REITS and Investors Beware When Buying a Property with Elevators (Part 1)

Editor’s Note. As one of the top elevator consulting firms in the United States, we see a lot of “disasters” out there. Among them is a failure to conduct “due diligence” before buying a property. Here’s a blog post on the topic of just how important “buyer beware” can be in the vertical transportation industry.

When a buyer hires The Elevator Consultants to perform an elevator due diligence survey or an elevator audit on a property they are evaluating for purchase a property transaction there are several patterns and traps the buyer falls into. In fact, we must disclose that in 100% of our engagements we uncover deficiencies that empower our clients during this transaction to gain large financial benefits.

Vertical Transportation ConsultingFirst the seller will do everything within their power to show the buyer that the elevator, escalators, lifts, and other vertical transportation assets are in great condition. The seller should use all measures to show the equipment is in great condition, will last its expected life cycle and/ or without flaws. For this reason, we do everything for the sellers we represent to make sure that the elevators are truly never a problem when they are selling their buildings. On the other hand, let’s look at the situation from the perspective of a buyer. Here, the seller may provide the buyer with quotes, proposals, budget numbers, capital plans, from one or many elevator companies. These quotes may have been solicited without a consistent scope of work. This is like asking your car mechanic to fix the noise you heard in your engine. Your car mechanic will give you a quote or estimate without having test driven, heard the noise or even looked under the hood. Another fact is that the elevator service providers are in business to make money, and so they may use “creative techniques” as to the quality of elevators and other vertical transportation assets.  If your seller says the elevator service provider said my cost to fix the equipment is “X,” and we say it is “Y,” then why didn’t the elevator service provider do the work in the first place since it is covered under industry best practices, code or the current contract in place? If the elevator service provider gave the current owner deferred maintenance, then they would be basically saying that “we haven’t been doing elevator maintenance”. In 100% of our on-site due diligence surveys, the elevator service provider is never providing the appropriate maintenance that is required to maintain the equipment to sustain its projected life cycle! The bottom line is we can assist you either as the buyer or the seller, and either get the proper work done and/or evaluate the situation (if you are a buyer) so that you know what you’re getting into.

Larger Capital Expenses such as Elevator Modernizations

If it is a larger capital expense like an elevator modernization or large repair than the proposal from the elevator service provider should have a defined scope of work.  The problem was this is that the seller, when obtaining these proposals budget etc., is never comparing “apples to apples.” We at TEC consistently gets quotes back from the seller asking, “how does this compare to your report?” If it doesn’t, we give a full snapshot of the equipment vis-a-vis the shape of the current equipment, how well it is being maintained, the deferred maintenance as well as capital plans. This is done in order to protect our client, the buyer. The elevator service providers are not required to do this. As a matter of fact, it is very common for the elevator service providers to tell the current owner they are in great shape. This is very common for property assessment companies to gather elevator information from the elevator service provider and the owner. People think because the elevators pass inspection and have the certificate in the elevator that it is fine, but this is often not the case.These certificates are not going to tell you about upcoming code upgrades, life cycle, deferred maintenance, performance issues. An investor is foolish to rely on this data!

Hiring an Elevator Consultant is a Smart Business Decision

Whether you are the potential building buyer or seller, remember it is a dog-eat-dog world, and the current elevator service provider will provide ownership with whatever information they need to maintain the account. Elevator service providers are not consultants, something which is stated in the fine print. Protecting your current or future investment with vertical transportation consulting is one area that is commonly overlooked. Indeed, if you’re selling your property you can follow our proprietary methodology when selling. Regardless, whether you are the buyer or seller, reach out to us today for an initial consultation on your vertical transportation consulting needs.


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