Build-to-suit Management Services
Purpose
To present a collection of services offered by SSI to support the planning, acquisition, site development, design, construction, and outfitting of a new facility to support the needs of a unique user.
General
Users often have unique requirements which cannot be satisfied by standard market product offerings. This sometimes requires users to develop a new facility. The choice of development strategy is a function of market availability and corporate risk tolerance. In general, the available strategies are:
- Development, At-Risk
- Development, Not-At-Risk
- Self-Development
In all procurement scenarios, there is a collection of major vendors of goods and services that are required. Who engages and directs each of these entities depends on the scenario. Here is a partial list of vendors:
- Civil Engineer – Performs environmental investigation, soils studies, surveys, hydrology, traffic and other studies. Prepares design drawings which affect traffic, parking, storm water management, grading, and public/private utilities. Interfaces with the local code officials to ensure that the site development plan complies with legal requirements.
- Shell Architect – Provides architectural services required to design the shell building and common areas.
- Shell Engineers – Design the structural, mechanical, electrical, plumbing, and other technical systems for the shell building. Often work as sub-consultants to the Shell Architect.
- Shell General Contractor – Provides all construction services required to construct the site work and the shell building. On very large projects, there may be more than one general contractor.
- Interior Designer – Provides interior design services for the leasehold improvements. Can be the same firm as the Shell Architect.
- Interior Engineer – Designs the mechanical/electrical/plumbing systems that are part of the leasehold improvements. Often works as a sub-consultant to the Interior Designer.
- Materials Inspection & Testing Agent – To provide quality control testing of critical shell building components, typically earthwork, concrete, steel, foundations, structure, and roof.
Development At-Risk
In the development at-risk scenario, the user engages a developer to provide a site, design and construct the facility, finance the development, and either own the facility long-term or sell the facility to a third party who would then lease it to the user. The user typically has no ownership interest in the facility. The underlying lease rate is a function of the total project cost, the developer’s financing arrangements, the credit of the tenant, and market conditions. The developer guarantees the lease rate in advance and guarantees that the facility will be completed by a specified date.
The developer can either develop the shell building and the interior improvements (turnkey scenario) or just the shell building. In a turnkey scenario, the developer engages all the vendors previously listed. If only providing the shell building, the developer engages only those vendors required to develop the site and the shell & core building. The user is responsible for engaging the interior designer and the interior contractor.
Advantages
- Simplicity. The user has the lowest level of involvement in the development process.
- The developer bears full financial risk. The developer guarantees the price in advance.
- The developer bears full performance risk (quality, schedule and safety). The developer is responsible for meeting the schedule and for ensuring the performance of all vendors of goods and services required incident to the development. The developer bears full responsibility for unknown site conditions and acts of God or man.
- The developer must provide the site and bear full responsibility for obtaining legal approval of the project. This task can be enormously complex, especially in highly regulated areas.
- The user has no financial interest in the project.
Disadvantages
- Highest cost. The developer charges a fee for assuming all the performance and financial risk. Since many times the developer controls the site, he is in a monopolistic position to dictate the value of the land, regardless of his actual cost basis.
- User has the lowest control over the design. Since the user is not an owner, the developer will control the design of the project to suit his long term interests instead of the user’s interests.
- The developer could be motivated to lessen the quality of the project since he benefits from any savings. The user has no visibility of actual project cost.
- The user has no equity interest in the project.
Development Not-At-Risk
(Fee Development)
In the development not-at-risk scenario, the user engages a developer to provide many of the same services required in the Development At-Risk scenario, but does not require the developer to guarantee the price or the schedule. The user may acquire the site separately. There is a participative process between the developer and the user in which the user exercises significant influence over the design and cost of the shell building. At some point in the design, after the user and developer have agreed on the design, schedule, and cost, the developer sometimes submits a guaranteed maximum price to complete the project. At this point, financial and performance risk shifts to the developer and he proceeds to complete the design and construct the project. There are cases, however, in which the developer never guarantees the price and the lease rate is not fixed until the project is substantially complete.
Upon completion, the developer may own the facility long-term, sell the facility to the user, or sell the facility to a third party who would then lease it to the user. Unlike the Development At-Risk scenario, the user may obtain an ownership interest in the facility. In this scenario, the developer hires and manages the same entities as in Development At-Risk.
Advantages
- The tenant can control site selection.
- The tenant has a level of involvement in the development process and has some, but not final, control on the design.
- The developer bears financial risk if he is required to present a guaranteed price during the process.
- The developer bears full performance risk (schedule, quality & safety). The developer is responsible for meeting the schedule and for ensuring the performance of all vendors of goods and services required incident to the development. The developer bears full responsibility for unknown site conditions and acts of God or man.
- The user can choose to have no financial interest in the project. At the end of the lease term, the tenant can walk away from the project.
Disadvantages
- High cost. The developer earns a premium for bearing financial and performance risk.
- If the user provides the site, the user bears full responsibility for obtaining legal approval of the project. This task can be enormously complex, especially in highly regulated areas like south Florida. This requires the user exercise proper due diligence during the site selection process.
- The user bears financial risk up to the point the developer proposes a guaranteed maximum price. Additionally, the developer may be motivated to reduce the quality of the product since he benefits from any savings from that point.
- The user must actively participate in the initial planning phases in order to establish the project program and performance criteria. The user must critically review the design presented by the developer to confirm the developer is designing the project to established requirements.
- The developer is the financer of the project and the provider of the site. Hence, he is able to earn additional fees from controlling these components.
Self-Development
In the self-development scenario, the user either directly engages all services required or engages a Development Manager to act on behalf of the user to engage the services. The user arranges his own financing. A Development Manager can provide all the management services normally provided by a developer, but does so for a much lower fee since the Development Manager acts as an agent of the user with no financial or performance risk. The user acquires the site directly and provides financing. The user retains full control over all professional and construction services required incident to the development of the project.
Upon completion, the user may own the facility long-term or sell the facility to a third party who would then lease it back to the user. Unlike other development scenarios, the user often retains an ownership interest in the facility. Since there is no middle-man in the transaction, the underlying rate to finance the development is purely a function of the user’s credit and the value of the underlying asset.
Advantages
- Lowest total project cost since there are no risk premiums assumed by a developer. The user is able to competitively bid all the professional and construction services required. The value of the land is at acquisition cost, not market value. The user has full control of his own financing.
- The user has full control of the design and schedule.
- If the user chooses to retain a Development Manager, the user can take advantage of the qualifications and experience of the Development Manager to mitigate the risk assumed under this scenario.
- The user can retain full financial interest in the project.
- Minimum financing costs for strong credit users.
Disadvantages
- The user must provide the site and bear full responsibility for obtaining legal approval of the project. Sometimes, this task can be enormously complex. Proper due diligence is required.
- The user bears full financial and performance risk. The user must carefully implement a risk management program to shift performance and financial risk to the various vendors of goods and services.
- The user must actively participate in all decisions related to the project or delegate this task to a third party manager.
SSI Build-to-Suit Management Services
SSI offers Build-to-Suit Management Services to assist users manage the development process. SSI can assist users in any of the development scenarios. In the Development At-Risk and Development Not-At-Risk scenarios, SSI serves as a user advisor and liaison to protect the user’s interests in the process and to verify that the developer is complying with the requirements of the lease or development agreement. In the Self-Development scenario, the user delegates to SSI appropriate authority to manage the development process on behalf of the user. The following is a collection of typical services provided by SSI in a Self-Development scenario:
Client Benefits
- Single point of contact for project activities
- Leverages knowledge of local requirements and customs
- Maximizes selection of qualified and experienced local vendors
- Maximizes market competition for professional and construction services
- Maximizes market competition for project financing
- Transforms project supervision from a fixed to a variable cost
- Minimizes User involvement in day-to-day project tasks; facilitates management by exception
Services
General
- Serve as a User representative with authority to act on the User’s behalf to monitor and coordinate development of the project
- Advise User on usual and customary procedures and processes employed to develop a project of this type and scale
- Interface with User management to bring together internal User staff actions required to support the project.
- Periodically publish meeting minutes, action items and progress schedules to inform User management and other project team members on project status
- Receive and advise on payment of invoices for goods and services to support the project
- Receive and advise on approval of project vendor change requests
- Establish and administer a program to track project expenditures against the approved project budget
Planning Phase
- Assist User prepare a strategic plan and business case for the project.
- Assist User prepare a schedule and budget for the project
- Assist User select and engage professional services to prepare the architectural program of requirements, design criteria, and final architectural and engineering construction plans for the project
- Advise User on the requirements for, and assist User select and engage separate specialty consultants that may be required for the project
- Assist User analyze various financing scenarios available for the project.
Site Selection and Approval
- Assist the User select and engage professional services for site due diligence and site design
- Assist the User analyze prospective sites
- Confirm that the site complies with local zoning and other regulatory requirements
- Assist the User obtain legal and regulatory approval of the project
- Assist the User negotiate agreements to lease or purchase a prospective site
Design Phase
- Monitor the activities of the design professionals and their consultants
- Review the design to verify general compliance with the architectural program and design criteria
- Monitor designer actions to coordinate the design with User requirements for loose and systems furniture
- Monitor actions to coordinate the design with User requirements for technology systems
- Coordinate preparation of periodic construction cost estimates to verify if the design is within budget
- Coordinate review and approval of the design by local regulatory agencies
- Coordinate review and approval of design submittals with the User
- Coordinate with User risk management staff to develop an optimum insurance program for the project
Construction Phase
Assist User select and engage one or more construction contractors to construct the project- Monitor contractor actions to obtain building and other required permits
- Assist the User select and engage quality control and inspection services.
- Meet project team members periodically to verify work coordination issues are being resolved
- Monitor progress of the work against the schedule; provide reports to the User on project status
- Schedule and coordinate substantial and final completion inspections. Confirm whether the contractor’s list of outstanding work is reasonably complete. Verify completion of outstanding work.
- Confirm that contractors have submitted all project close-out documentation
Loose and Systems Furniture Installation
- Monitor designer actions during the design and specification of loose and systems furniture and the survey, inventory and reuse of any existing loose and systems furniture
- Assist User and designer coordinate with existing furniture vendors to fabricate, deliver, and install any new loose and systems furniture and to relocate/reconfigure any existing loose and systems furniture
- Monitor and coordinate the installation, relocation, and reconfiguration of loose and systems furniture
- Monitor and coordinate actions to provide electrical connections to loose and systems furniture
- Coordinate the installation of voice and data structured cabling within the loose and systems furniture
Information Technology Systems
Procurement and Installation
- Coordinate with User information technology vendors and staff to collect and transmit the utilities infrastructure requirements for technology systems to the designer
- Coordinate with User information technology vendors and staff to confirm the requirements for the voice and LAN structured cable system
- Assist User select and engage professional and construction services required to design, construct, and commission the voice and LAN structured cable system
- Monitor the procurement, installation and commissioning of User network electronics and telephone system equipment.
- Coordinate technology systems work self performed by User with the overall project plan
- Confirm User actions to secure local, long distance, and WAN communications services
- Coordinate the selection and installation of audio-visual, access control, CCTV monitoring, and sound masking system components, if specified
Occupancy Phase
- Assist the User develop an overall relocation management plan
- Assist the User select and engage moving services
- Monitor and coordinate moving services during the move period