Due diligence for the off-plan purchase of an office building

Sector of activity: Real estate
Size (value of asset in €m): 90

Context

Acquisition due diligence for the off-plan purchase of an office building supported by an SCI (real estate investment company) acquired by an investment fund

The operation was based on a real estate development contract and provided for the establishment of an “earnout” additional price calculated on the rent level and timetable for marketing of the assets

Operation relating to the acquisition of the SCI’s shares and which raised significant tax issues

Our mission

  • Analysis of historical accounts of the SCI supporting the project, highlighting the main performance drivers and the conditions for financing the operation
  • Analysis of the real estate development contract (CPI), comparison of the costs incurred with the provisions of the CPI and identification of overrun risks
  • Identification of the principal adjustments to net debt to include in the price formula for the SCI’s shares
  • Assistance with determining the price formula and validation of the drafting of clauses in the purchase agreement
  • Support during negotiation meetings with the vendor
  • Assistance with the review of closing accounts and validation of the price formula adopted

Results

  • Due diligence made it possible to highlight price adjustments not identified by the buyer and secure the price of shares in a context of a significant tax impact

Key success factors

  • Familiarity with the sector
  • Ability to produce accurate analyses and highlight the principal price adjustments
  • Securing the price formula incorporating all of the operation’s adjustments and tax issues