The deal was nearing the finish line, recalls Robbie Perkins, SIOR, market president of NAI Piedmont Triad in Greensboro, North Carolina. He and his partner had been negotiating a 50,000-square-foot lease for a company that was an important contractor for the area’s new Toyota battery plant. Everything was smooth sailing until the developer told the brokers that regulatory entitlements would require the tenant to wait at least seven months before moving in.
The entitlements could have been a dealbreaker because the tenant wanted to begin a build-out and install equipment as quickly as possible. But Perkins, who had served as the mayor of Greensboro for two years, and as a city council member for 16, knew what to do. He called the economic development director for the city, who in turn assembled an “all-hands-on-deck” meeting that included the fire marshal, inspections director, and city planning representatives. Together, they determined ways to legally and safely allow the tenant to begin installation and construction according to the desired schedule. The deal closed shortly thereafter.
This experience confirmed what Perkins has long believed – that knowledge of the entitlements process can be invaluable, and well worth a broker’s time and effort.
EDUCATION
Admittedly, learning about the process might not be easy: Entitlements differ from jurisdiction to jurisdiction and are often based on intricate zoning regulations and local laws governing land use. “It’s like drinking out of a fire hose,” says Perkins. “You’re not going to get it all at once; you’re going to absorb it over a period of years.” Complexities abound. “Every market presents unique entitlement challenges, which is part of what makes the entitlements process so difficult,” says Karin Brandt, CEO and founder of coUrbanize, a technology company that powers community engagement in real estate development and planning.
Despite these complexities, there are several steps brokers can take to educate themselves. Perkins advises younger brokers in his firm to pick a jurisdiction or two, look at the agendas for planning board or zoning commission meetings, and attend them or watch them online. Rezoning cases, he finds, are especially useful. He also suggests that brokers read their local newspaper and add themselves to the mailing list of their state realtors’ association, which keeps its members informed of governmental affairs.
Joshua Stein, a real estate attorney based in New York City, recommends that brokers visit the website of the Urban Land institute to access classes and read publications about entitlements. For a more localized perspective, he urges brokers to connect with local lawyers who handle zoning applications to learn how the entitlements process works in a certain market. “A broker or lawyer in Chicago probably doesn’t need to know the ins and outs of entitlements in South Florida,” he says. “Good brokers need to cultivate not only a general -- but also a hyperlocal -- understanding of entitlements.”
Howard Goldman and Caroline Harris, partners in the land use boutique law firm GoldmanHarris LLC in New York City, urge brokers to take advantage of public resources, many of which are available online. Brokers in New York City, for instance, can access various databases on zoning and buildings to learn about a property’s zoning and landmark status, violations, as well as applications for permits and approvals at the site or within the surrounding area. They can also access the Automated City Register Information System to find deeds, mortgages and other recorded documents, and digital tax maps.
JUSRISDICTION DIFFERENCES
Goldman and Harris note that a key differentiator among jurisdictions is the extent to which they recognize “as-of-right” development. “As-of-right developments need only demonstrate compliance with applicable sections of local zoning and building codes,” they explain. “As-of-right approvals are like drivers’ licenses: If applicants meet all the requirements and pass the tests, they have a right to a license. Discretionary approvals, on the other hand, are typically subject to a lengthy public review process, involving a heavy dose of politics, and there is no right to approval.”
Every market presents unique entitlement challenges, which is part of what makes the entitlements process so difficult.
Goldman, Harris, and Stein point to New York City’s Uniform Land Use Review Procedure (ULURP) as an example of a lengthy public review process. “It’s a 200-day process once you file your application, but putting together a proper ULURP application itself takes months,” says Stein. Brandt identifies San Francisco and Los Angeles as tough jurisdictions for entitlements. As she notes, these two cities have complex zoning and environmental regulations and many residents who demonstrate NIMBYism (“NIMBY” stands for “Not In My Backyard”).
FACILITATION
If you are leasing office space or selling an industrial site to a buyer that isn’t planning any significant changes to the structure or operations, entitlements are unlikely to play any role in the transaction. But if you are working with a client that wants to develop a site or repurpose a building, or if you simply want to position yourself as a trusted advisor, a knowledge of entitlements can come in handy. “You add value if you bring this to the table,” says Perkins.
Stein suggests that brokers encourage their clients to try, where possible, to build as-of-right or in a way that requires fewer discretionary approvals. When discretionary approvals are unavoidable, brokers can follow Brandt’s advice and convey to their clients the importance of starting the community engagement process as early as possible – ideally, before the plans are submitted – and incorporating the feedback into the plans. “When office and industrial developers can show evidence to approvals boards of how they have meaningfully and inclusively engaged the community in the area where they’ll be building, they’re much more likely to receive on-time approvals and prevent costly delays,” Brandt says. Engagement also helps deflect NIMBYism by giving local residents a voice in the planning process.
CONCLUSIONS
You can’t expect to become an expert in entitlements overnight, but if you make a concerted effort to learn the basics, you will be in a better position to counsel your clients. So don’t delay, do your research, ask questions, attend meetings, and add zoning to your comfort zone.
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