The Situation

The client owns and operates a substantial real estate portfolio comprised of numerous office buildings and shopping centers throughout the United States. They turned to LeaseProbe and Real Diligence for assistance in evaluating the merits of acquiring a sizable multi-tenant office building in Pennsylvania.

The Challenge

LeaseProbe's meticulous review of the leases uncovered inconsistencies within the seller's CAM structure. Comprehensive research and financial analysis were required to uncover the true picture. Real Diligence picked up the challenge and began an exhaustive process of financial due diligence. What emerged were a number of discrepancies between the seller's income and the actual terms of the leases. Among those discrepancies were:

  • A complicated amendment subtly overrode one tenant's responsibility to contribute to real estate taxes.
  • One tenant was being billed for more CAM than it was responsible for.
  • One tenant's CAM obligations were based upon an incorrect base-year amount.

The Solution

Real Diligence's analysis of the seller's base-year figures, current expenses and tenant obligations made it clear that there were significant discrepancies in the building's stated value, which would substantially lower reimbursement income. The client directed Real Diligence to convey these findings to the seller.

The Results

With Real Diligence's clear and concise summation of the building's CAM discrepancies, the buyer was able to successfully negotiate a reduction of the building's purchase price, resulting in significant savings.