Zoning out Featured

8:00pm EDT October 26, 2008

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 giancarlo.pinterpe@grubb-ellis.com.