Due Diligence Guidelines: Acquisition of Real Property
This guideline is applicable for proposed purchases of real property, transfer of real property (to the Board of Regents), exchange of real property (for the acquisition portion only) and for Eminent Domain. For exchange of real property the guidelines for disposition should also be utilized.
Eminent Domain will only be considered after a good faith effort to purchase and will be given strict scrutiny. If the institution anticipates that Eminent Domain may be pursued then the Central Office should immediately be consulted.
Pertinent Board Policy: Section 9.9.2
Request from President to Vice Chancellor for Facilities to acquire real property that includes all of the following as attachments:
A. Three independent appraisals of property value (One original of each)
B. Phase I Environmental Report (Two originals)
C. Facilities condition analysis of all physical improvements (One original)
D. Recordable survey (Seven recordable surveys)
E. Legal description
F. Color pictures of property
G. Location map
H. Narrative (in the following numerical outline order)
- Size in acres.
- Description of physical improvements on property
- Statement indicating conformance with institution’s master plan including excerpts from Master Plan indicating conformance
- Any known easements, restrictions or reversions on property
- Any restrictions or reversions attached to the acquisition by Seller
- Specific proposed use of property
- Current location of proposed uses of property
- Justification for acquisition including reason(s) why the activity cannot be conducted on existing property
- Specific source of funds
- If an acquisition is proposed from a business or corporation, could the property be acquired for no charge if considered as a charitable donation? Items to be reviewed include information regarding:
a. Any outstanding mortgage on the property
b. The property’s assessed value relative to fair-market value
c. An assessment of the property’s salability
d. Issues that could lead the owner to viewing the potential purchase as a gift
- Tax assessment of property value
- Any tax liabilities associated with the property. Will the BOR be responsible for any property taxes as the result of the acquisition?
- Any other potential tax issues
- Operating or capital costs associated with the acquisition
- Any unusual operating costs as the result of the property acquisition
- Expenses that are anticipated as the result of the property acquisition
- Will the property produce an income? If so, through what means and what organization and operating unit will gain the benefit from the income? Will unrelated business taxes be an issue? Will there be any significant operating cost resulting from the need to manage the commercial leases? What impacts could occur if the commercial enterprises vacate the premises and the commercial space lies vacant? What percentage of the building is devoted to revenue-producing commercial enterprises?
- Are there any potential liabilities associated with the proposed acquisition, e.g., any unusual potential for accident, loss of revenues, or resultant additional costs?
- Opposition to acquisition by any individual or group
- Any additional information that a prudent person would consider to be relevant or important to understanding and considering the request.
A purchase option should also be provided. The term of the option should be sufficient to insure adequate time for comprehensive review and all required approvals.