Whether for annual capital budgeting or the refinancing of an existing property, building owners and managers need a comprehensive understanding of the physical condition of their properties. Not only does this help comply with ASTM 2018 standards, it also ensures the wellbeing of tenants and long-term success of the asset.
While PCAs and FCAs sound quite similar, they differ in both scope and purpose. Building owners and managers need to know what those differences are. By doing so, they can fully leverage the data and information they provide.
Focusing on the Short Term: Property Condition Assessments
PCAs focus on the current state of buildings and individual components. They are often completed at the request of a lender, appraiser or potential property investor. Typical PCAs list the operating status details of key building infrastructure. These include a building’s current deficiencies and the immediate repairs needed. PCAs are an integral asset for lenders or investors who want urgent information. They help estimate an asset’s most immediate capital needs during the due diligence process and can aid in informing purchase and lease price negotiations.
There are specific inspection standards that need to be met for conducting PCAs. The ASTM 2018 Guideline for Property Condition Assessments sets these standards. This document outlines a baseline framework for any PCA done in North America. Under the ASTM 2018 guidelines, assessments must include the following base requirements:
- The review of documents and the process of conducting interviews
- Evaluation of physical deficiencies and the process to assess capital costs
- The administration of a walkthrough survey
- Details on who can conduct the PCA from a certification and quality control perspective
The ASTM Standard uses:
- Documentation Review and Interviews
- Walk-Through Survey; refer to Section 8. 5.2.3
- Preparation of Opinions of Costs to Remedy Physical Deficiencies
- Property Condition Report
By definition of the ASTM 2018 standards, a PCA typically does not include a forward-looking view although many firms will include a multi-year capital reserve estimate.
A Tool for Long-Term Capital Planning: Facility Condition Assessments
Conversely, FCAs tend to focus on long-term aspects of asset management. As detailed in a recent post, they help determine capital budgeting and investment management strategies. This makes them an essential asset for building owners and managers. FCAs help managers understand, evaluate and plan capital expenditures, including maintenance costs for buildings and their specific operating components.
Unlike a PCA report, FCAs can better determine an organization’s income, expense and cash flow projections. They provide more detailed capital expenditure estimates on a quarterly or annual basis. This means that they typically include:
- The lifecycle status of a building’s infrastructure
- Details on immediate or deferred maintenance
- Estimates on replacement costs for building infrastructure
- The total building value from a construction cost perspective
- The evaluation and ranking of capital investments from a strategic planning perspective
Data and Digitization: Unlocking the True Value of Your Condition Assessments
For organizations who want the most from their assessments, data needs to be standardized, accurate, and accessible. Information should also be integrated into financial analysis or budgeting software. For example, you can have data on capital expenditures and maintenance costs directly added into cash flow projections. This allows you to better test scenarios and optimize capital plans around other revenue and cost factors.
Lastly, automate the data collection process for a PCA or FCA with tools that incorporate ASTM 2018 standards right within them. This will allow you to achieve compliance, and conduct assessments that truly improve your planning decisions.
With the recent launch of our Facility Condition Assessment Software, 4tell™ Solutions is taking the lead in capital planning software for real estate and facilities management. If you’re looking to improve your FCA or PCA process, contact us for more information.
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