units that will last another 15-20 years? That’s a $300,000 difference for a 300-room hotel. If you knew that before you put the property on the market, you could either begin the repair program, or have the plan in place and make the buyer’s argument moot.
- Build a Solid Argument for Postponing a $450,000 Repair: You have a 25-year old chiller. Many PCA consultants for the buyer will look at the ASHRAE median life table and say that the chiller has a 23-year life…better replace it now for $450,000! But what if this particular model of chiller is very robust and has a good performance history (just like cars, some chillers are more reliable than others)? What if your property staff has done a very good job maintaining this chiller? What if that actually means that there really isn’t a reason to budget to replace this chiller for another 5 years? Can that help you in a sale?
- Achieve Significant Savings by Fine-tuning the Replacement Recommendation: Now what if that same chiller really is in bad shape and needs to be replaced soon. The buyer’s PCA will assume replacing it with a similar model…”like-for-like”. But what if that chiller was originally oversized at say 500 tons, but in all reality only needs to be 400 tons? What if knowing that saves you $50,000? What if you just go ahead and replace it, and what if the new chiller is expected to save you 25% on electricity? Would that increase the value of your building?
- Spend $100,000 Now to Repair Rather than $1,000,000 to Replace: What if you have a 250,000sf warehouse with a 20-year old roof. Many buyers’ PCAs will automatically recommend replacing the roof now because it is 20 years old. What if that is expected to cost $1,000,000 and the buyer pushes you to lower the sale price by that amount? How would your deal change if you knew that in all reality, this particular roof could be made to last another five to seven years by making $100,000 worth of repairs now?
These are just some examples of the types of issues we’ve encountered before, but I think you get the point.
As a seller, getting your own PCA gives you the information you need to help you decide how to best position and prepare your building for sale.
About National Property Consulting Group, LLC
NPC is a building assessment and advisory firm that specializes in performing property condition assessments and energy consulting focusing on the industrial, hospitality, and housing sectors. For more information about National Property Consulting Group (NPC), please visit www.npcg.net or contact: