Phil Fischler

 
Digging Up Bones  
 

By Phil Fischler

As members of a local science museum, our family has enjoyed an elaborate exhibit the museum is hosting that displays life-like animated model dinosaurs and ice-age mammals.  Our seven-year-old twins have been inspired by the thrill of archeological conquest, and a part of our back yard now looks like a moonscape.  So what does this have to do with development?  Recently there is a comparable quest to unearth detailed answers to a more recent calamity.

 As the current market cycle unwinds, lenders and investors are finding themselves unexpected owners of commercial real estate.   In better case scenarios (financing problems aside), properties are in need of intense marketing, leasing and management support; in uglier scenarios, projects have been completely abandoned midway through construction or development.  Regrettably, many of these projects should never have been funded or constructed and will serve as physical reminders of the tuition that our industry is paying for the fury of the go-go days.

Prudent owners are moving quickly to take stock of their new assets - digging up bones to get a sense of what they now own.   Many development and consulting firms are a mere shadow of their prime, and the list of folks left who can provide detailed insight is getting shorter by the day.  If scarcity equals value, then its stands to reason that the person who has all of the intimate property knowledge can be a pretty valuable asset to the new owner.  The challenge lies in knowing how to quickly identify and connect with these key professionals.  A few approaches come to mind:

¨ Search the public record: development and building permit applications and County Commission meeting minutes will all reveal key individuals who were involved on a particular project.

¨ Contact the City/County Planning Department:  In Florida’s highly regulated development environment, few projects are advanced without substantial involvement from the local Planning Director or Community Development Department Director.

¨ Reach out to the design consultants:  In many instances key development professionals maintain relationships with their preferred consulting team.  The construction documents will identify the engineer or architect of record, who often will be able to quickly connect you to the key development players.

The individual responsible for the day-to-day heavy lifting on the project (not  necessarily the deal maker) is a key source of detailed property knowledge.   A few conversations with this individual can reveal years of historical context and help more accurately assess both risk and opportunity.  In many cases this individual can quickly shed light on the unfinished business and associated liabilities that are lurking below the surface.  Another critical bit of intelligence that can be revealed is clarity on which entitlements and permits are subject to sunset provisions and which warrant protecting, extending … or in some cases advancing.  One sure way to devalue an asset is to allow its land use or zoning entitlements, concurrency or hard-earned public approvals to lapse because no one thought to, or took the time to, read the fine print within those approvals, and understood their relevance in the context of the overall property.  Unfortunately, many have learned this lesson the hard way, by unknowingly allowing complex and expensive Development Orders to expire or allowing $M+ concurrency fees to vaporize because critical milestones lapsed.  These painful missteps could have been avoided with the benefit of some key information, and the knowledge of what to do with that information.

It’s a huge understatement to say that working through this phase of the real estate cycle will present its share of challenges.  Give yourself an edge by digging up a few bones and reconnecting with those who best understand the property.  You’ll be glad you did.  And as my children now remind me, the mass extinction 65 million years ago may have wiped out the dinosaurs, but those that survived went on to become one of the most successful and diverse groups on the planet!

-Phil Fischler is a Managing Member of Fischler Direct an Asset optimization, Resource Management, Advisory Services firm in Fort Myers.

 

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