Step One

Select a QUALIFIED INTERMEDIARY to assist you with the build-to-suit exchange as early in the process as possible. Key points to consider in selecting a Qualified Intermediary are: the knowledge and experience of the staff; the professional assistance provided by the Qualified Intermediary to your real estate agent, CPA and attorney; the security of the property while it is being held by the Qualified Intermediary, and the security of the exchange funds held by the Qualified Intermediary, which are of especially critical importance.

Step Two

In all types of exchange transactions always instruct your real estate agent to include an "Exchange Cooperation Clause" as an addendum to the purchase and sale agreement on both the relinquished property(ies) and the replacement property(ies) used in the exchange.

Step Three

Contact your tax and/or legal advisor as early in the build-to-suit exchange process as possible to consult with them to determine the advisability and feasibility of completing a build-to-suit exchange and whether the build-to-suit exchange should be structured as a "delayed" or "reverse" exchange. Build-to-suit exchanges are significantly more expensive than delayed or simultaneous exchanges because they are more complex and require additional time and effort by the Qualified Intermediary to set up and administer. In addition, since the Qualified Intermediary or its affiliated Holding Entity must hold title to the replacement property to complete the exchange, the Qualified Intermediary has increased risk and liability that is not present in delayed or simultaneous exchanges, which significantly adds to the cost of the exchange.

Step Four

Contact your tax and/or legal advisor as early in the build-to-suit exchange process as possible to consult with them to determine the advisability and feasibility of completing a build-to-suit exchange and whether the build-to-suit exchange should be structured as a "delayed" or "reverse" exchange. Build-to-suit exchanges are significantly more expensive than delayed or simultaneous exchanges because they are more complex and require additional time and effort by the Qualified Intermediary to set up and administer. In addition, since the Qualified Intermediary or its affiliated Holding Entity must hold title to the replacement property to complete the exchange, the Qualified Intermediary has increased risk and liability that is not present in delayed or simultaneous exchanges, which significantly adds to the cost of the exchange.

Step Five

Prior to the Holding Entity taking title to the replacement property in the build-to-suit exchange, you must have hazard and commercial general liability insurance coverage naming the Holding Entity as an insured or additional insured for the amount of liability coverage specified by Qualified Intermidiary. In addition, prior to taking title to commercial, industrial or raw land the QI must be provided with a copy of the Phase 1 Environmental Site Assessment report or other comparable environmental evaluation that is no more than six months old for review and approval. The QI will require that the Phase I be certified to the Holding Entity and the Phase I must state that the property is free of contamination. Finally, each contractor or subcontractor that will work on the construction project must be licensed and have the appropriate insurance and a bond satisfactory to the QI.

Step Six

If the Qualified Intermediary or its Holding Entity is taking title to the replacement property and if there is a third party lender, you must contact your lender, whether it is a financial institution or the seller of the replacement property, and instruct your lender that you will be completing a build-to-suit exchange and that the Qualified Intermediary or its Holding Entity will be the borrower on the loan until such time as the replacement property is deeded to you. The loan will need to be non-recourse to the Qualified Intermediary and its Holding Entity. For both delayed build–to–suit exchanges and "safe harbor" build-to-suit exchanges your lender can require that you be a guarantor on the loan and that you offer other collateral (other than the relinquished property), if necessary, to meet the lender’s underwriting guidelines.