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PHILADELPHIA-Just operating your property and running things as if business is usual will not cut it in today’s environment, when several tenants are going out of business or looking to downsize. Nowadays, due diligence is more important than ever, and landlords are advised to do a lot of research to find out what’s going on with current and prospective tenants.

Public documents, like lawsuits or tax liens, can give you an idea of a tenant’s help, as can trade publications covering whatever industry they’re involved in, said speakers here at the Building Owners and Managers Association’s annual Office Building Show at a session entitled “Recognizing and Managing Tenant Financial Distress.”

“It’s out there,” said Tara Gorman, an associate at Washington DC-based law firm Greenberg Traurig. “You just have to look.”

There are other things a landlord can do to physically assess the health of a tenant. Gorman suggested counting how many people come out of an office during a fire drill. It also doesn’t hurt to make sure the name of the entity on your lease is the firm’s most updated name and still exists. “If you see people walking through the front lobby with a plant, that’s a good sign someone is leaving,” she said.

Lights off in the middle of the day are a bad sign, said Dan Chancey, a Grubb & Ellis property manager based in Memphis, TN. “You have to know as much about your tenant than you’ve ever known,” he said.

That’s because the nature of how companies got through bankruptcy has changed over the last few years. Instead of Chapter 11 restructuring, when a company would reorganize, emerge and continue to do business–more firms, like Circuit City, are filing Chapter 7 and simply going out of business altogether.

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