Hi All Have you got any advice on how to do DD on a tenant that is occupying a commercial property that you have been interested in? I am wondering what questions you asked and who you asked them to. CIP is obviously very strongly correlated to tenants so it only makes sense that when we seek out properties we do our DD on them too! I suppose the obvious first question is how do we ensure the tenant is financially stable and capable of paying rent on time and without any issues? Edit: here are some questions I was thinking could be asked directly to the tenant Do you know the building is for sale Would you buy? How is business, is it growing/making money? Would you give me a rough estimate of turnover? How many staff do you have? Will you be here long? Is the area busy/thriving? Have you noticed much crime? Are there any outstanding maintenance items? Is there enough foot traffic/parking?
You inherit the tenant when you purchase, hope that the vendor did their DD when they offered the lease. You could ask the vendor to provide the financials that the tenant provided with their application (if they'd still be relevant now). Like any other tenant, you can request the ledger from the managing agent via the vendor to confirm their current/history. You can run company searches through ASIC & data providers (directors, credit report etc).
Keep the dialogue friendly and, perhaps, ask if there is anything they want/need/outstanding (repairs, signage, etc) to break the ice. Happy tenant = Happy landlord (generally).
HI SNM. . if i went to: Search ASIC's Registers | ASIC - Australian Securities and Investments Commission --> https://connectonline.asic.gov.au/R...rchRegisters.jspx?_adf.ctrl-state=q90u5awox_4 and put in the ABN on the lease but nothing came up. is this the wrong place to do a company search? i also went to ABN lookup and found the company there. clicking the link there took me back to an asic connext page summary of the entity. I am not sure what to look for here though? also which data providers are worth looking into?
@kmrr - of the points that you added: 1 & 2 - you don't want additional competition if there isn't already a sign on the building and the tenant isn't aware of the sale 3 Is valid, as a general question 4 & 5 Not yours to ask/none of your business 6 & 7 Can be done by observation - are there lots of sale/lease signs, dumped cars, derelict properties 8 Valid but may also be wishlist/BS as they haven't been requested/tenant responsibility under the lease 9 Can be done by observation - does the area have foot traffic (not required for many businesses but retail is a must), parking is the parking area full/available on street parking/parking restrictions etc The free search is just the headline stuff, You need a paid search such as Company Search | InfoTrackgo or Equifax (there are others as well)
Ha! It seems i might have to pay to learn this lesson! if that is the case which service do you recomment?
Got the Equifax. The biggest lesson i learned was that there is very minimal information on credit history, defaults and credibility on a business/abn that was setup in the last 15 months! nonetheless a lesson learned!
@kmrr - Now you know who the director(s) are, where they live, and the state of company. The vendor may have taken a risk on a new company or the company may have replaced another.
Could do zillion search on the company for credit risk, check the industry - is it booming or struggling during Covid? International travel agent - bad news, small office for online sales base - could be booming. Again only some ideas of more things to look at as industry doesn’t mean the business is going well. Good luck
