Measuring for Due Diligence

When assessing the value of a building on either the buyer/seller side in a sale many factors such as location, condition, and existing tenant base are considered. Another important aspect is total rentable square footage. The use of accurate sf numbers that follow REBNY or BOMA measurement standards is essential to maximize rentable income. It is also vital then during a due diligence phase to be certain that the rsf numbers being used to establish the ongoing value of the property are in fact correct.

We have performed due diligence surveys for many acquisitions on both the buyer/seller sides. Most recently we’ve provided services for the 222 Broadway, 1370 Broadway, and 4 NY Plaza transactions. Over the years our work has helped discover inconsistencies in rsf numbers presented to the potential buyer, added credibility to existing calculations, and uncovered additional value because the building was under measured. One way a building can be under measured in NYC, apart from being done incorrectly, is the loss factor applied to the REBNY usable space is below market average. Historically we’ve seen that buildings under measured grow anywhere from 3% to 10%. This growth translates to a significant amount of additional rentable income.

We suggest asking yourself the following question: Given the amount of time and money you spend to acquire/sell a building does it makes sense to take a chance on the existing rsf numbers?