S.E.C. Real Estate Observer

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This article will speak of our experience with our design architect, the professional who comes up with what the building will look like. Just as we do not pick the low bidder for our engineer, we seldom employ the most famous architect. It is our experience that famous usually translates into two things: needlessly expensive and, more importantly, someone who will ignore our ideas and design a monument to his own legend. Many architects use the same design features over and over. This is not necessarily a bad thing, but it can get old. That said, there are architects such as David Schwarz, from Washington DC. His designs are considered excellent, yet I can usually spot a Schwarz project.

HINT: Long-term investors do not like buildings that can be identified by when they were put into service. In our opinion, a well-designed building is like a beautiful woman: she should age gracefully and look good forever. Think about the “modern” buildings constructed in the 1950s and 1960s.

The design architect will usually have multiple professionals under his contract. For the architect to submit the plans to the city requires that he have a structural engineer, MEP engineer (mechanical, electrical, plumbing), and possibly the landscape architect under his control. These plans will be stamped by the professional who does the design and will carry that particular designer’s name. It is imperative that the architect use design professionals who understand what we want. Many times I ask to meet with the MEP personally. One of my pet peeves is MEPs who have never been to the field.

HINT: For smaller projects, you might consider a design/build RFP (request for proposal). Usually controlled by a good GC (general contractor), the entity issuing the RFP design/build criteria will use subcontractors with whom he has had significant experience. The initial plans, drawn by the architect, are submitted to the mechanical (HVAC), electrical, and plumbing subcontractors for their review. The subcontractors are tasked with the design, delivering the plans and coming up with a certification (stamp) from a professional engineer stating that the plans are designed according to code and ordinance. This is a way to obtain a quality design at a much lower cost and ensures that the designer has field experience. Many engineers will review the plans and stamp them.

As stated previously, we can “drop” an architect from a helicopter into a city or state far away from his base (although he must be licensed in that state), and he can interpret the local ordinances and codes and come up with a design. However, one issue to consider is who is going to represent you at Planning and Zoning (P&Z) and at City Council meetings if the city requires public comment. It takes at least one trip to P&Z and sometimes two hearings before the City Council in many of the cities we do business in. It can get expensive to send an architect to other cities. For that reason, a local firm may be your best choice. Review the firm’s work, check its references, and so forth. We usually ask S.E.C.s or CCIMs with whom such firms have worked in their native cities.

HINT: When developing for national accounts such as restaurants, ask who your tenant representative or local broker has successfully used in the past. If an architect has designed a prototype building, you might obtain a significant discount by using that architect and revising the design to match your site.

The design will have to meet ADA (American Disabilities Act of 1990) requirements, which usually falls under your architect’s contract. ADA is a federal law, and like so many federal mandates, it was not really debated in Washington DC before it was enacted (Obamacare!). Here is a little-known fact outside of the development community: ADA really does not have any guidelines; generally, it just states what you cannot do and that you will face the United States Department of Justice, Civil Rights Division if you are found in violation of the act! The act is an excellent example of an “unfunded mandate” handed down by the federal government to the states. Each individual state is responsible for interpreting the mandate and coming up with rules and penalties at the state level. As investors and developers, we need to ensure that the building will or does comply. Google ADA.gov for a very sobering dissertation on what we face as owners of commercial real estate. And be glad it is held at the state level.

Texas Department of Licensing and Regulation (TDLR) ensures compliance with ADA in Texas under the Texas Architectural Barriers Act (TABA). Every state has its own act and its own rules and regulations. In Texas, the plans are reviewed by a Registered Accountability Specialist (RAS), someone licensed in the state to certify that the plans meet TABA. Then, after the building is constructed, an RAS comes out for the final inspection. If the building does not meet TABA specs, the RAS can require that you tear out the portion that is in violation. The most common examples are ramps that do not meet slope requirements outside and toilet paper and hand towel dispensers that are not set at the proper height inside. Even if the tenant is responsible for construction (e.g., a restaurant interior finish out), it is the property owner who is at risk. So we, too, must be careful who our tenants use in construction. If a violation is brought before the Department of Justice, even if the interior finish out was completed by the tenant, the property owner will be sued by the government!

Also, if you are purchasing an existing building, make certain that the building has been inspected and approved. In Texas, it might be years before TDLR notices that the building owner has not called for the final TDLR inspection and that the final paperwork has not been filed on record. In 2011, we purchased a property that was constructed in 2000 but had never filed the final inspection. Following that—eleven years after the building was completed—TDLR made the final inspection and demanded that we take out parking lot ramps to comply with ADA. We had no choice but to do it. My fault; that won’t happen again!

Sorry to take so much time talking about ADA, but this one can cost us dearly.

HINT: We strongly suggest that the tenant use the same RAS for the interior as we use for the shell. The law is open to interpretation, so two RASs may have two different opinions. If the tenant does not use the same RAS, we will tell the RAS certifying the interior that the exterior has already been approved and will give them the certification letter. Many times they will ignore the exterior if we do this. We also tell the tenant that we are certified, so if the client’s RAS comes up with a different opinion, the tenant is responsible.

The selection of the architect is one of the two most important design decisions we make; the other is the selection of the civil engineer. The civil engineer sets the design on the site, takes care of drainage and parking, and so forth, while the architect coordinates the structure. Yes, it is the architect’s design that we see, but the other professionals help him ensure that the structure meets the intended purpose.

HINT: Although a residential architect might be able to design a stick-and-brick building on a slab foundation, if he has no experience in medical office, the building might not really be usable. The same concept applies to an architect experienced in retail versus one who designs many big box industrial buildings. The two buildings might both be clear height boxes, but they are very different in the intended use. Pick an architect who is experienced in your product.

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