Technical Due Diligence

What is a Technical Due Diligence?

TECHNICAL DUE DILIGENCE IS THE PROCESS OF EVALUATING LAND, BUILDINGS OR PROJECTS INVOLVED IN A REAL ESTATE INVESTMENT.

A Technical Due Diligence is intended to determine the current status and future contingencies of a property, prior to the transfer of the same, with the aim of minimizing and limiting the risk in a real estate transaction. For this purpose, within the evaluation process, we carry out an exhaustive and thorough analysis of the possible risks, among others:

Compliance of the building or project with current regulations (at the time of design or current).
Study of the feasibility of a new use of the building.
Study of the condition and useful life of the existing construction elements and installations.
Estimation of the necessary costs for the use and/or exploitation of the property, adjusted to the current use and market.
Knowledge of the current and future costs for adequate maintenance.

The main objectives of a Technical Due Diligence are the following:

To know the state of the property under study, making a detailed study of the constructive elements and facilities that compose it, identifying the defects, performances and useful life of each one of them.
To confirm the suitability of the property for the intended use.
To know the initial necessary expenses, as well as the possible future expenses.
Provide a solid basis for investment negotiations.
Obtain a level of protection for buyers/operators.

Who needs Technical Due Diligence?

BUYERS WHO WANT TO UNDERSTAND THE RISKS OF THEIR INVESTMENT AND IDENTIFY OPPORTUNITIES AND SELLERS WHO WANT TO ADDRESS POTENTIAL PROBLEMS IN THE SALE OF THE PROPERTY.

Technical Due Diligence provides the necessary information to avoid unexpected costs and delays in a real estate investment, as well as serving as a solid basis for negotiation during the property’s transaction.

It is advisable for buyers to understand the current state of the property they are acquiring and its physical characteristics before purchase. This allows for the estimation of costs needed to adapt or improve the property to make it usable or to upgrade it, thus avoiding later surprises.

For sellers, it allows them to provide greater credibility to third parties regarding the current state of the property and its technical viability for various uses.

Properties on which we perform Technical Due Diligence

Unbuilt Land: We conduct a study of the land from a technical perspective and evaluate its urban situation. You will receive a report on the current state, possible uses, and actions to improve the condition of the land.
Stopped Construction, Unfinished Works, Works without Operating Licenses: We carry out a thorough study of the current state of the construction, estimating the progress and work needed to complete it. We indicate the actions and requirements to obtain operating licenses, so you are aware of the procedures needed after acquiring the property.
Existing Buildings Intended for the Same Use: We evaluate the current state of the building, the useful life of the construction systems, and the installations. We assess the necessary repairs for its use, as well as possible improvements within the current market and indicated use. We estimate the maintenance work and replacements of construction systems and installations according to their useful life.
Existing Buildings Intended for Change of Use and/or Modification Projects: We evaluate the current state of the building, the useful life of the construction systems, and the installations. We will study the feasibility of the desired project. We assess the renovations needed for its use. We estimate the costs of improvements and modifications for the indicated project. We estimate the maintenance work and replacements of construction systems and installations according to their useful life.

In short, thoroughly understand the object, explore options and opportunities, and make informed decisions with confidence and transparency.

What makes Gloval different?

TECHNICIANS WITH EXTENSIVE EXPERIENCE AND THE NECESSARY QUALIFICATIONS IN DIFFERENT AREAS

We adapt to each client’s needs, providing personalized service. We delve into the aspects that interest you the most, aiming to answer the most common questions that arise:

What is the current state of the project?
Are there any issues with permits, legalizations, or licenses?
What documentation is available for the project?
What are the main construction elements and installations of the property, and what condition are they in?
Is there a possibility to implement improvements?
What documentation is available for the project?
What are the main construction elements and installations of the property, and what condition are they in?
Is there a possibility of implementing improvements?

Let’s have a chat

How do we do a Technical Due Diligence?

WE PRODUCE A COMPLETE AND EXHAUSTIVE TECHNICAL REPORT, AIMING FOR ORDER, SIMPLICITY AND VISUAL CHARACTER

Our intervention as Technical Due Diligence results in the preparation of a report that addresses the client’s needs, following the points detailed below:

Contracting: We excel in offering personalized customer service tailored to competitive prices.
Documentation: We request and conduct a detailed study of all received documentation, assessing any missing documents and potential future issues if applicable.
Visual Inspection: We thoroughly inspect the building, including construction systems and installations. We perform a discreet inspection, avoiding any inconvenience with our presence in the building.
Risk Assessment: We conduct a detailed analysis of risks and anomalies detected in the documentation or during the visit, as well as an evaluation of the useful life of the construction elements and installations.
CAPEX: We assess all detected anomalies and risks, detailing the actions to be taken over a maximum period of 10 years, thus providing a precise economic estimate.
Our Report: We compile all the above into a document where simplicity, order, and clarity are paramount.

Documentation

We will check that all the obligatory documentation according to the state, autonomic and sectorial regulations exists and is available and we will advise you on the necessary documentation for the final compression of the property from the constructive-architectural point of view as of facilities.
We will check that the documents provided are in force and correspond to the reality of the property.

Inspection

From the information available in the project documentation and the possible main measurements taken during the visit to the building, we will carry out a check and control of the surfaces.
The revisions are carried out according to checklists, insisting on those points whose maintenance or replacement are more burdensome, detecting possible infractions, as well as constructive pathologies or constructive damages in the building.

Costs

Based on the Due Diligence analysis, we will propose a 10-year Capex plan based on the review of existing documentation, the visit, the actual conditions of the property, and the application of useful lives and market prices.
Likewise, we will prepare an initial Capex estimate (Zero Setting) that assesses the necessary cost to bring the asset to optimal conditions, based on applicable regulations and the investor’s requirements.

Inspection

Once the inspection has been carried out and the information obtained from the documentation has been compared with what was verified during the visit to the property, we will draft the report according to the defined scope, highlighting the anomalies detected.
Finally, we will send you the detailed Technical Due Diligence report, and our team of professionals will be at your disposal to answer any questions you may have.

Frequently Asked Questions

Who is part of the qualified staff?

For a good Technical Due Diligence, we need accurate, technical knowledge of the building processes within the real-estate sector. In this regard, the experience and sheer volume of all the appraisals made by GLOVAL make us an expert company in this type of appraisals. The qualified staff who is devoted to preparing this type of appraisal reports depending on the type and use of the property is made up of architects, architectural technicians, construction engineers and agricultural engineers.

Is a Technical Due Diligence mandatory in the sale/purchase of a property?

It is not mandatory, but it does provide the opinion of a third party who is not involved in the sale/purchase regarding correct and accurate information on the current situation of the property and other aspects like regulatory compliance, deficiencies, suitability of the project, current and future costs, etc.

Which documents do I need to provide?

In order to carry out a Technical Due Diligence report, it is considered advisable to have the following documentation (when available):

Execution/Rehabilitation Project. Construction budget. Memory of qualities
Building Book
Updated plan of the property
Inventory of installations
Documentation accrediting the legality of the installations.
Maintenance carried out, both constructive and installations. Contracts in force.
Budgets of works and reforms carried out. Supporting documentation and supporting documents.
Environmental documentation (if applicable)
Licenses
Land registry statement
IBIS
Other documentation considered to be of interest for the correct performance of the commissioned work.

What information does a Technical Due Diligence report generally collect?

By way of example, the index used in the Technical Due Diligence reports, which is adapted to the type of property analyzed, is as follows:

- - Object of the order
  - Documentation provided
  - Initial data
  - Description of the building
  - Urban planning licenses
  - State of the building’s constructive elements
  - Condition of the installations
  - Licenses of the installations
  - Capex