Our team here at Natura has performed thousands of Multifamily Property Condition Assessments. Lenders and real estate investors routinely reach out to us to execute PCAs to ensure there are no surprises in the commercial building or property that might affect equity, or performance over time. When it comes to Real Estate Due Diligence, you may ask which Property Condition Assessment standard is right for your potential investment. We’re here to help you make sense of it all. But first….   

What is a Multifamily PCA, and Why is it Important?

Property Condition Assessments (PCA), also known as Property Condition Reports (PCR) or Commercial Building Inspections are in-depth results of a thorough investigation into commercial building/property. They are based on standardized lists of requirements established by lenders and government entities. These reports discuss all major building systems and site improvements and include insights into any immediate repairs (capital needs) and recommendations on how to handle maintenance and/or replacement of building systems over time.

In this article, we’re going to briefly explore PCA standards and requirements as they relate to the most common lending scenarios for multifamily properties. Though it is important to note that, outside of these classic lending scenarios, we can custom create a set of standards for your property based on your goals for it over time. For now, however, let’s talk established standards for PCAs and what they might mean for your investment.

ASTM Guide to Property Condition Assessments

The American Society for Testing and Materials (ASTM) Guide to Property Condition Assessments (PCA) is the industry standard for building assessments on commercial properties, including multifamily or multi-unit properties. ASTM’s PCA guidelines include a review of the building’s documents, an on-site survey, a cost analysis over the next 12-20 years for all major repairs and replacements, and interviews with relevant staff.

When it comes to multifamily and multi-unit properties, some of our clients request all of the units be assessed, which is possible, but can take a long time and can impede the due diligence process. Instead, ASTM encourages conducting a statistical sampling of the total number of units. This sampling is to provide an assessment of enough units to be statistically significant compared to the total number of units. This way, we can efficiently – and much more affordably – assess the overall health of the property and systems, and ensure a report is provided within the diligence timeframe.  

IMPORTANT TO NOTE: the ASTM standard does not require any environmental considerations such as mold sampling, radon testing, etc. These fall under the ASTM standard for Environmental Site Assessments (ESA).

Fannie Mae/Freddie Mac

If you are receiving funding from Fannie Mae or Freddie Mac, you may have seen it called a Physical Needs Assessment (PNA). A PNA must be performed to their standards and regulations for multifamily or multi-unit properties.

The Fannie Mae standards and requirements are similar to the ASTM’s standards but are a bit more rigid. As an example, Fannie Mae requires that building consultants and field assessors have specific credentials. They also require certain information on particular building components, and reports sent to them require a specific format. The Fannie Mae guide also includes an environmental element which requires us to report on moisture, microbial growth, and pest management.

HUD

If HUD funding is desired, the property owner will need to have a HUD compliant Project Capital Needs Assessment (PCNA) performed on the property.  The PCNA is a special type of property condition assessment developed by HUD to observe and comment on items that are of particular interest to HUD including accessibility and Federal Fair Housing Act violations.  A HUD PCNA typically has a 20-year cost reserve table and is now formatted and submitted via the CNA E-Tool recently developed by HUD.

HUD has many financing options that have their own forms of due diligence required including the HUD RAD program geared toward private development investment in public housing projects that are undercapitalized for maintenance and upgrades.      

CNAs

Capital needs assessments are typically used in affordable housing projects as they give the leeway to not only report on existing condition but on future desired items. I.e. a new clubhouse or adding a pool, or adding an amenity that doesn’t currently exist.  

Most state housing authorities will expect a capital needs assessment style report for submission of low-income housing tax credits.  

PCAs and NAC

We know what you’re thinking: Please, no more acronyms!

NAC stands for us (Natura Architectural Consulting). Multifamily Property Condition Assessments are what we do. This article is a simple overview of the different types of due-diligence assessments that can be performed on a multifamily or multi-unit commercial property. There are many types of property assessments (and yes, even more acronyms) outside of lending protocols that could be critical insights for the equity, efficiency, and performance of your building. To properly assess – as well as effectively report on – any element of a PCA, PNA, PCR, CNA, or PCNA,  you need experts like NAC.

 

We Love Buildings, and we think you’ll see that right away. Give us a call to talk about your potential investment or current portfolio today!