Standard Property Condition Assessments
McClain Consulting Services, Inc. performs hundreds of Property Condition Assessments (PCAs) for lenders and investors of commercial facilities throughout the United States each year. A typical PCA for our clients is designed to meet or exceed the scope of work included in the industry-standard ASTM E2018-15, Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process.
Generally, the purpose of the assessment is to assess the general physical condition and maintenance status of the property and to recommend repair/maintenance items considered significant for the property to continue in its current operations and/or to be restored to a good condition consistent with comparable projects of similar age.
Similar to the PCA in scope, McClain Consulting Services has prepared numerous Physical Needs Assessment (PNA) reports of multifamily, assisted living, and nursing home facilities throughout the country, in accordance with Fannie Mae Multifamily Delegated Underwriting and Servicing (DUS) Guide, Part III for Physical Needs Assessments, Federal Home Loan Mortgage Corporation (Freddie Mac) guidelines as specified in their Multifamily Seller/Servicer Guide and Chapter 15, Engineering and Property Condition Requirements, and United States Department of Housing and Urban Development (HUD) Federal Housing Administration’s Multifamily Accelerated Processing (MAP) Guide and Mark-to-Market Program Physical Inspection Services Statement of Work.
The assessment typically reviews the following systems:
- Site and Grounds – Site drainage, landscaping, irrigation, exterior lighting, walls, fencing, signage, and exterior amenities.
- Pavements and Flatwork – Pavement, parking, curbs, loading docks, patios, and walks.
- Structural Systems – Foundations and structural framing of walls, columns, intermediate floors, and roofs.
- Building Exteriors – Exterior wall finishes, stairs and steps, exterior doors and windows.
- Roofing – Roof membranes, parapet walls, drainage, skylights, flashing, and penetrations.
- HVAC Systems – Cooling, heating, air distribution, and ventilation components.
- Plumbing Systems – Domestic water, plumbing fixtures, natural gas, sanitary sewer, and storm-water systems.
- Electrical Systems – Power, distribution capacities, emergency systems, and lighting.
- Fire/Life-Safety Systems – Fire protection sprinkler and standpipe systems, fire extinguishers, alarm, and security systems.
- Vertical Transportation Systems – Elevator and escalator equipment.
- Interior Building Components – Interior finishes of common areas and tenant spaces.
- Accessibility to Disabled Persons – Visual review of parking, ramps, entrances/exits, path-of-travel, elevators, and restrooms.
- Public Records Review – Interview personnel from the governing municipality to identify any currently outstanding building or fire code violations at the property and review available documentation such as building permits and certificates of occupancy.
- Regional and Local Zones – Seismic Zone according to the Uniform Building Code (UBC), Flood and Wind Zones according to Federal Emergency Management Agency (FEMA) maps.
- Microbial Visual Survey – Visual survey for the presence of microbial growth within the facility, interviews with property personnel to determine past water leaks/infiltration as well as tenant complaints concerning mold or microbial growth at the property.
Each Property Condition Report (PCR) typically includes a description of the system components and existing conditions, Expected Useful Life (EUL) and Remaining Useful Life (RUL) projections, photographic documentation, and prioritized repair and replacement recommendations, with preliminary costs estimates.
Customizing the scope for each client, we will typically prepare opinions of costs for recommended repairs, if necessary, of the existing structure and for site improvements. Opinions of costs for repairs are frequently divided into three categories: Immediate Repair Needs, Short-Term Repairs, and Physical Needs Over-the-Term for the defined analysis term requirements. These categories are summarized below:
- Immediate Repair Needs are life safety, stabilization, or code violation items that require action based on being (i) an existing or potentially significant unsafe condition, (ii) significant physical deficiency, (iii) poor or deteriorated condition of a critical element or system, or (iv) significant building code violation.
- Short-Term Repair Needs are repairs that are not life, safety, stabilization, or code issues, but are repairs that are beyond the scope of regular maintenance and that should be performed on a priority basis.
- Physical Needs Over-the-Term are items needing repair or replacement that are beyond the scope of regular maintenance but are necessary to maintain the overall condition of the site. These items will be assessed over a future analysis period.
Pre-Acquisition Equity Property Condition Assessments
When our clients purchase a more complex facility or would like a more detailed assessment than is typically provided by ASTM E2018-15, Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process, we provide a comprehensive equity investment scope of work, which involves individual licensed experts evaluating separate facility components. Depending on the individual facility, specialists may include the following:
- Civil Engineer / Pavement Specialist
- Structural Engineer
- Building Envelope or Curtain Wall Specialist
- Roofing or Waterproofing Specialist
- Mechanical, Electrical, Plumbing (MEP) Specialist
- Fire/Life Safety Specialist
- Elevator Specialist
- Acoustics Specialist
- ADA/Handicap Accessibility Specialist
The work of the team members assembled for a given facility are coordinated by Chuck McClain, who has been managing teams of condition assessment specialists since the 1980s. Each specialist provides an in-depth evaluation of his or her respective facility system and creates a detailed description of the system components and existing conditions, Expected Useful Life (EUL) and Remaining Useful Life (RUL) projections, photographic documentation, and prioritized repair and replacement recommendations, with preliminary cost estimates.
To customize the scope for each client, we typically prepare opinions of cost for recommended repairs delineated into two categories: Immediate Repairs/Replacements and Physical Needs Over-the-Term for the defined analysis term requirements. These categories are summarized below:
- Immediate Repair/Replacement Needs are repairs beyond the scope of regular maintenance, and should be performed on a priority basis. This is work that requires action based on its being (i) an existing or potentially significant unsafe condition, (ii) material physical deficiency, (iii) poor or deteriorated condition of a critical element or system, (iv) significant building code violation, or (v) a condition that if left “as is,” with an extensive delay in remedying it, has the potential to result in or contribute to a critical element or system failure and will probably result in a significant escalation of its remedial costs.
- Physical Needs Over-the-Term are items needing repair or replacement that are beyond the scope of regular maintenance but are necessary to maintain the overall condition of the property. These include major recurring probable expenditures, which are commonly not classified as an operation or a maintenance expense. Physical Needs Over-the-Term are reasonably predictable in terms of frequency and cost; however, they may also include components or systems that have an indeterminable life, but nonetheless have a potential liability for failure within an estimated time period.
Seismic Risk Assessments
When a given property is located within a seismically active area, McClain Consulting Services conducts a Seismic Risk Assessment involving field observations, a review of available documentation, and the interpretation of statistical calculations, in order to establish a general level of seismic hazard and earthquake damage potential at the property. The assessment can follow several industry scopes of work but is typically performed in conformance with a Level 1 Investigation as defined in ASTM E2026, Standard Guide for the Estimation of Building Damageability in Earthquakes.
Earthquakes are randomly distributed in time and are usually defined on a probabilistic basis. ASTM E2026 defines the Design Basis Earthquake as the site ground motion with a 10% probability of exceedance in 50 years, equivalent to a 475-year return period. This earthquake has an equal chance of occurrence in any year, and the probability of occurrence in any given year is 1/475, or approximately 0.2%. We gather and analyze ground fault, regional seismic history, and ground acceleration data. Based on this estimate of ground shaking and available data, the damage to buildings at the subject property is evaluated, using the Scenario Expected Loss (SEL) and Scenario Upper Loss (SUL) criteria.
- Scenario Expected Loss (SEL) represents an estimate of damage at the mean value of a normal distribution curve describing damage to a large population of buildings similar to the building being assessed. In a portfolio of similar buildings, approximately 50% are likely to experience less than the estimated damage, while the balance is likely to experience more than the estimated damage.
- Scenario Upper Loss (SUL) represents an estimate of damage that has a 10% percent probability of exceedance, due to the specified ground motion of the scenario considered. In a portfolio of similar buildings, nine out of ten buildings are likely to experience less than the estimated damage, while one building out of ten is likely to experience more damage.
The SEL and SUL are estimates of losses expected to occur from an earthquake attributed to local geological faults reported as a percentage of building replacement value. This is a standardized hazard level often used by property owners and investors to gauge the severity of earthquake ground motions at appropriately conservative damage risk levels. Other stakeholders in an investment (for instance, a mortgage lender or insurer) may require different levels of conservatism in their decision-making processes.
The Seismic Risk Assessment typically includes the following:
- Review of available geologic and soils reports and drawings. We review available documentation and look for any field changes from the original structural design that may significantly affect the structural/seismic performance.
- Inspection of the facility to assess the property, building, related facilities, and general site characteristics. We observe the general building configuration, building exterior components, and portions of the accessible structure, as well as the overall quality of construction. Our site observations typically include an assessment of the general practice for anchorage and positioning of major building service equipment, to assess the potential earthquake behavior of this equipment.
- Preliminary assessment of earthquake ground-shaking, liquefaction, and fault surface rupture potential, based on historical regional hazard data.
- Identification of general seismic deficiencies and preliminary estimate of facility earthquake damage loss, based on empirical loss estimation methodologies.
Engineering judgment is a necessary component of this assessment, since analytical methods do not exist that will encompass all parameters necessary to determine a precise determination of the extent of any damage caused by earthquake scenarios. The process involved in developing the loss estimation is subject to a number of estimations and projections, including:
- Underlying soil response
- Possible magnitude and duration of the earthquake
- Effects of the distance to the causative fault
- Type of building structure
- Quality of the structure’s design and construction
McClain Consulting Services provides detailed evaluations of the mechanical, electrical, plumbing and fire/life safety (MEPF) systems at a facility. The work is performed by a licensed professional engineer with extensive experience in evaluating existing buildings. While individual scopes of work vary, this evaluation is typically comprised of the following:
- A walk-through survey of the structures to observe the ages and operating conditions of the building systems/equipment. The observations will be used to anticipate replacements and/or major repairs that may be necessary.
- A review of the available drawings, for familiarization and for use in describing the type of building systems used and noting available design criteria.
- An interview with the chief engineer/available maintenance personnel regarding current conditions, past and current repair/replacement budgets, and/or repair activities.
In evaluating the HVAC systems, our engineer provides a detailed description of the system components and their operation. We gather information at the facility, including the manufacturer, capacity, and age of the equipment; the effective age and remaining useful life of the equipment; the overall cooling capacity of the system, including reserve capacity, based on anticipated loads; current operating efficiency; building ventilation systems; air handling distribution systems; control and building energy management systems; review of equipment service history; and the refrigerants and ozone-depleting substances (ODS) present in the mechanical equipment. The HVAC system is typically evaluated in relation to any required retrofitting or replacement work for the facility to comply with the Clean Air Act concerning the use of Chlorofluorocarbon (CFC) refrigerants and the International Mechanical Code.
In evaluating the electrical systems, our engineer confirms the type of service provided to the facility, including the type, size, and location of on-site transformers; electrical room conditions and electrical metering configurations; distribution voltage and capacity verification; electrical metering configuration confirmation; service capacity verification for each building section; wiring and bus duct material type confirmation; and emergency power capacity and configuration verification.
In evaluating the plumbing systems, our engineer gathers information that includes the size and material type of domestic water supply service; natural gas service size and distribution system; sewer discharge piping size, location, and configuration; distribution piping system materials and capabilities; pump, lift stations, and pressure tank components; as well as capacity and capabilities of the water heater systems.
In evaluating the fire protection and life safety systems, our engineer reviews the components of the fire protection, fire alarm, and life safety systems in use at the facility to confirm the manufacturer, age, and capacity of the equipment, such as the fire-suppression and sprinkler systems; identification of recalled fire sprinkler heads; fire department connection and hydrant locations and serviceability; fire pump capacity and system configuration; control panel, alarm, and detection system component verification; emergency exit signage and lighting configuration; and exiting design.
We prepare an assessment report documenting MEPF system components, configuration, and conditions, via detailed descriptions, photographic documentation, and building diagrams, as needed. The report typically includes a table detailing the specifications of major HVAC equipment, prioritized repair and replacement recommendations with opinions of cost, and suggestions on systems improvements.
ADA Compliance Surveys
McClain Consulting Services performs Americans with Disabilities Act (ADA) Compliance Surveys to assess a property’s compliance with disabled accessibility regulations and guidelines.
During this survey, we review the property to assess its general compliance to portions of Title III of the ADA. The goal of our review of compliance is to identify accessibility problems and to provide a guide for making the facility more usable for people with disabilities.
The ADA is a law passed by Congress and signed by the President in July of 1990 that prohibits discrimination on the basis of disability. To affect this prohibition, the statute required the development of regulations, the first of which were issued in July of 1991. The regulations detail requirements, including compliance with design and construction standards. Those standards are expressed in the ADA Accessibility Guidelines (ADAAG).
This Act requires public accommodations to provide goods and services to persons with disabilities on an equal basis with the rest of the general public. After January 26, 1992, the ADA began requiring that architectural and communication barriers be removed in public areas of existing facilities when their removal is readily achievable.
On July 23, 2010, Attorney General Eric Holder signed final regulations revising the Department of Justice’s ADA regulations, including its ADA Standards for Accessible Design. These final rules went into effect on March 15, 2011. Compliance with the 2010 Standards for Accessible Design was permitted as of September 15, 2010, but not required until March 15, 2012.
As defined under Title III of the ADA, existing facilities considered to be “public accommodations” must take steps to remove architectural and communication barriers deemed “readily achievable” under the retroactive requirements. A readily achievable alteration is defined as “easily accomplishable and able to be carried out without much difficulty or expense” (28 CFR 36.104).
Our surveys typically assess the existing facilities for compliance with the 2010 Standards for Accessible Design. We will identify areas not in compliance with the ADAAG at the property. This work is typically performed by a Registered Accessibility Specialist familiar with both federal and state standards.
The typically scope of work for an ADA Compliance Survey will include the following activities:
- Field reconnaissance and photographs
- Data collection and comparison to ADAAG
- Preparation of the report
Each ADA Compliance Survey Report typically includes a description of the facility components and a comparison with current handicap-accessible design standards. Photographic documentation of the identified areas of non-compliance is provided, along with prioritized modification recommendations and preliminary costs estimates.
Vacant Space Assessments
McClain Consulting Services has performed hundreds of Vacant Space Assessments (VSAs) throughout the United States since 2005. The purpose of the VSA is to observe the general physical condition and maintenance status of current and potential future vacant suites at a property, to provide detailed information about the suites to prospective lessees.
Our clients tell us they have been able to close deals an average of 30 days sooner by utilizing the data presented in the VSA report. The scope of services typically includes a visit to the property to review the vacant spaces and identify the characteristics and condition of each vacant space and its associated building components, in addition to preparing as-built floor plans for each suite in AutoCAD.
McClain Consulting Services typically assesses the condition of the following components:
- Interior Finishes – including materials, ceiling types, ceiling, and roof deck heights.
- Storefront Components – including glazing and framing types, and measurements, such as front façade width and storefront display space depth.
- Exterior Finishes – including façade materials, fenestration, and design.
- HVAC Systems – including equipment type, manufacturer, heating and cooling capacity, age, power source, electrical requirements, filter size, and estimated replacement costs.
- Plumbing Systems – including component types, manufacturer, water heater capacity and power source, age, and estimated replacement costs.
- Electrical Systems – including equipment manufacturer, main panel capacity and amperage, system voltage, metering configuration, and estimated replacement costs.
- Life, Safety, and Fire Protection – including type of fire sprinkler system, fire extinguishers, recent inspection data, fire alarm and detection components, and estimated replacement costs.
- Disabled Accessibility – including general compliance, signage, floor area clearances, and design of accessibility components.
The assessment results in a comprehensive report, including photographic documentation to provide an inventory of each suite that can be used as a tool to more efficiently and economically lease the space.