Due Diligence

Due Diligence is the analysis of the facts and circumstances associated with an investment, intended to provide an investor with a full disclosure of the facts and risks in order to arrive at an investment decision.

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As seen in the graphic above, the first three layers of due diligence are performed by the sponsor, the lender and legal counsel, while a fourth layer is performed by our brokerage.

After an offering is initiated by the sponsor and approved by the lender and legal counsel, it is given to our brokerage due diligence department. Our full-time analysts review each offering, with the following five key areas as their focus:

  • Examination of the Real Estate Provider (Sponsor)
  • Analysis of the Properties Themselves
  • Analysis of the Market
  • Analysis of Program Structure
  • Evaluation of 1031 Tax Compliance

These analyst findings are then presented to our investment committee. Each member of this committee has many years of commercial real estate experience and expertise in the 1031 exchange marketplace.

Our brokerage due diligence department rejects approximately 30% of the offerings presented. The reasons for rejection are varied and can relate to the property itself, the sponsor, the financing, or the market. It is important to note that this final level of due diligence is after the sponsor, the lender and the legal counsel have all approved the offering, meaning that those offerings declined by us may be available to investors through other brokers.

In this context, it is especially important that investors feel comfortable with the standards of their broker and that their approaches to investment align. Cornerstone, having uninterrupted experience for the last 11 years in the field of 1031 exchanges using DST and TIC structures, has a conservative approach.