In the Spotlight: Be the Quarterback

Most real estate transactions involve not only a lease or purchase of property, but construction and/or development of the property as well. Transactions commonly require the participation of several people, forming a team of experts, to bring the transaction successfully from concept to fruition. Team members may include the real estate broker (or in-house real estate manager), construction manager, architect, site development manager, civil engineer, surveyor, land use/entitlement attorney, environmental attorney, title company, and real estate attorney, as well as paralegals. The entire team needs a central point for the coordination and dissemination of information coming from each team member's particular area of expertise. The large majority of such information will make its way into the contract being drafted and negotiated by the real estate attorney and necessitates that the real estate attorney take the lead (i.e., be the quarterback) to coordinate, gather, and disseminate information from and to the team members.

A typical real estate contract (whether it is a lease transaction or a purchase and sale transaction) contains the financial/business clauses of the deal; project and closing dates; due diligence conditions; entitlement and zoning conditions; environmental contingencies; construction responsibilities and time frames; escrows; construction hold backs; letter of credit requirements for construction of municipal improvements, such as sewer, water, drainage, and public road improvements; construction specifications; concept plans; building plans or the method of creation and approval of same; site plans with building areas; parking counts; construction reimbursables; division of responsibilities for government approvals; construction items; creation of plans; etc. All of the items listed above, plus many more, should be considered, evaluated, and resolved in order to finalize a real estate contract. If timing does not allow the resolution of all items prior to executing the contract (which is often the case), the contract must contain a method for resolving the items as they come up in the due diligence/development process.

Create a Checklist

How does the real estate attorney bring the team together to gather the information, assign responsibilities, and then disseminate the information among all team members? Create a checklist. The checklist is the quarterback's game plan. Due to the numerous trades involved and the many issues that need to be dealt with, a checklist initially prepared by the real estate attorney and disseminated to the team is essential for an organized, detailed approach to a real estate transaction involving development of the property.

After the checklist is disseminated, set up periodic meetings or conference calls with all team members to add additional items to the checklist; assign responsibility for the various tasks on the checklist to individual team members; set estimated time frames for completion of the tasks; and document, within the checklist, dated notations after each meeting or call that reflect the status of completion of each item on the checklist until the project is complete.

A suggested method for setting up each call and gathering information for the checklist is as follows:

1) The real estate attorney should first determine which team members will be involved in the transaction. Most of this information will come from the real estate manager who provided the initial deal structure for the transaction. If all team members have not been assigned at the time the initial checklist is prepared, your client's department head, who is responsible for a particular aspect of the transaction, should be listed for that assignment and attend the calls/meetings until a replacement is appointed. This will ensure that all aspects of the transaction are being observed and considered while you are in the contract negotiations stage. As the quarterback, you will have to explain to your client that the early involvement of the entire team is necessary. Once the contract is executed, it may be too late to obtain changes to the agreement regarding issues discovered post contract execution, which is why early involvement is important.

2) Prepare an initial checklist to be used for the transaction that can be electronically updated after each meeting or conference call. Be sure to list the initial team members and all the information available about the transaction, including time frames, business conditions, and attachment of any site plans you may have. At a minimum, the checklist should include all issues to be addressed in the due diligence portion of your real estate contract as well as details for the coordination of the site plan, construction, and financial aspects of the transaction. In addition, a time and date for the first meeting/conference call should be selected and noted on the checklist.

3) Electronically transmit the initial checklist to the team members at least one week prior to the meeting/conference call. Request that each team member be prepared to discuss the aspects of the deal in connection with his or her area of expertise, and also request a written update from them at least three days prior to the meeting/call so that the checklist can be updated and redistributed the day prior to the call. All team members will not be able to participate in each meeting or call due to travel and meeting schedules, but it is the responsibility of the real estate attorney to gather the updated information from any individual not able to make a meeting or call and insert it onto the checklist.

4) The real estate attorney should attend the meeting/call and kick off the meeting with a brief summary of the transaction before turning to the checklist to cover each trade involved in the deal. As each member of the team addresses his or her particular area, the real estate attorney or the paralegal on the transaction should take detailed notes in order to update the checklist and disseminate it shortly after the call. During the call, all issues/items on the checklist should be assigned to a team member for handling with an estimated completion date. If the responsibility is that of the other party to the transaction, note it, but still assign a team member to follow up on the progress and report back to the team at the next meeting/call.

5) Before ending the call, set the time and date for the next meeting/call. This should be a team decision based on the stage of the deal and how fast progress is expected. At the beginning of the deal, the frequency of the meeting/calls may be few and far between but as issues are discovered and the closing date approaches, the frequency of the meetings/calls may increase. If a meeting/call is not scheduled in a period of at least 30 days, you may want to consider sending out the latest checklist to each team member and requesting an update to disseminate to the team as an interim step prior to the next scheduled meeting/call.

6) During each meeting/call, the real estate attorney should ask each team member to review any problems or issues that may be anticipated or have been discovered as the contract is being negotiated or during the due diligence period allowed by the contract, as the case may be. Some transactions may have numerous issues, while others may involve very few. Very often, issues may be discovered that will result in unanticipated costs. The checklist should periodically update these costs to ensure that the increased costs do not exceed the initial budget approved for the transaction by such a large amount that the transaction is no longer feasible due to its failure to make a decent return on the investment.

Continue to update the checklist and schedule meetings/calls until all items have been satisfactorily concluded.

Next month's installment will discuss compliance issues, dissemination of information, and the level of detail of the checklist.

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Most real estate transactions involve not only a lease or purchase of property, but construction and/or development of the property as well. Transactions commonly require the participation of several people, forming a team of experts, to bring the transaction successfully from concept to fruition. Team members may include the real estate broker (or in-house real estate manager), construction manager, architect, site development manager, civil engineer, surveyor, land use/entitlement attorney, environmental attorney, title company, and real estate attorney, as well as paralegals. The entire team needs a central point for the coordination and dissemination of information coming from each team member's particular area of expertise. The large majority of such information will make its way into the contract being drafted and negotiated by the real estate attorney and necessitates that the real estate attorney take the lead (i.e., be the quarterback) to coordinate, gather, and disseminate information from and to the team members.

A typical real estate contract (whether it is a lease transaction or a purchase and sale transaction) contains the financial/business clauses of the deal; project and closing dates; due diligence conditions; entitlement and zoning conditions; environmental contingencies; construction responsibilities and time frames; escrows; construction hold backs; letter of credit requirements for construction of municipal improvements, such as sewer, water, drainage, and public road improvements; construction specifications; concept plans; building plans or the method of creation and approval of same; site plans with building areas; parking counts; construction reimbursables; division of responsibilities for government approvals; construction items; creation of plans; etc. All of the items listed above, plus many more, should be considered, evaluated, and resolved in order to finalize a real estate contract. If timing does not allow the resolution of all items prior to executing the contract (which is often the case), the contract must contain a method for resolving the items as they come up in the due diligence/development process.

Create a Checklist

How does the real estate attorney bring the team together to gather the information, assign responsibilities, and then disseminate the information among all team members? Create a checklist. The checklist is the quarterback's game plan. Due to the numerous trades involved and the many issues that need to be dealt with, a checklist initially prepared by the real estate attorney and disseminated to the team is essential for an organized, detailed approach to a real estate transaction involving development of the property.

After the checklist is disseminated, set up periodic meetings or conference calls with all team members to add additional items to the checklist; assign responsibility for the various tasks on the checklist to individual team members; set estimated time frames for completion of the tasks; and document, within the checklist, dated notations after each meeting or call that reflect the status of completion of each item on the checklist until the project is complete.

A suggested method for setting up each call and gathering information for the checklist is as follows:

1) The real estate attorney should first determine which team members will be involved in the transaction. Most of this information will come from the real estate manager who provided the initial deal structure for the transaction. If all team members have not been assigned at the time the initial checklist is prepared, your client's department head, who is responsible for a particular aspect of the transaction, should be listed for that assignment and attend the calls/meetings until a replacement is appointed. This will ensure that all aspects of the transaction are being observed and considered while you are in the contract negotiations stage. As the quarterback, you will have to explain to your client that the early involvement of the entire team is necessary. Once the contract is executed, it may be too late to obtain changes to the agreement regarding issues discovered post contract execution, which is why early involvement is important.

2) Prepare an initial checklist to be used for the transaction that can be electronically updated after each meeting or conference call. Be sure to list the initial team members and all the information available about the transaction, including time frames, business conditions, and attachment of any site plans you may have. At a minimum, the checklist should include all issues to be addressed in the due diligence portion of your real estate contract as well as details for the coordination of the site plan, construction, and financial aspects of the transaction. In addition, a time and date for the first meeting/conference call should be selected and noted on the checklist.

3) Electronically transmit the initial checklist to the team members at least one week prior to the meeting/conference call. Request that each team member be prepared to discuss the aspects of the deal in connection with his or her area of expertise, and also request a written update from them at least three days prior to the meeting/call so that the checklist can be updated and redistributed the day prior to the call. All team members will not be able to participate in each meeting or call due to travel and meeting schedules, but it is the responsibility of the real estate attorney to gather the updated information from any individual not able to make a meeting or call and insert it onto the checklist.

4) The real estate attorney should attend the meeting/call and kick off the meeting with a brief summary of the transaction before turning to the checklist to cover each trade involved in the deal. As each member of the team addresses his or her particular area, the real estate attorney or the paralegal on the transaction should take detailed notes in order to update the checklist and disseminate it shortly after the call. During the call, all issues/items on the checklist should be assigned to a team member for handling with an estimated completion date. If the responsibility is that of the other party to the transaction, note it, but still assign a team member to follow up on the progress and report back to the team at the next meeting/call.

5) Before ending the call, set the time and date for the next meeting/call. This should be a team decision based on the stage of the deal and how fast progress is expected. At the beginning of the deal, the frequency of the meeting/calls may be few and far between but as issues are discovered and the closing date approaches, the frequency of the meetings/calls may increase. If a meeting/call is not scheduled in a period of at least 30 days, you may want to consider sending out the latest checklist to each team member and requesting an update to disseminate to the team as an interim step prior to the next scheduled meeting/call.

6) During each meeting/call, the real estate attorney should ask each team member to review any problems or issues that may be anticipated or have been discovered as the contract is being negotiated or during the due diligence period allowed by the contract, as the case may be. Some transactions may have numerous issues, while others may involve very few. Very often, issues may be discovered that will result in unanticipated costs. The checklist should periodically update these costs to ensure that the increased costs do not exceed the initial budget approved for the transaction by such a large amount that the transaction is no longer feasible due to its failure to make a decent return on the investment.

Continue to update the checklist and schedule meetings/calls until all items have been satisfactorily concluded.

Next month's installment will discuss compliance issues, dissemination of information, and the level of detail of the checklist.

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