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Commercial property transaction process (Deal Management)
Typically, a broker will identify a property that fits a set of criteria set out by an acquisitions, capital investment, or private equity firm. The firm will perform an informal assessment of the property location and potential profitability, and if they are interested, they will signal their intent to move forward with a letter of intent (LOI).
An investment committee with senior acquisitions executives reviews all pending deals and advises whether to move forward with a purchase and sale agreement, or PSA, and a deposit. A PSA is an exclusive agreement between the seller and a single interested buyer. No other LOIs or PSA may exist for one property at a time.
Once a PSA is executed, the acquisitions team usually has 30 days to perform due diligence, unless an extension is granted. During this 30-day period, the acquisitions team investigates the property thoroughly in an attempt to uncover any undesirable characteristics, damage, or other circumstances that could affect the profitability or final selling price of the property.
The acquisitions team may want to investigate the rent roll, existing vendor contracts, city permits, insurance policies, etc.. The acquisitions firm may hire a third party to conduct an appraisal, environmental reports, traffic counts, and more. The ultimate goal is to gather as much information as possible to make an informed investment decision.
Once due diligence is complete, the acquisitions team must decide whether to move forward with the purchase to closing. Closing is a window of 10-15 days during which the acquisitions firm owes an additional deposit, and they must finalize financing.
When a deal closes, post-closing processes may begin, including notifying tenants of an ownership change, transferring vendor relationships, and handing over relevant information to the asset management team.