AICPANational

RealEstateConference

DueDiligenceStephenA.StonerNovember17,2000WhatisDueDiligenceRiskmanagementtoolVariesbyclientVariesbypractitionerConsistencybeginningtodevelopinsecondarymortgagemarketsIndustrystandardsacceptedbyratingagencies,investors,andintermediariesDependentongooddata2HistoryofDueDiligencePriorto1980’sMinimalLate80’s,early1990’sRequiredandcriticalMid1990’s-currentChangingrealestatemarketsMuchdoneinternallyLargerbuyersDifferentriskmitigationproceduresFuturetobedetermined3ReasonforDueDiligenceFilestufferDecisiontoolSalestoolAssetmanagementDealstructuring4TheDueDiligenceProcessSales

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Review6FinancialOperationalReviewRevenueStreamsCurrentRentSignedandcurrentleases(includingamendments)LegalclausesRightoffirstrefusalGodarkprovisionsRighttocancelNoncompeteclausesOtherTenanttourAccountsreceivableagingOtherformsofcashflowStorageInternetandtelecommunicationaccessPhonerevenue(hotelsandmotels)Other7FinancialOperationalReviewOperatingCosts:highlevelCostspersquarefeetBOMAandotherbenchmarks(buildingsize,locationandage)AnalyticreviewReviewoftaxreturnsAdjustmentsforunusualitemsResultsusedtofocusdetailedreview8FinancialOperationalReviewOperatingCosts:detailedServicecontractsEconomicreviewReviewexecutedcontractsComparefinancialtermstooperatingstatementsLegalreviewDurationAbilitytocancelorrebidImplicationsofsaleRepairsandmaintenanceReviewofvouchersCapitalizationversusexpensesPropertytaxesReviewrecenttaxbillsOtherReviewofvouchers9FinancialOperationalReviewCapitalitemsDeferredmaintenanceWalkthroughEngineeringreportCapitalimprovementsEngineeringreportStrategicplanforproperty(ies)IdentifiableversusannualLeasecommissionsLinkedtorevenuestreamMarketcommissions-adjustedforbusinessplanTenantimprovementsLinkedtorevenuestreamPrimarilydrivenbyphysicalconditionofbuildingandmarketrequirementsEngineeringreport10FinancialOperationalReviewConclusionsNormalizedNOIIdentificationandquantificationoftrendsUnusualitems11TheDueDiligenceProcessSales

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ReviewPhysicalAssetandEnvironmentalReview14MarketAnalysisThreeprimarycomponentsSiteanalysisSupplyDemandSupplyDemandSquareFeetTime15MarketAnalysisSiteAnalysisVisibilityAccessIngress/EgressAmenitiesSourcesofdemandCompetitionQualitySurroundinglanduses,currentandprojected16MarketAnalysisSupplyHistoricalinventoryExistingandfuturecompetitiveDisaggregatedbysize,quality,andageProjectedfuturedevelopmentPlanningdepartmentsMediaresearchLocalmarketinterviews17MarketAnalysisDemandHistoricalabsorptionMarketresearchofkeyindicatorsNewbusinessstartupsPopulationgrowthOthereconomictrendsOtherdemographictrendsProjectedgrowthindemandDemand(sqft)Time18MarketAnalysisReconciliationofsupplyanddemandRentalratesPercentagerentsOccupancylevelsCommissionsBuildoutGrowthratesRentalExpenseCapitalizationratesRenewalassumption19MarketAnalysisSpacemaybevacantpriortore-leasingNewrentissetNewtenantimprovements,commissionsBaseyears,sales,otherlevelsaresetRenewalassumptions-Whathappensattheendofalease?20TheDueDiligenceProcessSales

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ReviewPhysicalAssetandEnvironmentalReview21PhysicalAssetandEnvironmentalReviewEngineeringreportDeferredmaintenanceRequiredcapitalimprovementsArchitectsorspaceplannersEfficiencyofexistingspace:opportunitiesorconstraintsforvalueenhancementEnvironmentalPhase1,2and3Titlesearch22TheDueDiligenceProcessSales

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AnalysisConvertinganalysistocashflow23PROFORMAANALYSISAnalysisofprojectionassumptionsbaseduponhistoricalperformanceandmarketresearchCompilationofprojectedrevenues,expensesandnetoperatingincomeAnalysisofcapitalizationanddiscountrates,debtserviceandpost-financingcashflow,ifrequired24Thingstolookfor:Ifaportionofthepropertywasnon-operatingduringtheyear,theeffectonfutureoperatingresultsneedstobeconsideredTheseller’sorbuyer’sbudget,ifusedintheanalysis,maycontainoptimisticassumptionsThefeesandcorporateoverheadexpenseschargedbythesellerwillbemodifiedafteracquisitionAllappropriatetaxingjurisdictionsandrespectivetaxesareadequatelyreflectedEffectsofnon-recurringitemsprojectedtooccurPROFORMAANALYSIS25TenantbyTenantAppropriatelyTimedIndustryAcceptedReadyfor“Whatif”AnalysesEasytoReviewandProofPROFORMAANALYSISAdvantagestoPrefabSystems269、靜夜四無無鄰，荒居居舊業(yè)貧。。。12月-2212月-22Saturday,December17,202210、雨中黃葉葉樹，燈下下白頭人。。。06:57:0206:57:0206:5712/17/20226:57:02AM11、以我獨沈沈久，愧君君相見頻。。。12月-2206:57:0206:57Dec-2217-Dec-2212、故人江海海別，幾度度隔山川。。。06:57:0206:57:0206:57Saturday,December17,202213、乍見翻疑疑夢，相悲悲各問年。。。12月-2212月-2206:57:0206:57:02December17,202214、他鄉(xiāng)生白發(fā)發(fā)，舊國見青青山。。17十二月月20226:57:02上午06:57:0212月-2215、比不了得就就不比，得不不到的就不要要。。。十二月226:57上上午12月-2206:57December17,202216、行動出成果果，工作出財財富。。2022/12/176:57:0206:57:0217December202217、做前，能能夠環(huán)視四四周；做時時，你只能能或者最好好沿著以腳腳為起點的的射線向前前。。6:57:02上上午6:57上上午06:57:0212月-229、沒有失敗敗，只有暫暫時停止成成功！。12月-2212月-22Saturday,December17,202210、很多事情情努力了未未必有結果果，但是不不努力卻什什么改變也也沒有。。。06:57:0206:57:0206:5712/17/20226:57:02AM11、成功就是是日復一日日那一點點點小小努力力的積累。。。12月-2206:57:0206:57Dec-2217-Dec-2212、世間成事，，不求其絕對對圓滿，留一一份不足，可可得無限完美美。。06:57:0206:57:0206:57Saturday,December17,202213、不知香積寺寺，數里入云云峰。。12月-2212月-2206:57:0206:57:02December17,202214、意志堅強的的人能把世界界放在手中像像泥塊一樣任任意揉捏。17十二月月20226:57:02上午06:57:0212月-2215、楚塞三湘湘接，荊門門九派通。。。。十二月226:57上上午12月-2206:57December17,202216、少年十五五二十時，，步行奪得得胡馬騎。。。2022/12/176:57:0206:57:0217December202217、空山新雨雨后，天氣氣晚來秋。。。6:57:02上上午6:57上上午06:57:0212月-229、楊柳散和風風，青山澹吾吾慮。。12月-2212月-22Saturday,December17,2022