THE APOD OR HOW A SIMPLE PAPER FORM CAN BUILD TRUST AND SIMPLIFY COMPLEX CRE TRANSACTIONS.

February 9, 2016

 “What’s it like being a commercial real estate broker?”

   a friend asked recently.

I paused for a moment and pondered.

“It’s simple, but it’s not easy,” I said.   

“What’s not so easy about it?” he asked, with a tone that implied he views my career as scarcely harder than a grade schooler's paper route.

 “Well, it’s difficult to manage trust issues between Sellers and Buyers and other stakeholders in almost every transaction,” I said.

Here’s why folks: There are lots of problems with sharing correct and verifiable information.  It’s more like buying a business and less like buying a stock.  But there is a way to address this issue—the APOD.

In the sale of investment real estate, key financial information is shared with a simple one-page form.

APOD is an acronym for Annual Property Operating Data.  And if there is one thing, among all other things, that any broker or Seller can do to ensure a smooth transaction with minimal trust issues, it’s to have a complete, correct, and verifiable APOD available for the buying side of the transaction to review and rely upon.  Still, it’s amazing that multi-million dollar properties are often listed—and sold—without an APOD available.

An APOD summarizes the money involved in the annual operations of the property in three categories:  income, expense, and net. As seasoned brokers and investors know, the “net” portion is the net operating income (NOI) – a key element in the discussion of cap rate and price in the income approach to value methodology.

An APOD should also be verifiable.  For most owners of investment property, this means the APOD can be reconciled by comparing it to their federal tax form Scheule E.  A savvy Buyer’s broker will know to ask for this along with the APOD.  A smart Seller’s broker will have it available for qualified buyers when the time is suitable, separate from the Seller’s full tax return.

The best brokers do a lot to help their clients make good decisions.  For clients buying commercial real estate, an APOD is a necessary item on the due diligence checklist.  A professional Buyer’s broker should make fulfilling that request easy.

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