DUE DILIGENCE
due dil.i.gence: the analytical process of the facts and circumstances associated with an investment, intended to help an investor make the most appropriate decision in the given time frame.
1031 investors are often rushed by the timing of the transaction, thereby making it difficult to gather enough information to make suitable replacement property decisions. PRESIDIO’s affiliation with OMNI Brokerage, Inc. (OMNI), provides clients with a due diligence process that opens the door to TIC replacement property choices identified through careful analysis and evaluation. Due diligence is performed in four key areas before TIC replacement properties are selected and presented for investor consideration. This qualification process is conducted and overseen by PRESIDIO’s own specialists as well as OMNI’s Investment Committee assessment and evaluation of the Sponsor.
Real estate companies from across the country make available to investors a variety of replacement property options through TIC investment programs. Because investors often do not have the resources, time or expertise to evaluate these companies, PRESIDIO researches the overall viability of these companies through its network of professionals and due diligence consultants. In conjunction with OMNI’s investment committee, PRESIDIO will often perform on-site reviews of the company’s operations, management team, and financial statements prior to offering their properties to investors.
Analysis of Program Structure
It is critical that the structure of these TIC replacement properties is suitable
to the investors’ needs. When larger, institutional properties are packaged
into TIC ownership they are offered with pre-arranged financing, and coownership
structure. The investment committee reviews the attributes and
disclosure materials of each TIC program to determine investor suitability.
Evaluate 1031 Tax Compliance
A 1031 tax deferred exchange is a complicated transaction and requires
strict compliance with IRS rules and regulations. Recent revenue procedure
rulings and developments at the Treasury Department provide additional
guidelines for IRS compliance. PRESIDIO works closely with OMNI’s
Investment Committee to research the tax structure of TIC programs for
compliance with IRS and Treasury guidelines.
Property Analysis
Each property must stand on its own merits and show evidence of strong
investment performance. PRESIDIO and OMNI, through their due diligence
qualification process, evaluates the property’s fundamentals comparing
available properties through a side-by-side analysis. Cap rates, market
information, property statistics, equity and debt ratios, are examples of this
level of economic analysis.
