Situs provides both acquisition- and lender-related accounting due diligence services to its clients.  Our experienced accounting team, managed by Certified Public Accountants with broad industry experience, performs rigorous financial testing procedures that provide clients with reliable information about their real estate transactions, which allows them greater confidence in their decisions. Our aim is to be financial real estate advisors, providing financial analysis and support to our clients in a variety of ways.

We verify the accuracy of historical operating statements by comparing them to third-party documents such as bank statements, financial statements, tax returns, and invoices. We reconcile rent rolls with lease abstracts to discover any discrepancies, test underwriting base rent and recovery revenue to lease abstracts and historical tenant billings, and ultimately quantify the effect on underwritten cash flow.  We also review tenant correspondence files and analyze tenant billing documents to identify potential credit issues. We then summarize our findings in a concise agreed upon procedures report tailored to assist our clients’ individual transaction needs.

In addition, our procedures add value in the acquisition and financing process by providing assistance with onerous issues such as lease covenants, operating agreements, tenant expense reimbursement methodologies, historical operating volatility, internal controls, lease-by-lease property modeling, and joint venture modeling.

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Agreed Upon Procedures & Financial Testing

Situs offers agreed upon procedures (AUPs) and financial testing services to buyers and lenders of commercial real estate.  We work closely with our clients to develop procedures based on the type of asset and the particular requirements of the project.  Our experienced accounting team will test the historical operating statements of an asset, portfolio, or company, in order to verify the accuracy of the financial information contained therein, and then prepare an agreed upon procedures report summarizing our due diligence findings.  With a focus on clear and straight-forward presentation of property-level issues, our reports strengthen the borrower’s position and in some cases, have even provided the basis for a renegotiation of the final purchasing price or a renegotiation of transactions terms.

Common Area Maintenance Reconciliation Modeling and Testing

Our experienced lease abstracting team will carefully review all tenant leases, identifying any specific clauses pertaining to common area maintenance (CAM) expense reimbursement (e.g., pass-through expense allocations or limits on expense increases).  We then review historical billing statements to ensure that the terms of each lease have been followed.  Any noted discrepancies can then be incorporated in the underwriting cash flow before the transaction is completed.  We also reconcile the lease terms to the Argus® financial model, ensuring that cash flow projections are feasible and as accurate as possible.

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Balance Sheet Analysis

Our experienced accounting team can confirm the existence and accuracy of assets listed on a balance sheet, and we can identify and evaluate existing or potential liabilities. Armed with this knowledge, commercial real estate buyers and lenders can make well-informed decisions regarding their real estate transactions.

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Internal Control Procedures

Situs can conduct an investigation into the operating procedures of highly complex or simple organizations, which provides commercial real estate lenders and non-operational buyers confidence in knowing that historical operating statements and cash flow projections are both feasible and accurate; it also allows them to evaluate whether the current management team has adequate staffing and procedures to properly manage the asset going forward.

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Construction/Developement Project Cost Testing

Situs provides construction/development project cost testing services to passive investors and commercial lending institutions. Our experienced analysts will examine partnership contracts to ensure that the calculation of fees and incentives have been conducted according to the terms of the contract, and to confirm the accuracy of construction- or development-related costs.

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Joint Venture Modeling, Preferred Return, & Promote Structure Testing

Our experienced accounting team can provide waterfall, preferred return, and promote structure modeling for complex joint venture partnerships.