Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.
Issue link: https://westernrealestatebusiness.epubxp.com/i/873170
48 • September 2017 • Western Real Estate Business www.REBusinessOnline.com L ast year was known as the year of port- folio transactions. The student housing industry saw about $10.3 billion in trans- acted assets, with five major portfolio transactions contrib- uting about $4.6 bil- lion 1 . Campus Ad- vantage performed due diligence on a 19-property portfolio in August and September of 2016, making it one of the industry's largest portfolio trans- actions. The firm has also conducted studies on its West Coast properties, including 11 in California, seven in Oregon, two in Washington and one in Nevada. Through its experience, Campus Advantage has identified success- ful techniques to perform bulk due diligence services, and gained new knowledge during the process that will be implemented in future due diligence analyses. If your firm is get- ting ready to perform a portfolio due diligence, you should be prepared to create a strategic plan — then revise that plan numerous times throughout the process to factor in curve balls that are bound to happen when analyzing multiple assets. Consider the following strategies when performing portfolio due dili- gence services: • Start by identifying your core team. Identify resources who can travel to the sites to perform the assessments and analytical resources that will head up the efforts in the home office. Clearly define each team and the re- sponsibilities they will oversee. • Request an extended due diligence period, and split the travel and on- site assessments into two to three weeks. Splitting the travel and property as- sessments into two to three weeks allows for additional resources to be in the office compiling and analyzing the collected data in real time. It also leaves room for any unexpected set- backs, such as weather delays. • Outline expectations prior to the start of due diligence. When performing due diligence on a large portfolio, it is necessary to engage employees from other de- partments and properties. Thus, it is imperative to clearly outline expecta- tions before the assessment begins. • Identify a lead resource in each market. Since a portfolio of properties will likely span over multiple markets, it is key to identify an on-site market re- source to help schedule travel, gather property materials and lead the due diligence efforts on site. • Assemble a home-base team. This team will set up and organize necessary documents, such as unit in- spection forms, lease audits and prop- erty photos, to help support the team on the road. • Begin the analysis prior to travel- ing. Work with the broker and seller to col- lect any necessary reports before lease audits begin. These include reports outlining concessions, vacancies, etc. These reports should be used to for- mat the audit spreadsheet that the on-site teams will use to confirm lease information during the site visit. • Identify trends and communicate them to the team on weekly calls. Study the trends at the first few prop- erties and apply necessary changes to the methodology for the remaining audits and property assessments. • Take the time to audit every lease. Statistically, trends should be identi- fied with auditing only a portion of leases. However, one extra day on site will save time on the analysis and ensure there are no gaps in the under- writing. • Interview the general manager, leasing manager and maintenance supervisor. Interviewing key staff members will uncover property nuances and help the acquisitions team better under- stand price sensitivity and needed capital improvements. • Turn the daunting task into team building. Assessing a portfolio of assets is not an easy task, especially when resourc- es need to be pulled from multiple departments and properties to com- plete the on-site work. Emphasize the importance of accurate work product, but also encourage the teams to have fun while on the road. Performing portfolio due diligence services will be a monumental expe- rience as it signals substantial growth for the organization. However, it should be approached with a well- thought-out methodology to avoid unrealistic underwriting or unfore- seen operational issues. Be prepared to learn from the process and revise your strategy multiple times before the end of the due diligence period. However, with a strong team and well-devised plan, undertaking a portfolio due dili- gence is achievable and will result in substantial profitability for all parties involved. Madison Meier, Vice President of Business Development, Campus Advantage 1 Source: Real Capital Analytics Meier STRATEGIES TO PERFORM DUE DILIGENCE ON A MULTI-PROPERTY PORTFOLIO Portfolio buys are always fun and exciting, but there's work to be done as well once the deal's closed and the ink dries. By Madison Meier The Highlands in Reno, Nev., is situated just two blocks from campus, making it easy for students to get to class while offering incredible views of the city's downtown area. Titan Court in Eugene, Ore., is ideally situated near the University of Oregon, Lane Community College and Northwest Christian University.