Due Diligence Guidelines: Introduction
About Real Estate Due Diligence
These Due Diligence Guidelines are provided to assist campuses, consultants, advisors, brokers, and other licensed professionals in basic communication and instructions regarding Board of Regents procedures for real estate transactions. These guidelines are designed to be both a quick reference and a detailed guide of the Due Diligence that the Board of Regents considers appropriate for real estate transactions. These guidelines are not exhaustive in describing every nuance of every conceivable type of transaction, but rather a road map to guide users in Due Diligence requirements.
It is desired that these guidelines will provide assistance that will help in facilitating the timely review and comprehensive understanding of real estate transactions that is expected by the Board of Regents and necessitated by our roles as public servants. To that end, the following general comments are made:
The Due Diligence Requirements each contain an introductory paragraph that provides a description of the transaction types for which the particular Due Diligence Requirement should be utilized.
The Due Diligence Requirements for each transaction type call for a letter from the President to the Vice Chancellor for Facilities with attachments.
The attachments to the President’s letter should include all documents listed in the Due Diligence Requirements.
The narrative attachment should contain all of the information listed under narrative and should be in the numerical outline order provided.
- Involve Central Office early in the process.
Involving the Central Office early in the process (even before formally submitting a real estate transaction to the Central Office) will insure that the real estate transaction is one that will be able to be consummated. This would be helpful for real estate transactions requiring Board approval and also routine real estate transactions, but is almost essential for non-routine real estate transactions (real estate transactions for which there have been no Due Diligence guidelines established). Experience has shown that without this early involvement, significant time is frequently spent trying to undo what has already been done to salvage a real estate transaction.
- Responses to the Due Diligence guidelines should be provided for all real estate transactions. The same detailed review is necessary for those real estate transactions that are within the authority delegated to the Chancellor as for those items that require specific Board approval. A delay in the processing of real estate transactions, to acquire needed information for review, could result if the Due Diligence guidelines are not followed.
- Submit package of information detailed by Due Diligence guidelines.
The guidelines require a cover letter be submitted. Please do not attempt to respond to the Due Diligence guidelines within the confines of this cover letter. A better approach is to submit backup material to the cover letter that responds specifically, in numbered order, to each of the Due Diligence items. This will permit quick review of the real estate transaction and not require a search through the documentation to find the information.
- Submit Complete package of information.
The intent of the Due Diligence guidelines is to assist the institutions in submitting information that is as complete as possible. Brief answers are not always the best answers. Responses should be fully explanatory, including background information regarding particular answers, and not just responsive to the specific question of the Due Diligence guideline. Institutions should attempt to answer any questions that they perceive could be asked, even if not a specific item on the Due Diligence guidelines.
- Annotate standard agreements, when used, to clearly indicate changes made.
All agreements are reviewed for legal and business adequacy. If the institution negotiated terms differing from those contained in the standard agreement then it is helpful to state this and to point out the specific areas that differ. This will preclude a review of the complete document and will permit focus on the differing terms which will result in a quicker review. Additionally, if there are no modifications to the standard agreement, then stating this will also expedite the review.
- Do not communicate directly with the Attorney General’s Office.
Communication around the Central Office often causes confusion. The Attorney General’s office is tasked with providing legal advice only. The Attorney General’s Office is not tasked with providing advice on business term issues. When the Central Office is circumvented the Attorney General’s Office frequently provides advice on business terms. This advice may be in conflict with Board policy, approval or intent. Not all real estate transactions require specific review by the Attorney General’s Office. The Central Office can help facilitate review by the Attorney General’s Office of specific items requiring review. If there is the necessity for direct communication between the institution and the Attorney General’s office, this will be coordinated by the Central Office on a case by case basis.
- Establish a single point of contact for each real estate transaction for the institution.
All responses to follow-up questions should be focused through a single point of contact for each real estate transaction. Multiple contacts provide conflicting and inconsistent information or information that does not adequately address the issue being raised. This requires further inquiry of the institution and further exacerbates any delay in real estate transaction processing.