Local and regional government authorities play a big role in your company’s real
estate selection process; knowing how to work with them can open up many doors.
“We have several different levels of government in Michigan,” says Giancarlo Pinterpe,
senior vice president of the Industrial Group
at Grubb & Ellis Company. “Cities, townships, counties, the state — the bureaucracy
can be daunting.”
Some administrators are more pro-business than others and offer incentives and tax
abatements. Planning and zoning boards can
make or break a project, and city ordinances
and timelines can seriously affect your bottom line.
The process may seem overwhelming, but
an experienced real estate broker can help
your company navigate the process.
Smart Business talked with Pinterpe about
working with government authorities to
ensure the best real estate solution for your
firm.
What role do government administrators
play in real estate policymaking and subsequent decisions?
When brokers consider a client’s requirements, they’re thinking about where the company would best fit, minimizing moving
expenses, negotiating tax incentives, and
researching brownfield and renaissance
zone opportunities. Government administrators play a significant role in all of these
things and may vary amongst themselves in
mentality.
Planning boards, which regulate master
plans and review them with third-party engineering companies, also must be considered.
Zoning ordinances also are important. The
language might be strict or ambiguous, allowing the zoning board to approve or reject certain uses for properties within the zone.
For instance, a few years ago, one of the
townships I cover realized that many of its
industrial buildings would sit vacant
because the automotive industry is consolidating, so it reworded its zoning ordinance
to include uses that would not traditionally
fall into the industrial category. An array of
ancillary businesses like gymnasiums, service/retail businesses, dance studios and even
shooting ranges — normally considered higher commercial-type uses — flocked to
the township.
How can government incentives and tax
abatements make a difference?
Companies meeting certain criteria can
negotiate tax abatements and other incentives. Additionally, properties can be approved as brownfield sites, which are typically functionally obsolete or have environmental issues, or be located in a renaissance
zone, which provides tax incentives
designed to spur investment in a particular
area. Examples of incentives include the
following:
- exemption from the single-business tax,
which is based on number of employees,
total payroll, new jobs created and type of
use of the property; - abatement of up to 100 percent of the
usual real estate tax; - abatement of up to 100 percent of the
usual personal property tax for new equipment; and - reimbursement of roughly 10 percent
from the state on brownfield projects more
than $10 million.
Keep in mind these incentives don’t last
forever — they usually expire seven to 12
years after the date of issuance.
When municipalities or governments are
involved, how much advance time is needed
to seal a real estate deal?
On average, it takes between nine and 18
months for a new building, depending on
where you’re going to locate.
However, the timeline may vary between
municipalities. For instance, one municipality might give building permits within a few
weeks, while another might take six months
or more. I can have a company in and up and
running in one municipality before anything
even gets approved in another. Overall, the
earlier you get started, the better because
then you can cover everything and make
sure it’s done right.
Of what value can a broker be in the real
estate selection process?
Politically, having existing relationships
with government authorities is a huge step
toward breaking down barriers and capturing incentives. A good broker has a leg up in
the negotiation process because of the trust
that he or she has established through past
performance.
Another consideration is experience.
Some municipalities, for example, might be
less attractive to real estate professionals on
behalf of their clients because they are too
difficult to work with from a use or rehab
standpoint, because they can’t comply with
established timelines or simply because they
aren’t as pro-business.
The smart approach is to develop criteria
upfront with a qualified real estate broker. It
should include a business plan, anticipated
growth and overall philosophy of the company. Real estate agents cannot circumvent
the legal process of government approvals
and timelines thereof, but they can prepare
their clients to make informed decisions,
maximizing investments and minimizing
risks.
GIANCARLO PINTERPE is senior vice president of the Industrial Group at Grubb & Ellis Company. Reach him at (248) 350-1192 or
[email protected].
