Leveraging the Power of Third-Party Reviews

Syndicators and investors are increasingly hiring third-party reviewers to ensure that various aspects of a project—from accessibility compliance to architectural plans—meet standards.

Third-party reviewers give an unbiased and highly nuanced perspective on the viability of properties to be purchased or rehabbed, and work at nearly every stage in the development process, from pre-purchase through rehabilitation, refinance, and ongoing construction review.

No matter the flavor, though, all forms of third-party review are meant to add an extra layer of protection for developers. “Everything we do is in a risk management umbrella,” explains Nate Gillette, president of Natura Architectural Consulting, which specializes in property due diligence for multifamily and affordable housing projects. “We’re reviewing these projects to try to find where the pinch points are going to be, so they don’t have issues down the road either with construction, material selection, or language in a contract.”

Accurate Insights with Financial Upside
Nate Gillette, an architect by training, says that Natura will be brought into deals by tax credit syndicators, investors, or other interested parties to review the project from start to finish. “We look at all the drawings, Geotech reports, and different environmental reviews,” he says. “Then, we write a report based on what [the party that hires us] needs. Each has different underwriting standards.”

In addition, reporting standards may differ depending on the city or state, so a third-party reviewer must have expertise within the various regions where they operate.

Though each process is unique, Natura will generally conduct a multi-step review. First, Nate Gillette says he works primarily on the front end of projects before any construction or rehabilitation occurs, creating reports that will inform a transaction’s capital needs assessment and allow for more precise budget estimates.

“A lot of times we’ll go out to the site and do a condition assessment on the property to see what the scope of work is going to be on the rehab,” he says. “These syndicators are going to be married to these projects for about 15 years, so they want to make sure it is going to be a decent project without many asset management problems down the road.”

Once the upfront assessment has been completed, Tammy Gillette, Natura’s vice president, leads a team that performs monthly construction monitoring visits.

“We review the contracts, drawings, budgets, schedules,” Tammy Gillette says. “We do an overview of all those documents to make sure our team maintains the scope of work and quality of the project. They can be anything from new construction to historic rehab, light rehabs – anything.”

When a project closes, Tammy Gillette works with her team to do monthly inspections of the site’s ongoing construction work to ensure the project is meeting standards. The extensive reviews allow for risk management and an independent point of view, which she says is a key benefit of working with a third-party reviewer.

“We’re looking at things like the installation of materials, the number of tradespeople on site, the schedule, and the budget,” she says. “If the project goes off schedule, it can affect the ability of the investors to utilize the tax credits.”

Tammy Gillette says that these inspections and budget reviews will coincide with a project’s funding draw meeting, allowing greater financial insight at a critical moment during the project timeline. “We’re comparing the draw where the contractor is requesting funding with the work that’s being done and the quality of the work,” she says.

Accessibility Compliance
In addition to providing oversight and accuracy on the financial side, third-party reviewers can also help projects ensure they comply with accessibility requirements.

Melissa Middleton, senior architect at Terracon, specializes in assisting projects with accessibility compliance across multiple programs, including the Americans with Disabilities Act (ADA), the Fair Housing Act, the American National Standards Institute, and the Uniform Federal Accessibility Standards. Much of Middleton’s work is on Low Income Housing Tax Credit projects. 

Terracon covers both renovation and new construction projects “from start to finish,” Middleton explains. This means reviewing architectural plans during pre-construction, performing a framing observation during construction, and then conducting a final inspection once construction is complete. Along the way, “we also do two training sessions for the [project’s] entire team,” she says.

Middleton says that Terracon will generally be brought in early in the process, once a property is purchased or renovation plans are drawn up. For example, on renovations, “sometimes we work with the architect at the initial outset, looking at the property and seeing what changes need to be made,” she explains. Middleton says that common compliance-based changes are walls that should be moved, electrical systems that should be updated, and upgrades to kitchens and bathrooms.

“Then we work with the architect when they’re developing the plans, and then with the contractors when they are building,” she says. Overall, “the process can be a couple of years.”

At the end, she provides a letter of certification.

Developers can, and often do, seek third-party accessibility review voluntarily. However, in some states, such as Georgia, projects are required to work with qualified accessibility consultants at specific points in the development timeline, such as when resolving a non-compliance dispute.

Depending on the state where the project is located, builders are required to meet various accessibility standards. ADA standards are federal and generally apply to areas of public accommodation, such as access to the leasing offices. The ADA usually does not apply to dwelling units, unless utilized to design the designated mobility units on the site. Other standards, such as the Fair Housing Amendments Act of 1988, govern residential properties.

Additional subsidies and specific locales can carry their accessibility requirements, causing a complicated overlap of compliance regimes. The expertise of the third-party reviewer helps to untangle those requirements and clarify the specific needs of a project.

Middleton says her team helps builders “catch things” early on in the design process, avoiding costly fixes down the line. “We want to get it right the first time,” she says. “After you’ve done this for a few years, your eyes get trained to it. You have the drawings, but you walk into the space, and with your skill set, you know if something is right or wrong. You can feel if the dimensions are off.”