The Gatto GroupThe Gatto Group

Gatto GroupGatto Group
Tenant Representation Process

Strategic Planning

The Gatto Group clearly differentiates itself from the competition in our strategic/business partner approach to relationships. It will be the responsibility of the Gatto Group, led by Michael Gatto, to ascertain the business objectives and physical needs of the Client, and then develop a facility model which both accounts for and integrates these needs. This facility model address both leasing issues (i.e. demographics, term, expansion/contraction rights, termination provisions and audit clauses) and the physical issues, (i.e. optimal size, hours of operation, capital, equipment, furniture and equipment needs, infrastructure needs and preliminary capital budget.)

With backgrounds in strategic planning, financial analysis, workplace efficiency and project and construction management, the Gatto Group and partners are best suited to both facilitate communication between the partnership and lead the development of Client’s ideal facility solution. Further, our expertise and hands on construction and management expertise will help facilitate the tactical portions of this assignment, as detailed throughout this proposal.

Location Analysis

With the approval of the Client, the first step in the location analysis may be to provide demographic surveys to determine the origination of your personnel, customers, distribution, etc. Employee, customer or distribution mapping may help to isolate a specific area of town. This will allow the Client to narrow the search area, or to place a relative value to those facilities which may or may not be geographically desirable due to employee or customer location.

A thorough review of markets and market alternatives will then be undertaken to identify those markets which may be softer than others, which reasonably fit our geographic and facility model parameters. This review will include opportunities that may not be readily available to the market, but may provide an outstanding alternative to the Client. We call these hidden, or not marketed options (i.e. Calfee Building & Progressive Insurance Lake County).

The location analysis phase will be led by Michael Gatto. His lifelong experience and knowledge of the Cleveland Metropolitan area will prove invaluable in the discovery of alternative locations and opportunities for the Client. [ top of page ]

Project Management, Design and Engineering, and Construction

One of the Gatto Group’s strengths is its project management and construction experience. We believe that in order to achieve the best results, the project manager and architect must be integrated into the process early on to ensure that there are no handoffs. To that end, a project manager and architect with expertise in dealing with the Client can be used to evaluate base buildings and improvement costs.

The Gatto Group can use a request-for-proposal process to solicit proposals from the best providers in the market, can work with the Client’s existing architect and contractors or can introduce proven partners to the assignment that we have a working relationship with.

The project manager and architect will identify the requirements for the design, engineering and construction of a facility model that best meets the Client’s needs. The project manager and architect will help throughout the process to develop budgets, timelines, negotiate changes, coordinate purchases, delivery and installation of owner-provided items such as phones, computers and furniture, machinery, shelving, distribution and logistics equipment and provide necessary quality checks. The project manager and architect will also continuously monitor the budget and schedule. [ top of page ]

Site Selection/Feasibility Studies

Site selection and feasibility studies are linked due to our integrated approach to service delivery, to ensure the selection of the best facility and location for the Client.

Feasibility studies can be done through the comprehensive quantitative and qualitative testing done by the architects and supervisors of the project and transaction management team. Each candidate building will be tested against the facility model to determine variances from the established benchmarks. For instance, the Gatto Group, project manager and architect will develop a detailed physical analysis that compares building systems and existing conditions for compatibility. It is not uncommon in these analyses to discover variances in building/site costs or amenities.

Separately, budget analyses on tenant improvements will be conducted to test the financial cost relative to the facility model as planned out in each building. This is a very important step in order to compare all options in an apples-to-apples basis. [ top of page ]

Build to Suit vs. Existing

When comparing all options available, the Gatto Group will look at a build to suit option and compare the cost to existing buildings. Understanding the cost of new construction creates a benchmark to evaluate existing options against.

The oversight of these studies is the responsibility of the Gatto Group. They will ensure that proper weighing of the criteria occurs and that this information is communicated effectively and efficiently to each of the Client's decision makers and team members. This in turn will ensure that site or facility selection most closely matches the needs of the entire organization.[ top of page ]

Economic Development & Government Incentives

The Gatto Group has experience in assisting our Clients with structuring and negotiating government incentives and leveraging one community against another to achieve the greatest benefit. We have orchestrated the process with outside experts and have worked directly with our Client’s professionals to structure economic incentives that have proved great economic benefits to our Clients.

A vast majority of programs are available and constantly changing and as we develop your strategy with a company, we determine the strengths and seek incentives that best match the strengths of a company to produce a Win/Win for a community.

A sample of programs available on the state and federal level are:

STATE FEDERAL
Enterprise Zones Work Opportunity Tax Credits
Job Tax Credits/Grants Long term Assistance
Geographic Incentives Federal Empowerment Zones
Sales & Use Tax Resources New Market Tax Credits
Property Tax Credits/Abatements R & D Tax Credits
Point of Hire Tax Credits Historic Renovation Credits
Green Tax Credits Energy Tax Credits

The Gatto Group will seek out and explore all government incentives (local, state, federal) that can benefit our Client and do economic projections to determine the value vs. cost of all incentives. We will then make recommendations supported by an analysis to the Client for review. [ top of page ]

Transaction Process

The following outlines the specific steps taken in the transaction or tenant representation process. It is the documentation of this process, both prior to and during the transaction that ensures successful communication between the Client and the Gatto Group.

I. Existing Cost Analysis/Benchmark

Analyze existing facility (if available) from a total occupancy cost perspective.

Establish current cost and benchmark build to suit on an aggregate and unit (PSF) basis.

Evaluate remaining liability on existing contract based on alternative lease start dates.

Assess feasibility of a tax/operating expense audit through the Gatto Group [ top of page ]

II. Transaction Schedule

Develop a schedule with each component of the process assigned target completion dates.

Consider alternative schedules which may relate to different transaction structures (e.g. lease vs. purchase, relocate vs. renew or build to suit).

III. Market Analysis

The Gatto Group conducts extensive market research and analysis. Our site selection process begins with intensive detective work thoroughly investigating all alternatives leaving no opportunity uncovered. (Hidden Opportunities)

As part of the market analysis we will explore sites for build to suit options and do all the necessary work to develop a cost basis for build to suit.

On an as needed basis, The Gatto Group will provide market research reports covering the following areas: vacancies, rental rates (current), effective rates (longterm), building expenses, leasehold improvement costs and demographic information.

This process includes:

  • Developing availability study of buildings.

  • Conducting examination of properties

  • Gaining market intelligence from a wide variety of sources, including:

Brokers, developers, lenders, corporate real estate executives, business leaders, industry trade groups.

  • Creating a detailed market survey.

  • Evaluating all facilities that are consistent with client's requirements, as well as "hidden opportunities” and build to suit options.

The process typically includes fact sheets on buildings, photographs, floor plans, location map, site maps or plans, transportation accessibility and competitors in the market. A stacking plan of the existing building can be included to compare against alternative buildings/sites and for study of status quo situation, as appropriate. The strategy can also include information on demographics, traffic patterns and location and logistic analyses. [ top of page ]

IV. Development of Preliminary Negotiating Strategy

To maximize The Client’s leverage in the marketplace, The Gatto Group will develop an aggressive negotiating strategy. The Gatto Group’s strategy strives to achieve the most beneficial and customized facility situation possible. This would typically include the following:

  • Most favorable long-term occupancy cost.

  • Flexibility for future expansion, contraction, cancellation and extension.

  • Payment of all relocation expenses and construction.

  • Highest quality of life.

  • Government Incentives

Developing a negotiating strategy that will maximize leverage and be convincing for all property owners and communities to believe and negotiate in good faith is a strong attribute of the Gatto Group. [ top of page ]

V. Fit Plan and Improvement Budget

Once a negotiating strategy is formulated and options are narrowed down, fit plans will be requested from a handful of options to determine space feasibility. In conjunction with the fit plan, which Landlords pay for, our construction managers will develop a detailed budget for each building allowing for an apples-to-apple comparison.

The Gatto Group does not believe, like our competition, in just blindly asking for the same tenant improvement allowance across the board from all options. We budget each fit plan and request from the owner an accurate allowance. This allows all buildings to put their best foot forward and to propose exactly what is needed. If a Landlord proposes too much improvement allowance, the Client’s rent will reflect this. If a Landlord does not propose enough of an allowance, the Client will have to come out of pocket.

It is best to get this specific on improvement costs up front when you have more than one option, as the leverage of other competing buildings will help drive the best deal. If a Client waits until a letter of intent or a lease is signed, it is too late to have leverage and the tenant pays for everything. [ top of page ]

VI. Solicitation of Proposals from Owners

After conducting a market survey and developing a negotiating strategy, the Gatto Group will request initial proposals from building owners, communities and build to suit contractors. The goal is to initiate a meaningful negotiation with a clearlydefined schedule for responding, and to create a level playing field for responses. The process is strategic, not mechanical in nature. The Request for Proposal (RFP) process typically benefits from being tailored to a specific owner/community/contractor, recognizing the strengths and weaknesses of the respondent. For negotiating leverage, the RFPs may be directed to respondents that do not fit our requirements or are not of interest to the Client. [ top of page ]

VII. Financial Analysis/Tenant Improvement Funding

Based on these proposals, the Gatto Group will prepare a financial analysis comparing the annual and total occupancy costs and build-out cots vs. allowance of every potential transaction including economic incentives against each other and the existing total occupancy cost benchmark.

The Gatto Group is well-qualified to understand the nuances of GAAP basis lease accounting for Client, and can:

  • Provide updates and summary reports throughout process.

  • Develop consistent apples-to-apples comparisons.

  • Track progress at each stage of negotiations.

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VIII. Development of Candidate Pool

The review of proposals and financial analyses leads to the development of a candidate pool from a financial perspective. However, the work of the project manager and architect further defines this candidate pool and incorporates the physical requirements of the business groups and the cost of any construction or renovation. [ top of page ]

IX. Negotiation of Lease Terms/Purchase Option

After developing the candidate pool, the Gatto Group will recommend aggressive, desired lease terms to building owners or purchase terms for a building or land for build to suit. The Gatto Group will negotiate to achieve all criteria outlined in the Facility Model. Our reputation and client base was built on tenacious tenant advocacy. In this process, we:

  • Devote time and attention "up front" to understand building ownership's position and carefully consider how certain occupant negotiating positions affect it.

  • Document negotiation process in a disciplined manner. This is critical to maintaining progress.

  • Achieve results early by "listening" patiently to the marketplace as owners lower offers and compete with themselves

  • Use "Bid Package"; a powerful tool which defines terms and conditions under which our Client will conduct negotiations, and conclude business.

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X. Approval Process

At this point, the strengths, weaknesses, financial terms, and physical characteristics of each property in the candidate pool are evaluated. The Client will now be in a position to make an informed facility decision. The Gatto Group will provide objective counsel throughout the decision-making process.

XI. Negotiation and Review of Legal Documentation

The Gatto Group will conduct a wordbyword review of the proposed document to ensure that the terms of the negotiated transaction are clearly set forth as agreed and that the legal terms are equitable. When the Client, the Gatto Group, all partners/vendors and the Client’s legal counsel are satisfied that the document correctly and fairly reflects the transaction and that it is a fair contract, the document will be executed.

The lease document preparation process includes:

  • Document review checklist

  • Tenant-oriented lease rider

  • Cross-check of all business points

  • Follow-up with conditional acceptance letters/punch list

  • Follow-up with estoppels, etc.

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XII. Move Management

The Gatto Group believes that a well organized, coordinated move is a team effort that begins well in advance of the move date. The move is dependent not just on a moving vendor, but on a team of Client, mover, contractor, telephone, data systems and furniture vendors working together under the project manager and architect to ensure the smooth execution of the move. The Gatto Group begins planning for the move from the day we start. The Gatto Group project manager and architect will be on site throughout the move process and will ensure a smooth transition into the new home. [ top of page ]

XIII. Expense Audit

The audit process begins when the Client receives annual operating expense reconciliation’s. At that point the Gatto Group can prepare a preliminary analysis. The analysis will include, a review of the lease sections relevant to operating expense escalations, a comparison of the subject building's operating expenses to those of similar buildings in the market and a summary of potential overstatements.

Based on the preliminary analysis, the Gatto Group will recommend further audit procedures if necessary. The Gatto Group will obtain the Client's authorization prior to scheduling audit fieldwork directly with the property manager. [ top of page ]