Challenge
A private real estate equity firm was provided with an opportunity to purchase a premier downtown office tower prior to the building being publicly listed for sale. The firm engaged Allegro to verify the financial underwriting supplied by the seller on the more than two million square foot office building.
Solution
The building sale was a sophisticated transaction with significant future expense obligations which needed to be reconciled with the purchase price and a multiple floor master lease. Allegro abstracted over 40 leases to verify income, operating expenses, tenant improvements, and commissions, and reconciled them against the master lease. Allegro verified the seller’s Argus model for accuracy and built a new Argus model to conduct comparative analysis.
Allegro’s team completed the analysis in an aggressive time frame and uncovered an error in the seller’s calculation of expenses which equated to roughly $800,000 in overstated annual income. Allegro outlined this discrepancy and other inconsistencies between the seller’s model and the actual financials. The seller acknowledged the errors and the client was impeded from completing a transaction which would have resulted in significantly less financial gain than expected.
