real estate covid due diligence

Real Estate Due Diligence in Covid-19 Times: New Risks and New Solutions

One of the things Covid-19 has taught us is how to reconsider the way we assess risks: Real Estate due diligence has not been spared from that lesson. 

Artificial intelligence has proved to be a versatile solution to help real estate professionals, investors, and lawyers to quickly identify any issue arising during real estate due diligence, accomodating for covid-related scenarios.

The Harsh Truth about Due Diligence

When performing due diligence on a portfolio of properties, perhaps during a M&A transaction, real estate lawyers are tasked with the herculean task of reviewing hundreds of lease agreements. Manually.

Due diligence on residential or commercial leases can prove incredibly important for assessing the risk involved in the purchase, but itself is a risky process, being error-prone, and being oftentimes limited to a limited number of contracts – usually the ones with highest value.

The Covid-19 pandemic is changing the way lawyers conduct due diligence in the context of real estate acquisitions.

Indeed, Covid-19 complicated the scenario by adding risk profiles, the necessity to look out for new potential criticalities inside each contract. 

For instance, there are a number of critical clauses that may need to be reviewed during a real estate due diligence process, in a pandemic scenario:

  • The building has adequate HVAC and safety measures
  • Termination clauses
  • Service Charges
  • Rent indexation
  • Lease provides for flexibility and renegotiations 
  • Business interruption insurance 
  • Loss of rent insurance 

Coming back to the initial problem… how to make sure that the due diligence process is performed correctly – if the Covid-19 pandemic means that there are new risk profiles to consider, which in turn, means more clauses to check for each agreement? 

AI-Document Review Technology in Real Estate: Lease Abstraction

 AI-powered document review technology allows for fast, granular and specific  review of agreements, reducing the time and risk connected with real estate due diligence.

Cognitiv+ has developed the Lease Abstraction tool, a machine learning technology that has been trained and optimized to identify key clauses in lease agreements. 

Watch a FREE Demo of the Lease Abstraction Tool. 
Acess a FREE Demo of Cognitiv+ Lease Abstraction Technology

Extraction of Key Data Points

Cognitiv+ lease abstraction technology is trained to recognise major data insights within lease agreements such as; 

  • Names of the tenant(s) and landlord
  • Address and square footage of the space
  • Rent 
  • Ground rent
  • Service Charges
  • Whether the tenant has right of first refusal
  • Termination Clause
  • Rent indexation
  • Real estate taxes
  • And many other Covid-19 relevant clauses

Obligation Identification and Extraction

The Cognitiv+ Lease Abstraction tool also allows for extraction of obligations, adding value to your risk assessment and ranking existing obligations among:

  • Deliverables
  • Obligations
  • Discretions
  • Prohibitions

Being able to assess and rank obligations adds granularity to the due diligence process.

Integration

Cognitiv+ API allows for customized integrations with your Data Management System: all the data extracted can seamlessly flow into your platform for easier analysis and visualization. 

Benefits of Lease Abstraction in Real Estate Due Diligence

    • Risk mitigation. Granularly and effectively reviewing the whole portfolio of leases allows for a more detailed due diligence process, substantially reducing the risk for the investor.
    • Time saving Automating the due diligence process means reducing the time involved in manual document review – our customers report time savings of 30–70%.
    • Resource optimization Leaving the most tedious and repetitive part of real estate due diligence to a lease abstraction tool means lawyers can focus on high-level interpretation of data.

Access a FREE Demo of Cognitiv+ Lease Abstraction Technology.

Acess a FREE Demo of Cognitiv+ Lease Abstraction Technology