Thursday, 7 June 2012

Liquid Investments - Streamlining Commercial Property Transactions

It’s another attempt to deal with the problem of liquidity in real estate investment – how quickly properties can be bought and sold.

Whilst trading in shares can take place in seconds, or even fractions of a second, property transactions by comparison can seem like wading through treacle, with days and weeks of due diligence and contract negotiation.

The IPF Guide, published in May 2012, is the second edition of the guide first produced in 1996.

The earlier guide was an attempt to reduce the delays that bedevil property transactions by recommending the preparation of a pack for sale incorporating all legal and management information at the outset.

When preparing the pack, advisors should be able to flush out problems such as missing deeds; inadequate or unavailable management information; unanticipated title defects; and physical deficiencies in the property, to name just a few.

Those issues can then be dealt with promptly, rather than waiting for problems to be raised down the line in a transaction by a buyer’s advisor.

The IPF says property in the UK continues to represent approximately 7%-8% of the total investment market (by value).

Ensuring a property is “ready for sale” is even more crucial in challenging economic times as prices are often renegotiated and funders become increasingly selective on assets and their sponsors.

The use of online data sites, or “deal rooms”, the biggest advance since the 1996 edition, is welcomed in the new guide, which contains recommendations on how best to run such sites.

The new edition of the guide also contains a key steps flowchart for both an asset and a corporate acquisition and a list of documents to be provided for the complete commercial property information package.

There’s also a readiness for sale checklist and even a checklist spreadsheet.

These charts and lists are very useful for anyone involved in property transactions and also for anyone starting out who wants to get an overview of the key stages involved.

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