Inevitably, the risk involved during the project life cycle of a single-tenant build to suit development is highest during the preliminary due diligence period. As the name implies, the investigation of more than 100 items for the potential site should be done thoroughly and with great care.
Please save this handy list as a quality assurance measure to avoid being caught off guard later when the deposit is no longer refundable.
1. Check the local building code ordinances as soon as possible.
After examining the title and exceptions, the natural next step should be to check the site’s current municipality codes to confirm the feasibility of your vision. No two cities’ building codes are alike. If you believe you are familiar with one because you have done business there before, there may have been changes you are unaware of, resulting in expensive errors.
While you’re at it, it’s also a good idea to confirm any zoning compliance certificates, zoning approvals, variances, or pending applications that are currently in place.
2. Check the site’s accessibility and the result’s visibility.
Due diligence should begin with this step because delaying it may force the project to be abandoned before excessive funds have been spent. It is a top priority because it will provide a clear understanding of the visibility once the necessary setbacks, landscaping, signage, and other elements are in place.
*Bonus tip: Check with the municipality again to ensure that the potential location of the building on the site is still code-compliant.
3. Determine whether your lender will accept third-party vendor reports.
Furthermore, this is a proactive step before spending money on obtaining the required reports. Site Investigation Reports (SIR), Property Condition Assessments, Phase I Environmental Reports, and Geotechnical Studies are a few examples. If you have a developer on your side, you can skip this step because the responsibility will be in their hands.
4. Determine the logistics of bringing utilities to the site.
Aside from ensuring that your project is code-compliant and on track to obtain permits, there is another requirement to keep in mind that may result in an unexpected cost: utilities. It would be best if you never overlooked determining the size and location of the nearest sewer, gas, water, and power supplies.
Consider hiring a preferred developer to uncover development issues such as insufficient utility capacity, local requirement changes, or environmental issues to ensure the highest level of investigation.
5. Keep a written record of all correspondence with the seller.
“Always get it in writing,” as the saying goes, and this is no exception. Don’t make the mistake of not having a paper trail in an industry notorious for relying on “handshake deals.” Make a habit of writing up-to-date email threads with the seller following an important phone call or meeting, or at the very least recording conversations with their permission to have a mutual record.
Above all, always keep in mind: Less risk = more diligence.
Use these five guidelines to ensure that nothing is overlooked during the due diligence process, which is a crucial step in the project’s success. The process may occasionally seem tedious and may even need to be prolonged.
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