Investing in real estate is an excellent way to diversify your portfolio but it can also be very complex.
Acquiring a property already being leased by existing tenants can make it even more complex. To effectively assess risks and the likelihood that your income stream will continue, we recommend our Acquisition Due Diligence Report.
The Acquisition Due Diligence Report removes uncertainty from the decision to purchase a commercial property with existing tenants by providing in-depth information that allows you to accurately assess the financial health and quality of existing commercial tenant base.
Properly assessing each tenant, especially those that make up a substantial portion of the income generated by the property, can help ensure that you invest in the most profitable spaces possible.
There are 8 main areas that the Acquisition Due Diligence Report focuses on:
- Current Corporate Status
The acquisition report will determine whether the corporate name on the lease has been changed due to a history of name changes or amalgamations and whether the name on the lease is the correct, full legal name. It will also identify whether the corporate entity is currently active and in good standing with Companies Branch and Corporate Tax Branch and whether the business is legally registered in the jurisdiction in which it conducts business.
- Information on Current Secured Creditors, Borrowing and Lease Facilities
The acquisition report will identify each tenant’s secured creditors and any borrowing facilities operated by the tenants including credit lines, term loans, lease facilities, chattel mortgages, conditional sales agreements and assignment of book debts and rents. The report will also include details on negative liens which not considered to be in the normal course of business, such as Tax Liens, (unpaid HST, GST, PST, RST or income tax), Writs of Enforcement, Civil Enforcement Registrations, Garageman’s Liens and other Crown Charges.
- Collections, Legal Actions, Judgments
The acquisition report will determine a history of collection actions and applicable disposition, as well as a history of legal actions launched by and against the tenant. If there is a history, information regarding the cause of action, amounts of actions, judgments and disposition will be detailed.
- Bankruptcy
The acquisition report will reveal history of consumer bankruptcy, consumer proposal, debt consolidation orders and corporate receiverships.
- Tax Court of Canada Judgments
The acquisition report will reveal any history of judgments obtained against existing tenants in the Tax Court of Canada, regarding disputes of unpaid taxes, re-assessments, interest and penalties.
- Commercial Payment History and Historical Data
The acquisition report provides each tenant’s payment history including a summary, list of trade items and payment trends over the past several years. It will uncover patterns in financial stability over a period of time. Further historical data will also be revealed using our proprietary property management database.
- Corporate Locations/Business Affiliations/ Possible Assets
The Acquisition Report will locate any other existing corporate offices, locations, or franchises, as well as business affiliations, amalgamations and subsidiaries. Comprehensive real estate searches will identify any real property which may be owned by the existing tenant.
- Public Company Documents / Web-site Information
The Acquisition report will reveal all information provided by the Canadian Securities Administrator and Canadian Depository for Securities for all publicly traded corporations. A review of the corporate web-site will be summarized, listing any relevant information.
QCR’s superior advantage is that for over 25 years we have been the primary provider of credit reports to the property management industry in Canada, thus allowing us to develop an outstanding industry specific database. This data base offers valuable information for property managers, real estate advisors, valuation/advisory firms, real estate investors, and brokerages across Canada to ensure that commercial property investors are able to make the most educated decision possible.
To find out more about our Acquisition Due Diligence report, contact us today!
