More Due Diligence Needed in Real Estate Deals, Advisor Says

Steven Moore, managing director at KPMG, joined REIT.com for a video interview at REITWise 2016: NAREIT’s Law, Accounting and Finance Conference at the Marriott Marquis in Washington, D.C.

Moore commented on some of the biggest mistakes that companies make when it comes to due diligence.

“The biggest challenge in real estate transactions is simply not doing enough due diligence,” Moore said. He described the due diligence process as an opportunity to confirm an investment thesis, verify that what the purchaser underwrote is still there and identify any other problems that may come up at a later point.

“It becomes the foundation of your ownership going forwards,” he stressed.

Moore noted that the most sophisticated operators use due diligence not only tactically, but strategically. Specifically, they try “to find opportunities within the transaction to enhance value delivery,” he said.

Turning to international developments, Moore said Chinese real estate investors in the United States are “assuming their rightful place among international investors” now that restrictions over them have been lifted.

Chinese investors came into the U.S. with a focus on trophy assets in marquee markets, he said. However, because they haven’t been able to realize their capital deployment strategies within those markets, in narrowly defined asset classes, “they are now expanding their purview and becoming more sophisticated about their approach,” Moore added.