The Patriot Deal Room: KILL IT EARLY

The deal killers I look for in the first ten days, before diligence gets expensive.

By Jeremiah Boucher | Founder & CEO, Patriot Holdings

The Hook

Every deal eventually closes or dies. The only question is how much you spent finding out which.

A title commitment, a Phase I, an ALTA survey, a property condition report, a roof report, a zoning report, and your attorney's time. That's real money and six weeks of calendar before you've even started negotiating off the findings. On most deals we pass on, the reason was sitting in a public record or the first ten pages of a report — we just hadn't looked there first.

This issue is the sequence we use now. Free checks before the PSA. Cheap reads right after. Expensive work last. And I'm going to walk it using the real reports from a deal we had under contract this summer: a roughly 46,000 SF small bay flex park in central Connecticut, with a cell tower in the courtyard and a cannabis retailer on the rent roll.

Gate One: Before You Sign the PSA

These cost nothing but an afternoon. If a deal fails one of them, you don't need a report to tell you.

• Run the tax reassessment. Every time. Find out how the jurisdiction resets value, and when. Texas reassesses to your purchase price almost immediately. Connecticut revalues on a five-year cycle — and the city this deal sits in revalues on the October 1, 2026 grand list. We were buying months before the assessor's pencil came out, with our purchase price as the freshest comp in the file.
• Look up rent control and lot-rent law. This is mostly a mobile home park issue, and it's a big one. A growing list of states and municipalities cap or regulate lot-rent increases. If your business plan is "bring rents to market," find out whether the law lets you before you pay for a survey.
• Pull the land records yourself. Most counties and towns put deeds, mortgages and recorded agreements online. Twenty minutes of reading tells you what the title commitment will say three weeks later: easements, recorded leases, redevelopment covenants, how many times the seller has borrowed against it.
• Search the state environmental files. State agencies keep public records of past filings, spills and cleanup programs. On this deal, a 2005 state environmental filing — a public record — described historic fill with ash and coal, a proposed use restriction, and seven potential release areas. All of that was available before we spent a dollar on a Phase I.
• Check the use against the zoning — and against your lender. Is every tenant's use permitted? Legal but non-conforming? And will your lender actually finance it? A tenant that's legal under state law and illegal under federal law, like cannabis, narrows your lender list on day one.
• Read the PSA for the diligence clock, not just the price. Four questions: How many days do I have? Do I have the right to invasive testing (drilling, sampling), or only a visual inspection? When are my title and survey objection deadlines — and do they fall before the reports arrive? When does my deposit go hard? A Phase II takes three to five weeks. If your PSA gives you 30 days total, you don't have time to find a problem and fix it.

Gate Two: The First Ten Days After You Sign

Start with the leases — every one, start to finish. They cost nothing and they're the income. Then, as the reports come in, read them in this order: cheapest and fastest first, because the title commitment can kill a deal the Phase I never gets to.

1. Title Commitment — read Schedule B like it's the lease

Schedule B-I is what must happen for the title company to insure you. Schedule B-II is everything they won't insure against. Most people skim both. Don't.

What this one told us:

• The cannabis requirement. Because the land includes a cannabis dispensary, the title company required senior staff approval, would not issue a closing protection letter, would provide no zoning coverage, and excluded any cannabis-related loss from both the owner's and the lender's policies. That's not a footnote. That's a lender conversation.
• The cell tower sits on easements through the middle of the property. A recorded site agreement gives the tower operator a lease area, a 20-foot access easement and two utility easements running through the courtyard. You own the dirt. You don't control it.
• Decades-old redevelopment contracts. The site was sold out of a city redevelopment program, with three recorded redevelopment documents from the 1970s, '80s and 2000s. These can carry use restrictions and approval rights that outlive everyone who signed them. Your attorney reads every one.
• Two mortgages and a modification. Both get paid off at closing — but a loan modification recorded last year is a seller-motivation clue (see below).
• The typos. The legal description names the wrong county. The property address lists the wrong ZIP code. Fix them now, not at the closing table.

2. Phase I ESA — skip to the RECs, then read the recommendations

A Phase I sorts findings into buckets. A REC (recognized environmental condition) is a live issue. An HREC is historical and closed. A BER is a business risk outside the ASTM scope. The only bucket that can kill you this week is the RECs — and the only section that tells you your next cost is the recommendations.

This Phase I found four RECs:

• Fill of unknown origin. The site was filled over roughly a decade in the 1950s and '60s. Nobody knows what's in it.
• An open state cleanup file that was never finished. The property was flagged under Connecticut's old property transfer program for petroleum and PAH contamination tied to that fill. The last state filing — from 2009 — said the fix would be excavation or a recorded use restriction limiting the site to commercial use. No restriction was ever recorded. The 2005 filing proposed the same thing. Seventeen years, same plan, never executed.
• Two underground tanks with no closure paperwork. Building department records show a 550-gallon waste oil tank and a 1,000-gallon oil separator. Neither was seen on site. No removal records were found.
• Monitoring wells on the property. Someone was watching the groundwater. The report couldn't confirm who, or whether it's done.

The recommendation: a Phase II with ground-penetrating radar, $8,000 to $14,000, three to five weeks. Now go back to your PSA. Does your clock survive that?

3. ALTA Survey — confirm what title told you, then look at the edges

• It plots the easements. Seeing the tower lease area and access corridor drawn through the courtyard makes the title exceptions real.
• It checks zoning. Industrial zone, retail observed use, use permitted. Building coverage at 24% against a 50% max. Setbacks met. Good.
• It shows the flood zone. Zone X — minimal hazard. Good.
• Look at the property lines. Fence lines sitting a few inches to several feet off the boundary, and an "observed storage area" along one edge. Usually minor. Sometimes it's a neighbor who thinks they own your side yard.

4. PCA — read what's excluded before what's included

The headline looked clean: $12,700 immediate, $104,800 short-term (mostly paving and exterior walls), $77,400 of reserves over twelve years. That's $0.14 per SF per year in reserves on a building that's nearly 50 years old.

That number is too low, and the report tells you why if you read the fine print:

• The roof was excluded. "Refer to roof report." On a 46,000 SF flat roof, the biggest capital line in the building isn't in the capital total.
• HVAC was excluded as a tenant responsibility — per property management. Not per the leases. Verify that in every lease before you underwrite it.

A report that tells you a 1970s masonry building needs $0.14 a foot is a report that left something out.

The Reports Talk to Each Other

The single most useful thing you can do with a stack of diligence reports is read them against each other.

• The 2005 state filing said a use restriction was proposed.
• The 2009 state filing said the same.
• The Phase I searched the state database and found none recorded.
• The title commitment confirmed it: no restriction in Schedule B.

Four documents, twenty years apart, all telling you the same thing: the cleanup plan was never completed. No single report says that clearly. Put side by side, it's obvious.

Seller Motivation Check

The land records tell the story.

The seller bought in 2019 with a $1.3M mortgage. In early 2023, three things were recorded within ten weeks: an amended cell tower agreement, a special permit from the city, and a recorded lease with the cannabis tenant. Three months later, a second mortgage for $2.25M.

That's a clean value-add play. Get the permit, sign the premium tenant, restructure the tower, refinance. I respect it.

Then, last fall, a modification to that 2023 loan. A modification can be a maturity extension, a rate reset, or a covenant fix. I don't know which, and I'm not going to guess in print. But a seller who modified a loan and then listed within a year is a seller with a date on the calendar — and that's worth knowing when you negotiate off your diligence findings.

Read the Tax Bill Like an Operator

In Connecticut, property is assessed at 70% of market value, then taxed at the local mill rate — one mill is $1 per $1,000 of assessed value. This city runs one of the highest mill rates in the state, near 70.

The assessor sets value at each revaluation, and this city's next one is the October 1, 2026 grand list. A sale at our price, months before that date, is the best comp the assessor will have.

The math at our purchase price:

• $5.4M × 70% = $3.78M assessed
• $3.78M × ~69 mills = ~$260,000 a year in taxes
• That's about $5.65 per SF of building — before insurance, before a single repair.

Against the seller's current bill: if the current assessment reflects roughly $2.5M of market value, the seller is paying about $120,000. That's a $140,000 annual increase. The seller's P&L won't show it, because the seller's P&L was never going to pay it.

Texas does this to you in year one. Connecticut does it to you on a revaluation schedule you can look up for free. Either way, you can know before you sign.

The Closing Lesson

Order your diligence by cost to kill, not by habit.

1. Free first: tax reassessment, rent control, land records, state environmental files, zoning and financing fit, the PSA clock.
2. Cheap and fast next: leases and the title commitment.
3. Expensive last: Phase I, survey, PCA, roof, Phase II.

Then read them against each other. The deal killer is rarely hiding in one report. It's hiding in the gap between two of them.

A pass in week one is the cheapest win in this business.

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Every issue of The Patriot Deal Room is a real deal we underwrote, with the real numbers and the real reports — the ones we buy and the ones we walk away from. Subscribe on LinkedIn and by email on Kit to get a working education in how small bay flex industrial actually gets bought, and how the bad ones get killed early. And if you'd rather own a piece of these deals than just read about them, that's exactly the conversation this newsletter is meant to start.

Jeremiah Boucher · Patriot Holdings