Commercial Real Estate Report

This report details the process of investing in commercial real estate, focusing on a redevelopment site in Kelowna. It emphasizes the importance of due diligence, including property condition assessment, location analysis, and legal review. The report outlines the investigation needed before purc...Read More

Running head: COMMERCIAL REAL ESTATE 1
Commercial real estate
Name
Institution
Date

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http://www.collierscanada.com/22500#.WbLE7PMjHIU
This is a redevelopment site that is located on Ellis Street that is at the center of Kelowna
district. The property was a former building owned by Kelowna food bank. It has proximity to
other thriving businesses in the area such as the law courts, resorts, and the Prospera place. The
site is in the middle of a zone that is visited by both domestic and foreign tourist. It’s close to the
beach making it an attractive investment property to redevelop as a shopping mall. Every
business environment experiences various forces which determine the success of a company
within the industry under which it operates. Competition in the business environment
significantly affects the operations of retail industry companies hence requires proper strategy
designing for a company to gain a competitive advantage over the rivals. Besides around the
region, little competition exists with attractive rental rates. This paper explores the industrial
property and gives an insight into the investigation to be conducted before its purchase.
Prior to the acquisition that highly relies on the mortgage financing, some aspects that
relate to the property will be investigated. First, the location of the building. Researching on this
issue ensures that the site of the property shows some prospect. Since Kelowna is a cultural
district, the location is suitable for business. Its accessibility to customers is easy. Besides, the
infrastructure allows transport of supplies required (Baum, 2009). Secondly, the condition of the
property. This investigation aims to ensure that the property is in the proper state. Additionally,
the repairs and remodeling of the property to suit its new purpose should be economically viable.
Along with these, the hidden costs will be investigated to ensure that the maintenance costs may
not outweigh the benefits of investing in the property. Lastly, the property’s litigation and
support services will be assessed before commencing the purchase. These comprise of the due

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diligence process on the property (Brueggeman, & Fisher, 2008). The hidden costs make the
company incur unnecessary and unplanned expenditures that require a supplementary budget.
Conducting due diligence on a commercial real estate property ensures that precautions
are undertaken before purchasing a property. The precautions cited earlier are part of this
process. They are done for some reasons which are discussed in this paragraph appropriately.
Most importantly, investigating a property ensure that the offer price reflects the actual value of
the property. Mortgage lenders request property appraisals to ensure that the property the
finances are invested in is a viable investment. As such, the purchaser will need an appraisal to
determine the value of the building (Sirota, 2014). Secondly, the precautions undertaken reveal
the hidden costs of property to ensure that its maintenance costs may be sustained without
limiting the benefits expected after purchase and commencement of a different enterprise.
Thirdly, litigation on the property allows the purchaser to identify previous owners or lessors and
ensure that the documentation of the building is legal without a chance of future legal issues
(Charney, 2010). Lastly, precautions about the location and the availability of support services
determine the viability of the future business.
While the above steps are conducted, the site of this property may affect the process. The
property is situated in the heart of the town. Doing due diligence in the central part of a city may
prove cumbersome regarding movement such as traffic jam thus requiring rescheduling and
consuming time. However, due to the easy access by road, this may not be a challenge.
Secondly, as the property to be redeveloped lies in the heart of the building, there may raise
problems with the local government with the attempt to avoid disturbing other business in the
area. This may entail many legal requirements in such as surveys and lease reviewing, as well as,
environmental investigations (Charney, 2010). Additionally, as the property is located in the

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heart of Kelowna, municipal agreements and bylaws will have to be upheld thus introducing
rigidity and time consumption in the process.
After conducting the due diligence process, the buyer may require placing special terms
in the purchase-sale contract of the property. One of these special conditions relates to the related
expenses of the property. This regards the management and maintenance costs that relate to the
property (Geltner et al. 2011). As a buyer, identify these expenditures determines when the
purchaser will assume them. As such as a purchaser, the particular term may entail the seller will
assume all accrued expenses up to the date the purchase is made. This ensures that the purchaser
does not inherit expenses that were incurred in its purchase. Secondly, land use approvals are
necessary (Sirota, 2014). The distinct term, in this case, relates to the previous assessments by
surveyors and local government to ensure authenticity and protect the buyer from inheriting legal
issues from previous lessees. Lastly, another special condition in the contract may entail the
seller to conduct an appraisal to allow the buyer to bargain the price of the property based on the
difference in the seller’s and purchaser’s evaluations (Ling, & Archer, 2012).
After all the conditions are met, some steps are undertaken to close the sale. An escrow
agreement is written stating the duties of the third party in the deal (Harwood, & Jacobus, 2013).
Secondly, the buyer and seller will deal with the legal authority and requirements relating to the
contract such as title transfer and title insurance for the purchaser. Thirdly, the buyer carries out
the zoning process to ensure that the intended purpose can still be undertaken (Longo, & Alberini
2006). This step is for reassurances as well as conducting environmental research. Like the prior
purchase process, the sale of this property will be affected by the location. However, these
challenges that arise from its location are due to the municipal regulations that will require that
standards are met and that the transaction is legal (Charney, 2010). Failure to comply with the set

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by laws and other policies set aside calls for strict scrutiny and even other legal measures that
make the defaulter suffer mercilessly. Besides, the intended purpose must comply with the
bylaws of Kelowna central district.

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References
Baum, A. (2009). Commercial real estate investment. Taylor & Francis.
Brueggeman, W. B., & Fisher, J. D. (2008). Real estate finance & investments. McGraw-
Hill/Irwin.
Charney, I. (2010). Three dimensions of capital switching within the real estate sector: A
Canadian case study. International Journal of Urban and Regional Research, 25(4), 740-
758.
Geltner, D., Miller, N. G., Clayton, J., & Eichholtz, P. (2011). Commercial real estate analysis
and investments (Vol. 1, p. 642). Cincinnati, OH: South-western.
Harwood, B. M., & Jacobus, C. J. (2013). Real estate principles. Prentice Hall.
Ling, D., & Archer, W. (2012). Real estate principles: A value approach. McGraw-Hill Higher
Education.
Longo, A., & Alberini, A. (2006). What are the effects of contamination risks on commercial and
industrial properties? Evidence from Baltimore, Maryland. Journal of Environmental
Planning and Management, 49(5), 713-737.
Sirota, D. (2014). Essentials of real estate investment. Dearborn Real Estate.