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Acquisition criteria as the basis of great commercial property investment decisions

Previously, I have discussed the benefits of commercial property investment.

Of course, all investment activities carry a certain level of risk. In commercial property, the investment risk can be minimised by ensuring that acquisitions are well-considered and the fundamentals of the opportunities are diligently investigated.

A great investment acquisition process takes a sequential approach by setting a general acquisitions philosophy that is then used as the basis of a set of stringent acquisition criteria.

Once the benchmarks have been set, all proposed acquisitions must be measured against them and assessed as compliant or satisfactorily differentiated from the criteria.

By strictly employing a process of this type, one can be confident that investment decisions have been correctly made on the basis of well-considered fundamentals.

The flow chart below outlines the basics of such an acquisitions process. Over the years, I have applied this process to in excess of 100 commercial property acquisitions.

Whilst the majority of these acquisitions have gone ahead, a number of assessments have resulted in the acquisition not proceeding. In most cases the decision not to continue was based on material uncovered during the due diligence process.

I consider the value of the process is best measured by those which have not proceeded, this is where active risk management is evident.

In summary, all acquisition processes should be based on a sound investment philosophy, well-considered asset selection criteria and comprehensive, targeted due diligence leading to a dispassionate investment decision.

Steven Goakes