Key Takeaways
- Every $1 of deferred maintenance costs $4-$5 to resolve including cascade effects (BOMA research).
- Deferred maintenance compounds through cost escalation, condition degradation, and cascade failures across systems.
- Use the TCO Method for acquisition pricing—it captures CapEx, vacancy during repairs, and reduced revenue.
- Establish walk-away thresholds before DD begins: FCI > 20%, deferred maintenance > 15% of purchase price.
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Test Your Knowledge
1.What is the typical multiplier for deferred maintenance compounding?
2.At what FCI threshold should an investor consider walking away from a deal?
3.How should deferred maintenance risk be quantified in the pro forma?