ACQUIRE · Red Flags

Red Flags— early signals before they become findings

ViewSeverity8 of 8

Sev · Conf

Title

Workstream

Impact

Status

Evidence

Updated

RF-01High·opened 1h ago

Deferred HVAC CapEx likely understated

Severity

high

Confidence

86%

Workstream

Operations

Model area

CapEx reserve

Impact range

$2.8M – $4.1MCapEx

Status

Converted to Finding

Description

Engineering report flags three rooftop units as end-of-life. Work order history shows 18 compressor-related issues in 90 days. Seller capital plan budgets only $450K over 24 months for HVAC.

Supporting evidence

Engineering Report — Phase II.pdf
p. 14, 22, 28
3 RTUs flagged end-of-life. Combined replacement est. $2.6M–$3.8M.
Work Order History — 24mo.xlsx
rows 218–244
18 compressor-related work orders in 90 days. Most repeat: RTU-3.
Vendor Invoices — HVAC.pdf
p. 7
11 service tickets in Q1 totaling $42,200, predominantly temporary repairs.
Capital Plan — 2026-2028.xlsx
HVAC tab
24-month HVAC budget: $450,000. Insufficient for replacement scope.

Contradictory evidence

Seller Q&A — Round 1.docx · Q.18

“Seller asserts RTU-3 and RTU-5 can be deferred 5 years with continued preventative maintenance. No third-party bid provided to support.”

Missing evidence

Third-party replacement bid
Equipment warranty detail
Original install date (mfr.)

Recommended action

Request third-party replacement bids from qualified mechanical contractors. Add the issue to the retrade package. Reflow the downside scenario with elevated CapEx reserve. Send to Operating Partner for review.

View linked finding (F-01) →