Capital construction roundtable held by NACORE.

A breakfast roundtable to discuss "Capital Construction: Procedures and Controls" recently offered support to real estate professionals faced with the daunting task of a substantial corporate relocation, development or redeployment.

Attended by NACORE New York City Chapter members and guests, the program focused on hands-on, pragmatic experience presented by panel members: Michael J. Miglino, vice president of business development at Adco Electrical Corporation; Howard E. Peskoe, Esq., a partner at Whitman Breed Abbott & Morgan LLP, who hosted the event; and J. Henry Knoblick, Jr., director of Deloitte & Touche LLP.

The panelists brought to the discussion their extensive, direct experience in the field, having been involved in hundreds of millions of dollars of acquisitions, development, and capital programs throughout North America.

Miglino has more than 30 years of experience supervising all aspects of real estate management for large financial institutions, including Citibank and Crocker National. During his extensive career, he has been responsible for all major and branch property operations and development nationally and internationally.

Peskoe has worked with major corporate users in connection with property acquisition and development in the metropolitan New York area. In his practice, he represents both contractors and building owners who are involved with new projects and renovations.

Knoblick has assisted corporate clients with the delivery of capital projects in New York City, including the development of owner/project teams, control and reporting mechanisms, budget reviews and project oversight services. In addition, Knoblick specializes in project tax planning and depreciation issues for new construction, renovations, and acquisitions.

Miglino noted that since the cost of occupancy for most companies is such a large part of their business expenditures, the corporate real estate and facilities functions should be part of the overall business strategies. As a responsible facilities project manager, he believes he has to understand the core business to serve the company well. To accomplish this, he has regularly invited managers and top executives to exchange discussion with his facilities staff at brown bag lunches.

"Since much of what the real estate department handles is technical, it is the job of the facilities and real estate people to convert that information into terms that managers at the core business would understand," Miglino said. He suggests that the audit control group be involved in a capital construction project from the start.

Knoblick agreed that part of the project controls is to "mobilize the internal forces and bring the accounting folks forward." Bringing in the tax planners, legal department and risk managers early on is vital to keeping costs under control. Project controls need to dovetail with corporate accounting systems, since "two years down the line, the project is complete and the project cost has to end up in the corporate books," he said.

"As an internal real estate department, you need to understand and adhere to the corporate policy for buying construction," Knoblick said. "Outside consultants have a role here. Often they understand the requirements of a construction project better than the inside auditors if the core business is not construction. Tax planning can help save a great deal of money and give you a bonus to the project."

For example, there are now credits of up to 10 percent in New York for renovating certain types of buildings.

Peskoe brought in the lawyer's perspective, discussing terms of contracts, particularly the waiver of warranty if you fail to notify a contractor of matters that need correcting within the first year, while a guarantee is in effect. He discussed the role of general contractors and construction management firms in helping to oversee a project, but warned that their responsibilities are limited by scheduling and the time it takes to bring in a project. Contractual responsibility, if one of the trades "falters along the way," doesn't fall to the construction management firm, but they should be made to bear responsibility for scheduling and costs, he said. Using such firms can assist with the operating control on a project.