TFT CPD sessions: Sustainable due diligence: the right data at the right time for transactions
Today’s buildings face tough challenges from market expectations, sustainability commitments and ESG objectives. What needs to be done to make these existing assets more valuable today and more resilient for tomorrow?
On November 28th, TFT kicked off its latest knowledge-sharing session on this topic. We held ‘Decarbonisation: the future for today’s buildings’ at RSA House; and featured three panel sessions combining expert advisors from the TFT team with project partners and client guests to bring multiple perspectives to the conversation.
The morning began with a look at commercial real estate acquisitions; a time-sensitive and often high-stakes process in which purchasers need to see the opportunities and challenges posed by a given asset, and vendors need to present a clear case to the market.
Panel overview:
Our panel for ‘Sustainable due diligence: the right data at the right time for transactions’ discussed the importance of understanding an asset’s sustainable credentials and potential within the typically tight timelines of a real estate transaction.
Our panellists were:
- Jay Ridings, Head of Technical Due Diligence at TFT
- Neil Granger, Senior Director for Engineering & Sustainability at TFT
- Jon Cochrane, Head of Asset Management and Sustainability at Feldberg Capital
Jay began by talking through the changing nature of building acquisitions and the need for a clearer understanding of a building’s sustainable potential. He noted how Technical Due Diligence (TDD) reports have evolved from mere snapshots of a building’s physical state to become templates or roadmaps for post-acquisition improvement works.
From Feldberg Capital’s perspective, Jon explained how TFT reports guide investor requirements, underwrite sustainability targets, insurance policies, and building performance improvements. The insights they contain help to plan the route to an ideal exit point for an owner.
Feldberg’s goal is to improve assets to the point where its future sale is de-risked for a prospective purchaser, allowing them to command the best returns. With that goal in mind, TDD reports must get under the skin of an asset.
But how much depth can one achieve in just a few days?
Though TDD reports need better data, Neil Granger highlighted the tension between quality research and the time constraints of a transaction, asking: “What is an acceptable level of risk – in financial terms – of having the wrong data? Can you quantify that and factor it in to your transaction timelines?” Neil’s view on the dilemma? “I don’t think the benefits of speed outweigh the long-term risk of bad data”.
Some insight can be achieved with modelling and gap analysis, but when benchmark data can be so wide of the mark for many buildings, it can be a risky approach.
From a client’s perspective, Jon described more data limitations impacting acquisitions, particularly around energy use when most buildings do not have metered usage data. Leasing information also emerged as a significant challenge, as a building’s occupation impacts future refurbishment possibilities. Removal of information silos and better communication can lead to teams identifying opportunities such as being more creative with short term leases or decant, without the need for full vacant possession. These can only be determined by looking at accurate data ahead of time.
Digital twins could address these challenges, our panel agreed. But can they do so today? That seems less likely, given the reality of implementing them across smaller, existing buildings. But as with all technology, such as digital data capture, this should improve over time.
The panel found more optimism in the trend towards sustainability certification and Science-Based Targets – which Feldberg Capital already has in place. These standards require demonstrable performance data and will drive building owners and occupiers to provide better data as a matter of course.
The final piece in the puzzle is to bring more specialists together as part of a sustainability-led approach to TDD. More technical advice on the available data, as well as to identify the ‘unknowns’ of an asset, are essential to realise the value of a building and set it up for a programme of sustainable improvements after purchase.
Back