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 to 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. There are some architects such as David Schwarz from Washington DC whose designs are considered excellent, but 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, he will require a structural engineer, an 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. I often ask to meet with the MEP personally. One of my personal pet peeves is MEPs who have never been to the field.

HINT: For smaller projects, you might consider a design/build request for proposal (RFP). Usually controlled by a good general contractor (GC), the entity issuing the RFP design/build criteria will use subcontractors with whom he has 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 acquiring a certification (stamp) from a professional engineer stating that the plans are designed according to code and ordinance. This is a way to get a quality design at a much lower cost and takes care of the issue of designers who have no field experience. Many engineers are willing to review the plans and stamp them.

As stated last time, we can “drop” an architect from a helicopter into a city or state far 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 thing to consider is who is going to represent you at Planning & Zoning (P&Z) and City Council meetings if the city requires public comment. It takes at least one trip to P&Z and sometimes two hearings before City Councils in many of the cities we do business in. It can get expensive to send an architect to other cities. So a local firm may be your best choice. Just look at their work, check their references, and so on. We usually ask other S.E.C.s or CCIMs who they have used in their native cities.

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

The design will have to meet the requirements of the American Disabilities Act (ADA) of 1990 and is usually included in 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 ADA 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 on the state level. As investors and developers, we need to make certain 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 if the building is not in compliance. And be glad the mandate is held at the state level.

Compliance with ADA is overseen in Texas by the Texas Department of Licensing and Regulation (TDLR) under the Texas Architectural Barriers Act (TABA). Every state has its own TDLR 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 make you tear out the portion that is in violation. The most common examples are ramps that do not meet slope requirements outside and things like toilet paper and hand towel dispensers that are not set at the proper height inside. Even if the tenant is responsible for construction in cases such as a restaurant interior finish out, it is the property owner who is at risk. So we must be careful who our tenants use in construction also. If a violation is brought before the Department of Justice, and 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 the final paperwork has not been filed. In 2011, we purchased a property that was constructed in 2000 but had never filed the final inspection. So 11 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 and did 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 different RASs may have two different opinions. If the tenant does not use the same RAS, we will provide the certification letter and tell the RAS certifying the interior that the exterior has already been approved. The RAS will often ignore the exterior if we do this. We also tell the tenant that we are certified and that if its RAS comes up with a different opinion, the tenant is responsible.

Choosing the architect is one of the two most important design decisions we make; the other is the selection of the civil engineer. While the civil will be the one who sets the design on the site and takes care of drainage, parking, and so on, the architect is the one who coordinates the structure. Yes, it is the architect’s design that we see, but his other professionals help him make certain 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 a lot of big box industrial buildings. While the two buildings might both be high, clear-height boxes, they are very different in intended use. Pick an architect who is experienced in your product.

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Please remember, these articles relate to my experience only. We welcome any comments at S.E.C.