What amount of due diligence would be needed on a master lease? I am looking at a turnaround park. Appears initially that it is mismanaged, but will be digging a little deeper. It brought me to this question that I can’t find the answer to. Obviously no appraisal needed, and I probably wouldn’t want a phase 1 until I actually am looking to become the owner, right? Anything else that would wait until I exercised the option?
You are correct – until you buy it you are just a manager effectively. You can wait on the Phase I and other reports if you want, but what if you have done all that work and find out that it’s contaminated? I would do the Phase I up front, as well as a review of the title to the park – anything that would preclude you being able to exercise your option. Appraisal is a waste of time because your goal is to make the value much higher.
Frank, you bring up a great point about the Phase 1. Thank you for your input.