Conducting Due Diligence and Design Review for Development Joint Ventures
Conducting Due Diligence and Design Review for Development Joint Ventures
Pond Robinson & Associates is a leader in due diligence for new developments, having years of experience across all asset types and with local and regional design, development, and construction firms across that nation. As an investor partnering to fund equity or debt in a development venture, performing thorough due diligence and design reviews is critical. These steps help to ensure that both the developer and the investment partners are making well-informed decisions, minimizing risks, and setting the stage for a successful project. Due diligence involves assessing various aspects of the project, from the zoning and regulatory framework to a detailed review of the design and construction documents. By reviewing essential documents, the team can identify potential risk early in the process.
Document Peer Review Scope
The first step in our due diligence process is a comprehensive document and design peer review (DDR). This involves a review of all available and relevant project documentation provided by the sponsor, seller, or developer, including drawings and specifications, budgets and schedules, design and construction agreements, and engineering and consultant reports. Our peer review helps to identify inconsistencies, errors, important recommendations, or areas for improvement, ensuring that all documentation is robust and accurate.
Our initial review will result in the generation of an issues and comments list for review by Client, the Developer, and the Design Team. We will also provide a narrative report. Once the issues and comments are reviewed and responded to, the results of our final review will be an updated issues and comments list along with an updated report, which will be issued in draft form for review by Client prior to final issuance. Review of subsequent documentation and drawing revisions are done as they are made available.
Zoning, Planning, and Development
An initial area of focus during due diligence is assessing the zoning, planning, and development regulations that apply to the site. It is essential to confirm that the property is zoned appropriately for the intended development and that any necessary zoning changes or variances are achievable. If steps are required to change the use or zoning requirements for the development, it is important to understand the steps and status of these efforts:
Zoning Review: Determining whether the proposed development is permitted under current zoning regulations.
Planning and Development Review: Understanding local land-use policies, development guidelines, and planning considerations to ensure alignment with project documents.
Parking Requirements: Verifying that the project complies with local parking regulation.
Building Codes: Ensuring compliance with current building codes, fire safety requirements, accessibility laws, and energy-efficiency standards.
Building Permits: Verifying what permits are required, which permits have been received, and the status of permit renewal or modifications.
Utility Availability: Review and verify the availability of public and private utilities to the project.
ALTA Survey and Easements, Conditions, and Constraints
An ALTA survey (American Land Title Association) is vital for identifying the boundaries, easements, and any legal encumbrances on the property. These surveys provide clarity on property boundaries, access rights, and potential restrictions or encumbrances that may affect the development:
Easements: Assessing any rights of others to use portions of the land.
Conditions and Constraints: Identifying potential environmental, utility, or legal constraints that could hinder development.
Letters, Reports, and Schedules
Institutional due diligence often involves reviewing various letters and reports. These documents might include reports from environmental consultants, engineering firms, land use attorneys, and authorities having jurisdiction. We provide a review of these documents to verify project recommendations and thoroughness of consultant reports.
Design Review: Specifications and Drawings
A critical part of the due diligence process is a detailed design review, which evaluates both the drawings and specifications for the project. This review ensures that the design meets the project’s objectives and adheres to the necessary codes and regulations. We will conduct a review of Project drawings and specifications provided for compliance with generally accepted and current industry standards. Our review will include, but is not limited to, architectural including building envelope and waterproofing, structural, civil, MEP, fire protection, landscaping, storm water, environmental, as applicable. Specialists for each technical discipline can be engaged for projects with complex design and engineering requirements.
Specifications: Reviewing material and system specifications to confirm materials, warranty conditions, and quality standards for the project.
Drawings: Ensuring that architectural and engineering drawings are coordinated, appropriately completed, and of institutional quality and design.
Resilience & Sustainability
Incorporating resilience & sustainability features into the development is becoming increasingly important in the institutional investment world. A cursory resilience and sustainability review focuses on the measures taken by the design team to increase its long-term operational efficiency. A more detailed review can be conducted for properties or developments that have higher climate risk factors or sustainability goals.
Development and Construction Schedules
Reviewing the development and construction schedules is crucial for understanding if the project can be completed on time and within budget. The schedules should align with key project milestones, including permit acquisition, construction start dates, turnover dates, and expected overall completion.
Development Schedule: Reviewing the timeline for pre-construction activities, design, approvals, construction, and leasing.
Construction Schedule: Review of the construction progress schedule to form an opinion as to appropriateness of the projected sequencing, duration of work items, and realism of the estimated Project completion based on the scope of the Project and the current availability of materials and labor.
Development & Construction Budget
A budget review is necessary to identify potential cost risk, contingencies, and the appropriateness of the various budget categories.
Development Budget: Verifying that the project’s financial plan is sound and realistic. Comment as to contingency levels and whether they are justified given the stage of the project and considering specific project aspects.
Construction Budget: Review of all construction-related costs (excluding soft costs) and provide an opinion as to its adequacy and appropriateness in relation to industry standard costs.
Construction Agreement and Other Agreements
Lastly, reviewing the construction agreement and any other relevant agreements—such as the development management agreement and joint venture contracts—is essential to confirm that all parties understand their responsibilities and risks. Additionally, evaluating consultant agreements ensures that all contractors and design consultants are adequately contracted and scoped.
Construction Agreement: Ensuring that terms are aligned with industry standards, procedures are clearly defined, and contingencies are accounted for.
Design Consultant Agreements: Reviewing consultant agreements to understand their scope and level of involvement with the project following the design phase.
Conclusion
Conducting institutional due diligence and design review for development joint ventures is a complex and multi-faceted process, but it is essential for understanding if a project is both feasible and successful. With a well-structured due diligence and design review process, potential risks can be minimized, and the project’s long-term viability can be secured.
By the Numbers:
1500 +
Projects
25 +
Years of Service
17 B
In Developments in 2023
50
States Served
Construction Services Leadership
Michael Raybon
Managing Principal
Michael Raybon is the Managing Principal of Pond, Robinson & Associates and brings 30 years of experience in the evaluation of existing facilities. Mr. Raybon has been the project engineer on thousands of projects involving all types of construction material forensic investigations. Over the last 15 years, Mr. Raybon has been an integral part of the operations and management of Pond, Robinson & Associates. In addition to previously conducting and reviewing property condition assessments and reports, Mr. Raybon has extensive technical expertise in evaluating the following construction materials: concrete, steel, masonry, stucco, roofing and waterproofing materials and membranes, sealants, coatings, and pavements. Mr. Raybon has been a registered Professional Engineer for 22 years.
Mr. Raybon has significant experience in both business management and client management. In his ownership role at Pond, Robinson & Associates, LP he interacts with real estate investors and corporate clients helping to coordinate evaluating the physical risk prior to real estate transactions or associated with operational issues.
Mr. Raybon has cultivated an understanding of site development, building construction administration, specifications, scheduling, and project management issues nationwide. Additionally, he has directed and managed consultants, contractors, and vendors to maintain schedules and budgets. In his role, Mr. Raybon has coordinated the engineering assessment of major projects located in many submarkets throughout the nation and reviewed the conclusions of specialty sub consultants for his clients on commercial office, industrial, retail, and multi-family properties.
Education
B.S., Materials Science and Engineering, University of Florida 1990
Registrations
Professional Engineer, Florida, 1998
Professional Engineer, Texas, 2009
Rebecca Fischer
Director of Construction Services
Rebecca L. Fischer is the Director of Construction Services at Pond, Robinson & Associates and brings over 25 years of facilities and construction consulting experience to the firm. Ms. Fischer has been involved in the design and construction of several new facilities, development and construction monitoring of large projects, and the assessment of existing buildings nationwide. She has over 21years of experience at PR&A working with our Investment and Asset Management clients on high profile development projects including high-profile resorts, office and residential complexes, and multi-family projects with total project costs of up to $935M. Through her experience with development and construction projects she has cultivated an understanding of site development, building construction administration, specifications, scheduling, quality assurance, cost control, and project management issues. She is a registered LEED® AP BD+C professional which has helped clients achieve their sustainability goals within their portfolio.
As Director of Construction Services, Ms. Fischer is tasked with client relations, coordination of services, mentorship and management of personnel, continuing education, and the quality maintenance of the construction related services and reporting. She is also actively involved in the construction administration and monitoring of several projects. Her years of experience allow here to add value for her clients related to budget, scheduling, quality control, and assessment of building components and design including the building envelope and accessibility.
Education
Bachelor of Science, Civil Engineering, Texas A&M University, 1997
Master of Engineering, Civil Engineering, Texas A&M University, 1999
Registrations
Professional Structural Engineer, Texas since 2003
LEED® AP BD+C since 2012
David Jones
Director of Real Estate Services
David Jones brings over ten years of well-rounded experience in design, construction, facility assessments and project management to Pond, Robinson & Associates. His role is to serve as bridge for clients, helping them understand and develop the right technical or project management approach to each investment or exchange. Mr. Jones has provided services to institutional real estate investors and lenders and many developers and contractors.
Mr. Jones has experience with property condition evaluations and construction observation and compliance reviews related to all asset types, including commercial office, industrial, retail, and multi-family improvements. His consulting experience includes comprehensive reviews of design documents for planned projects, performing evaluations of existing properties, and acting as the owner’s representative during the construction of properties of various sizes and complexities.
Education
Bachelor of Science, Construction Management, University of Houston, Houston, Texas
Registrations
Associate Constructor, American Institute of Constructors, License 10711
LEED® Green Associate™, Green Business Certification Inc. Credential ID 11131858
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