Why Failed Due Diligence Can Be A Good Thing

We’re meticulous when it comes to due diligence. We take it seriously because protecting our investors' hard-earned capital is our priority.

Since June, our team has personally visited more than 10 properties in six states, working through an extensive checklist with a critical eye.

When a property goes under contract, our team dives right in. We make it a point to get boots on the ground as soon as possible, and our analysts begin combing through every last detail. 

Unfortunately, not every property passes the test. On average, we terminate one in three contracts, typically within the first two weeks of our process.

One recent example of a deal that did not measure up was an Ohio medical office complex.

After personally visiting the property, conducting inspections, and performing extensive financial analysis, our team moved on to interviewing the tenants.

An immediate red flag, the seller denied our request to engage with the tenants. As a result, we informed the seller’s broker that if we could not complete our due diligence, we would have to remove this property from consideration, as is our standard operating procedure. Still, the seller refused.

Simultaneously, our financial analysts also learned that the property taxes were highly likely to increase in a meaningful way in the next year or two. The seller resisted acknowledging our findings, yet another reason why this specific property would NOT be a fit for HJH, and more importantly, would not fit the standard we hold to protect our client’s investments.

Was it disappointing to walk away from a deal? Sure. But this experience was also validating as it underscored the need for our strict review process and criteria.

In this case, failure was a good thing - our investors were protected.

Sometimes, a deal just isn't meant to be.

And that's okay.