C+S July 2021 Vol. 7 Issue 7 (web)

The Importance of Due Diligence in Adaptive Reuse Projects By Les Jeter

Embarking on an adaptive reuse development is no small task. It takes a dynamic team that has the vision and fortitude to overcome chal- lenges. Adaptive reuse projects also represent a significant investment in a community and a belief in the long-term growth of an area. These projects have become increasingly popular in recent years as demand for infill development rises and access to raw, developable land be - comes scarcer. The adage that big rewards require big risks certainly applies to adap- tive reuse projects. There is significant inherent risk on multiple levels, including working with an older property (which may or may not be dilapidated) and trying to transform a structure from its original use to something else entirely. This risk profile gives even seasoned developers pause and should encourage any team considering an adaptive reuse project to ensure they undertake a proper due diligence review before closing a deal. Understanding the existing conditions of sites and buildings under consideration for adaptive reuse is crucial to develop a full risk man- agement picture and making an informed decision. What is Due Diligence? At its foundational level, due diligence is a review of an existing build- ing or site to identify significant conditions that will affect the feasibil - ity and cost of redeveloping that building or site. Another perspective is that professional due diligence provides insights before a deal closes. The findings can add confidence to move forward or at least identify areas of concern and prevent headaches later by avoiding a site if it doesn’t meet the financial criteria for the project. Due diligence investigations typically include a “walk-through” and “walk-around” survey of the structure by experienced profes- sionals who can identify existing problems as well as emerging or potential concerns by visual observation. This process is best captured in three phases: • Phase One: Conduct a preliminary site assessment that includes historical research and collecting any existing information about a building or site. Resources include historical records, insurance docu - mentation and maps, and photos of the building and surrounding area. • Phase Two: An on-site walk-through survey to document existing conditions through images and field notes. That documentation typi - cally focuses on physical condition of a structure and those conditions visible to get a better understanding of potential problems. • Phase Three: Prepare a detailed report that outlines what information

has been gathered about a building or site and identifies potential items of concern as well as provides general guidance on what actions will be required for the project to move forward as planned. This due diligence report will provide a clearer picture of known or potential challenges present in an existing structure. For example, is the roof salvageable? Is the building structurally sound? Is evidence of water damage acute or could there be significant issues lurking behind walls and under floors? These are the types of questions a due diligence report will address to provide the development team with initial context on a structure. Those details are crucial components in crafting a project’s risk profile and determining whether the investment will work. Why It Matters The condition of a structure under consideration for redevelopment can be the ultimate dealmaker or dealbreaker. Most sites are adaptive reuse candidates because they’ve become neglected, or their original design no longer fits the highest and best use for that site. Before committing to a deal, the development team should ensure that the due diligence in these six key areas have been conducted: • Building Envelope: Assess the condition of the roof, walls, win- dows, doors, and other key components.



july 2021

Made with FlippingBook Annual report