Idea Transcript
Sentinel ESG Policies 1. Introduction Sentinel believes that environmental, social responsibility and corporate governance (ESG) factors can have an impact on investment performance and must be considered when evaluating real estate investment opportunities and managing real estate assets. Sentinel’s ESG policy is designed to (i) ensure ESG considerations are incorporated into our decision-making processes, (ii) provide our employees with guidelines for implementing ESG initiatives at our investment properties and (iii) define Sentinel’s position on ESG for the benefit of clients, stakeholders and third parties we work with. This policy applies to all Sentinel entities, employees and affiliates. 2. Environmental Sustainability Policies Sentinel’s environmental sustainability policies cover three broad categories: • Sustainability policies that govern the management of our real estate assets • Sustainability policies that apply to the evaluation of real estate investment opportunities • Sustainability policies that apply to third party vendors and suppliers a) Sustainability policies that govern the management of our real estate assets At the core of Sentinel’s environmental sustainability policies that govern the management of our real estate assets is The Sentinel Green Program. The Sentinel Green Program is designed to incorporate environmental sustainable operational practices into our property operations and renovation programs and includes strategies to reduce energy consumption, water usage, waste disposal and carbon emissions. Sentinel believes that the implementation of practical and cost-effective environmentally sustainable initiatives at our properties not only represents responsible corporate citizenship, but also serves the best interests of our clients through the potential to increase the value of our assets. Sentinel has three LEED accredited professionals on staff who are continually developing new sustainability initiatives and working with our management professionals to implement these strategies. A copy of the Sentinel Green Program is provided in Exhibit A. Below are examples of sustainability programs that Sentinel has adopted in the management of our real estate assets.
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Electric car chargers: Sentinel started to install electric car charging stations in our communities in December of 2014. We use a built-in system where residents can simply start a charge, track real time charging status and receive notifications from a mobile app.
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Lighting Audits: In 2016, Sentinel instituted a program to have lighting audits performed on all properties to identify energy savings opportunities. We identified the properties that would benefit from an LED retrofit and incorporated this into our capital programs. Compared to traditional bulbs, LED lights have a
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lower impact on the environment with less harmful mercury deposits than fluorescent lamps. Since LED lights last longer, they also reduce the amount of waste that goes into landfills.
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Supplier Engagement: Previously, we had partnered with Home Depot/HD Supply to create a catalog for our properties that identifies environmentally friendly products for unit upgrades and replacements in a way that is easy to use and distribute. In 2017, this catalog was incorporated into the HD website so that all sustainable products are identified with the “Ideally Green” label. In addition, a button has been added – the “Shop Sustainable Products” button – that will immediately link to products that would meet our requirements.
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Freon Replacement: Sentinel started to convert R-22 HVAC units to R-410A units in 2008 to reduce Freon usage. R-22 is a hydro-chlorofluorocarbon (HCFC) that contributes to ozone depletion. R-410A is a hydro-fluorocarbon (HFC) that does not contribute to ozone depletion. R-410A can absorb and release more heat than R-22, which reduces the risk of compressor burnout due to overheating. In addition, R-410A functions at a higher pressure than R-22, so new compressors are built to withstand greater stresses, reducing the chance of cracking.
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Sub-metering: Sentinel’s portfolio mainly consists of multifamily communities in which tenants pay utility companies directly for their own utilities. While submetering makes it difficult to track the energy consumption of individual tenants, the apartment industry has discovered that sub-metering contributes to energy conservation. When residents are paying for utility consumption, they tend to become more aware of usage and want to benefit financially by reducing unnecessary use. At the same time that this practice results in the saving of electric and water usage, it also benefits the landlord in reduced costs. Where state and municipal laws permit, Sentinel has been transferring the cost of all utilities from the landlord to the residents.
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Resident education: Sentinel’s residents are regularly provided with “green” lifestyle tips and environmentally favorable programs including comprehensive on-site recycling programs, battery recycling, reusable shopping bags, bicycles for resident use and other site-appropriate programs. We provide residents with a sustainability newsletter on our corporate website and in the resident portal of our property websites. The newsletter focuses on new sustainability programs as well as energy and water saving tips for renters. A sample of our resident newsletter is provided in Exhibit B.
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Trash recycling: Sentinel also utilizes third party vendors to provide “valet trash service” for the residents of our managed communities. The service provides individual containers and collects trash and recyclable materials directly from each apartment. This solves the problem for communities that have limited space for recycling containers as the valet trash service provider places the recyclables
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in appropriate containers, ensuring no contamination and increased recycling participation. viii.
Annual sustainability reviews: Sentinel’s property managers, district managers, asset managers and regional directors work with our capital programs and sustainability professionals to identify areas of improvement for each property during the annual budget and asset plan process. During this process, the capital programs team evaluates the capital needs for the coming year, including assessment of energy efficiency items such as lighting upgrades, insulating strategies, replacement of windows/doors and HVAC upgrades. They also address water efficiency issues, including repairs to irrigation systems, selection of appropriate landscaping and improvement of pool systems. Unit upgrades are evaluated and are designed to include both energy- and water-saving components, as well as environmentally advantageous materials.
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Other sustainability initiatives: Examples of other Sentinel sustainability programs include installing dual fuel boilers and utilizing web-based software to monitor and control heating costs, installing showerheads and toilets which reduce building-wide water usage, utilizing energy efficient appliances and installing bamboo flooring, an environmentally friendly flooring material.
b) Sustainability policies that apply to the evaluation of real estate investment opportunities When evaluating real estate investment opportunities, Sentinel’s due diligence teams follow a prescribed due diligence procedure that includes the engagement of third-party environmental consultants to assess the contingent risks associated with any pre-existing environmental hazards and the review of environmental reports maintained by the seller, if available. Checklists utilized by our environmental inspectors for each acquisition are attached in Exhibit C. c) Sustainability policies that apply to third party vendors and suppliers Sentinel requires its contractors and suppliers to provide energy efficient and sustainable materials for all of its properties to the extent practicable. For example, we have a national relationship with Home Depot/HD Supply that incorporates many of the best practices for the industry. Home Depot is the prime vendor for many of the fixtures and components of the various upgrade programs that Sentinel completes each year. We have recently acquired several NAHBGreen (National Association of Home Builders) certified apartment properties that have achieved a Bronze Level certification. NAHBGreen is one of the most rigorous green standards in existence, encompassing measurement of resource efficiency, energy efficiency, water efficiency, education and global impact. The following properties have this certification:
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Avant on Market Center Nona Park Village The Oaks at Johns Creek In addition, although Foothills at Old Town does not have a specific certification, the property was built with sustainability in mind and includes all Energy Star appliances and windows, programmable thermostats, compact fluorescent lighting, high efficiency air conditioning, water conserving showerheads and faucets and native and drought tolerant landscaping. As a means of tracking the effectiveness of our environmental sustainability policies, Sentinel initiated its participation in the GRESB (Global Real Estate Sustainability Benchmark) survey in 2011. This survey is used by institutional investors to engage with fund managers and listed property companies to improve the sustainability of the global property sector. Sentinel’s funds reporting to GRESB in 2016 represented four of the 16 total US residential funds responding.
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3. Social Responsibility Policies Sentinel’s policies related to social responsibility are included in detail in our comprehensive proprietary Policies and Procedures Manual, which is available to all employees as well as to existing clients upon request. Some of the policies that can be easily summarized are provided below: a) Diversity Sentinel’s equal employment opportunity policy states: There will be no discrimination against any employee or applicant for employment because of race, color, religion, gender, sexual orientation, age, national origin, disability or veteran’s status and any additional factors as may be mandated by applicable law. This policy includes but is not limited to the following: •
Sentinel will recruit, hire, and promote persons in all job classifications without regard to race, color, religion, gender, sexual orientation, age, national origin, physical handicap or veteran’s status, and any additional factors in a manner consistent with all applicable laws and regulations.
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Sentinel will ensure that all personnel actions such as compensation, benefits, transfers, layoffs, returns from layoffs, educational, social, and recreational programs will be administrated without regard to race, color, religion, gender, sexual orientation, age, national origin, disability or veteran’s status, and any additional factors in a manner consistent with all applicable laws and regulations.
b) Remuneration Sentinel’s corporate level professionals are reviewed annually by their immediate supervisors to evaluate their performance relative to their responsibilities. These evaluations are utilized by the Executive Committee to determine the annual bonus awarded to the employee, as well as to identify candidates for promotion. On-site managers are reviewed quarterly on the basis of their overall performance and the performance of the property for which they are responsible. Evaluations are based on a variety of property-level factors, including adherence to the operating budgets, operational improvement, the appearance of the property and the vacant apartments, vacancies and delinquencies, tenant turnover, accuracy of reporting, attitude of property staff and comments from tenants. Leasing agents are evaluated through monitoring their leasing performance and regular reviews. Each property is “shopped” in person quarterly by an independent service to evaluate leasing skills, and telephone shopping is performed monthly to evaluate the leasing agent’s phone presentation. Monthly leasing meetings review the training program regularly and allow the District Manager and Marketing Director to observe each leasing agent in “role playing” situations. These property management professionals are rewarded for good
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performance with incentive bonuses that are paid quarterly based upon a scoring system developed to weigh performance in all of these aspects of successful property management. c) Performance & Career Development Sentinel utilizes a web based training and testing system, Grace Hill, that allows for individualized training of property employees, when it is convenient and in a way that minimizes the loss of time from regular job duties. This training can be used both for new employees and for those who want to revisit subjects previously covered. Beyond courses in property management basics, Grace Hill offers courses on such topics as business etiquette, conflict resolution, customer relationship management, employee coaching, Fair Housing, hiring, mold awareness, preventing sexual harassment, time management, risk management, etc. All classes completed are tracked within the Grace Hill system. Sentinel also provides intensive training to its personnel in the application of nondiscriminatory renting policies and issues certificates to employees who satisfactorily complete the firm’s Fair Housing courses. Our internal auditors also teach many audit and policy courses all over the country each year, which are also recorded. In addition, we routinely fund job-related educational programs for our on-site employees, including IREM and National Apartment Association courses for property managers and leasing professionals and certification programs for maintenance employees. We encourage our employees to pursue their CPM, CAM and other certifications, and will pay for all classes leading to these designations. d) Health & Safety It is the policy of Sentinel that accident prevention shall be considered of primary importance in all phases of operation and administration. It is the intention of Sentinel to provide safe and healthy working conditions and to establish and insist upon safe practices at all times by all employees. The prevention of accidents is an objective affecting all levels of the organization and its activities. It is, therefore, a basic requirement that each supervisor make the safety of employees an integral part of his or her regular management function. It is equally the duty of each employee to accept and follow established safety regulations and procedures. Every effort will be made to provide adequate training to employees. However, if an employee is ever in doubt about how to do a job safely, it is their duty to ask a qualified person for assistance. Employees are expected to assist management in accident prevention activities. Unsafe conditions must be reported. Fellow employees that need help should be assisted. Everyone is responsible for the housekeeping duties that pertain to their jobs. Any injury that occurs on the job, even a slight cut or strain, must be reported to management as soon as possible. In no circumstance, except an emergency, should an employee leave the work site without reporting an injury that occurred.
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e) Cyber Security Authorized users have their domain login credentials validated by Microsoft Active Directory synchronized across three domain controllers. In addition, access to database applications requires additional user account access provided by designated database administrators. Appropriate password controls are in place to ensure that access to the network and applications is restricted to authorized personnel. Sentinel password security policies control user password configuration at the network level. Users are required to change their passwords every 90 days. Passwords must have a minimum of 8 alphanumeric characters. Passwords timeout after 3 incorrect attempts and the previous 3 passwords cannot be repeated. Passwords must be unique, should not contain repetitive characters and certain words should not be allowed as passwords. Remote access is achieved through the Juniper Networks MAG2600 Junos Pulse Gateway (with host checker) and is authenticated by Active Directory, but remote users must first apply for remote access permission. The default is no remote access. Access to the Internet websites and email is controlled by the IT department based on the company policy. All field office Internet access is managed and monitored centrally. All data traffic from the properties is routed through our encrypted VPN tunnels and inspected by anti-virus and web filtering systems before being allowed out. Sentinel uses Palo Alto Networks PA-2050 and Check Point Software Technologies 12200 next generation firewalls, utilizes Entrust digital certificates and subscribes to DDoS mitigation services from Verisign.
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4. Governance Policies Sentinel has an established code of ethics that is incorporated into all of our practices and ensures that the firm maintains good corporate governance. In addition, we operate our funds in accordance with their organizational documents, as well as in accordance with applicable laws, rules, regulations, policies and procedures. Sentinel’s code of ethics and an outline of Sentinel’s Ethics Training Course are provided below: a) Sentinel Code of Ethics Sentinel’s philosophy is to be a good, profitable, and enduring company. In achieving these goals, integrity and moral fiber are just as important as technical competence and work ethics to advance within the firm. The highest trust, confidence and responsibility is placed in each employee, and it is believed that his/her fundamental integrity and honesty is essential in daily relations with customers, the public and fellow employees. Sentinel will not tolerate any employee who achieves results by violating laws, being involved in dishonest or unscrupulous business practices, or who jeopardizes Sentinel’s reputation. Through these policies and actions, Sentinel seeks the very best that can be achieved: a firm that creates both economic value and acts on ethical principals. It is the responsibility of Sentinel’s leaders to make ethical behavior and efficient performance complementary. Sentinel measures excellence by qualitative values as well as by quantitative results, motivating employees to “do the right thing” while “doing things right”. All employees are encouraged to be alert to ethical ambiguity and to respond promptly to concerns about possible violations of laws and regulations. Sentinel also looks to its leadership to uphold these policies and standards and to set an example by instilling a spirit of honor in the workplace. With this in mind, the company and its employees are expected to comply with the following standards to the best of their ability.
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Quality and Fairness: All employees will pursue quality in every service provided by Sentinel and will strive to earn the clients’ trust. Therefore, employees will endeavor to deliver the product promised and what the customer expects.
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Assets and Funds: Each employee with responsibility for the use of Sentinel’s physical assets or funds will be accountable and responsible for his/her proper conduct as a fiduciary in relation to the use or protection of those assets.
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Internal Financial Reporting: Each employee has ethical and legal responsibilities for the proper use and protection of assets and for reporting financial and other important Sentinel information. Sentinel has established, and all employees must maintain, high standards of accuracy, honesty, integrity, completeness and confidentiality in regard to Sentinel’s financial records and reporting.
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Selection of Suppliers: Sentinel selects suppliers on the basis of the needs of its business. Consequently, only reputable, qualified individuals or firms under market compensation agreements that are reasonable in relation to the services required will be employed. No employee may select a supplier for any reason other than its ability to fulfill Sentinel’s needs. In particular, no employee may personally accept any goods, services or other forms of compensation or favors for less than market value. Further, no employee may own an interest in a business, be a supplier to or a creditor of a supplier, unless the interest is represented by a publicly traded security and the employee does not own more than 5% of the outstanding securities of any class. The provisions of this section are not intended to apply to routine, reasonable business entertainment customary in local business relationships.
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Improper Payments: Sentinel expects all employees to use only legitimate practices in commercial operations and in promoting Sentinel’s position on issues before governmental authorities. Kickbacks, fees, commissions, or any forms of “bribes” intended to induce or reward favorable decisions and/or governmental actions are unacceptable and prohibited. These provisions are not intended to apply to routine, reasonable business entertainment or gifts of minor value ($100), which are customary in local business relationships, provided that no laws or Sentinel policies are violated and full disclosure is made to the immediate supervisor. No employee will distribute any payment or anything of value, whether directly or indirectly to an individual or firm employed by, or acting for or on behalf of: • • •
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any customer, whether private or governmental, for the purpose of inducing or rewarding any favorable action by the customer in any business transaction; or any governmental entity, for the purpose of inducing or rewarding any favorable action or withholding action, by a governmental entity in any governmental matter; any government official, political party, or official of such party, or any candidate for political office, for the purpose of inducing or rewarding any favorable action or withholding action, or the exercise of influence by such official, party or candidate in any business transaction or in any government matter.
Confidentiality: Each of our employees has a responsibility not to misuse privileged or confidential information for any purpose or for “passing on” to outsiders. We have an obligation to keep our clients’ business confidential; care should be taken in discussing business in elevators, airplanes or in other public places. Unauthorized disclosure of information relating to a client’s or the company’s affairs may result in dismissal.
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Observation of the Code of Ethics: Each employee has an obligation to observe and uphold Sentinel’s Code of Ethics. Every employee should avoid even the appearance of impropriety since such appearance would undermine the general support of the Code of Ethics. Violation of this policy may result in disciplinary action, up to and including termination of employment.
b) Sentinel Real Estate Ethics Training Outline Sentinel strives to maintain the highest standards of personal integrity and business ethics. Every employee has a responsibility to conduct themselves in accordance with the four basic principles of Ethics. Those four principles are:
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To be Trustworthy: We must not violate trust and must be truthful in our dealing with others. All who are our clients and residents have a right to receive and we have an obligation to provide truthful statements and to not misuse or share confidential information with others without permission of your supervisor. Discussions about our business, information about our communities, residents and vendors should not be disclosed without permission.
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To be Responsible: We must understand and allow company policy to guide all of our dealings with employees and vendors. Accepting personal gifts or services from fellow employees, vendors, residents or prospective residents is not allowed outside of corporate policy which is described in detail in the personnel section of the Policy Manual. If questions arise, please seek your supervisor’s guidance and approval. Employees must be aware of the Sentinel Conflict of Interest policy as it relates to: • Screening and hiring of Employees • Resident screening and adherence to Fair Housing Laws • Any gifts, whether monetary or tangible must not be accepted without disclosure and supervisory approval.
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To Be Respectful: We must always show courtesy and respect in our dealings with our clients, our residents and fellow employees. All of us must treat all whom we deal with in a manner of courtesy and respect. We cannot discriminate against or harass anyone in a verbal, non-verbal or written manner. Follow the golden rule. Remember that your personal reputation and that of Sentinel is based on our individual actions and conduct.
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To Be Fair: We have become and can only remain a great organization because of the efforts of every one of us. It is not enough to just follow policy. There is not a policy that can cover every situation that may occur in the working environment. Ask yourself the questions “Is it Fair?” and “Is it Right?, and seeking supervisory guidance when you are not sure how to respond should lead to solutions that are appropriate. We should strive to be the kind of people that we want to associate with.
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Some other areas that require ethical conduct are: •
We ask all employees not to impose political and social opinions within your community and workplace. We ask all employees to not share personal information about themselves or about residents. This includes both written and verbal information. Examples of such information could be community financial statements, vendor bids or contracts, resident applications and lease files. We ask all employees to not solicit goods or distribute literature in the workplace. Employees engaged in charitable, civic, political, religious or other outside activities may not represent that they are representing Sentinel or using Sentinel or its facilities for outside activities. Employees may not work in outside employment without prior written approval of their supervisor.
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Every employee is expected to observe and comply with the Sentinel Code of Ethics. Violations of the code or actions that cast a negative light on Sentinel or our communities will be reviewed and may result in disciplinary action including suspension or termination. Remember, an excellent personal reputation is only achieved by quality personal actions and is maintained by a positive attitude. c) Mitigating Risks of Bribery and Corruption Sentinel has several mechanisms in place to mitigate the risk of bribery and corruption within its organization: i.
Whistle blower mechanism Sentinel has established a detailed procedure for employees to register whistle blower complaints as well as other complaints, as described below.
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Complaint and Grievance Procedures. Employees may file complaints reporting violations of Company policy, workplace concerns, violations of law and related issues in accordance with the following provisions. (For purposes of the following, violations of law will be deemed to be included as violations of Company policy.)
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Distinction between Grievances and Other Complaints. In general, in order for a complaint to constitute a grievance suitable for immediate review and investigation by the Company’s Grievance Committee, the employee filing the grievance must allege a breach of Company policy by another employee, usually a supervisor, that led to or caused some tangible, direct detriment to the employee filing the grievance. An exception to the requirement of personal detriment applies where the person alleging the grievance is complaining about sexual 11
harassment, in which case tangible detriment need not be alleged or proven. (Sexual harassment claims are specifically discussed below.) In addition, in order for a grievance to be suitable for review, it normally must also be established that the regular chain of supervision has failed to remedy or address the consequences resulting from the alleged breach of policy after having been made aware of an alleged breach. Complaints meeting these criteria and the definition of a grievance may be filed with a Sentinel Grievance Officer. Complaints that do not involve personal and tangible detriment to the employee making the complaint may also be addressed to the Grievance Committee by contacting a Sentinel Grievance Officer. However, employees should be encouraged to first reasonably attempt to address concerns about perceived breaches or failings of policy within the normal chain of supervision. Normally a complaint about the actions of any employee should first be made to the employee’s supervisor. •
Procedures Governing Grievance Committee Investigations. General. Following delivery of a complaint constituting a grievance committee to one or more of Sentinel’s Grievance Officers, the complaint will be referred to the Grievance Committee. The Grievance Committee has the authority to investigate all allegations of the employee filing the grievance (the “grievant”). Other complaints. As noted above, complaints concerning violations of Company policy that do not involve tangible personal detriment to the employee, or for those that involve tangible personal detriment but that has not previously been made within the regular chain of supervision, may also file their complaint with one or more of Sentinel’s Grievance Officers. Upon receipt of either such type of complaint, the Grievance Committee will meet to determine whether to refer such complaint to the appropriate person or persons within the regular chain of supervision. Any such reference would be made in order to allow the appropriate supervisor or supervisors to attempt to resolve the matter. For complaints involving personal detriment to the employee that have not been previously addressed to a supervisor in the employee’s chain of supervision, the Grievance Committee will monitor the progress of such efforts during the period that the appropriate supervisor or supervisors attempting to address and resolve the complaint. Such monitoring will include verifying that appropriate measures are being taken and all applicable policies are followed. If following the referral and the lapse of an appropriate period of time either the employee who filed the complaint or the Grievance Committee determines that the outcome of such referral has been unsatisfactory, the Grievance Committee will proceed to investigate the matter in the same manner as for a grievance. In cases where a complaint has been made that does not involve personal detriment to the employee, the Grievance Committee will monitor the applicable management group’s handling of the complaint. Reports concerning such management group’s efforts will be generated as indicated and forwarded to the Company’s President. Policies and Practices Governing Responses to Grievances and Other Complaints; Retaliation is Prohibited. The Company prohibits retaliation against any employee who in good faith reports violations of Company policy, workplace concerns, violations of law and related issues. This prohibition applies whether the complaint is first addressed to a
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Sentinel Grievance Officer or to any supervisor. The company also prohibits retaliation against an employee for filing a complaint regarding the Company with a government anti-discrimination agency. Further, Company policy bars retaliation against anyone for assisting with the investigation of such a complaint. An employee who retaliates against another employee for filing a complaint hereunder or for assisting in the investigation of such a complaint by a governmental agency will be subject to disciplinary action up to and including termination.
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Notice of Complaint and Grievance Policies. All new employees must be advised of the procedures and policies under these provisions. In addition, a sign shall be posted in a conspicuous place within the employee work area of every office or on the employee bulletin board, if applicable, advising of the availability of these procedures. The sign shall also contain the telephone numbers of the offices of the Grievance Officers. An appropriate posted notice must be placed where it is visible to all personnel. Additionally, each New Hire must be given a copy of these procedures and sign a form acknowledging receipt.
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Rights of Privacy in Respect of Filed Complaint. Employees who wish to file complaints hereunder may request that their identity or identities be kept confidential. The Company will make reasonable attempts to comply with such requests; however, any employee making such request should be aware that those about whom such a complaint is made will have certain rights to reasonably understand the nature of the complaint. If the Grievance Committee determines it cannot fairly proceed with its investigation and continue to comply with such requests, the employee who requested confidentiality will be contacted and so informed. At that point the Committee will suggest that the employee withdraw the request for confidentiality. If the employee refuses to do so, the Committee will make a determination whether it can or cannot continue with the investigation. Any employee requesting confidentiality who also alleged suffering or that they may suffer personal detriment should be aware that it is unlikely their identity can be kept confidential in the process of resolving the complaint. Any employee requesting confidentiality should also be aware that the Company might be subject to a demand of information from a government agency concerning matters covered by the request for confidentiality. The company may feel it necessary to submit such information in response to such a demand. Where appropriate the Company will consider whether it can first inform the employee who requested confidentiality of the government’s demand and proceed accordingly.
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Responsibility to Assist in Company Investigations. It is the responsibility and obligation of all employees to provide reasonable assistance to the Company in respect of any internal investigation. Failure to comply with this requirement may subject the employee to disciplinary action up to and including termination. Reporting Violations. An employee who observes any conduct by other employees in violation of Company policies or of the law has a responsibility to
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promptly inform his or her supervisor, a Sentinel Grievance Officer or the company’s Legal Department. ii.
Investment management processes Throughout its due diligence process as well as its asset and property management processes, Sentinel routinely assesses risks of bribery and corruption and has checks and balances in place to prevent exposure to those risks. Our internal audit staff performs both standard audit procedures and operating reviews. Each property is visited unannounced at least twice a year for a thorough financial and management procedures audit. Part of the audit includes compliance with Sentinel operating controls for approving and executing transactions affecting the asset. Sentinel’s internal audit group reports to Michael Kenny, the firm’s General Counsel, and is independent of both the operational groups and the accounting department. Every entity or Fund Sentinel manages has segregated cash accounts that are established during the formation period. Investor capital is wired into or out of these segregated accounts. The cash manager has access to initiate such transactions; however, a senior accounting officer and the Portfolio Manager approve all capital expenditures. Investment Committee approval is required for all acquisition, financing and sale transactions. Upon acquisition of a property, the senior transaction officer and accounting officer approve outgoing wires. These wires are supported by Investment Committee authorization. Sales are communicated between the Portfolio Manager, senior acquisition officer, senior accounting officer and cash manager. Closing statements are provided ahead of time from outside counsel in order for the cash manager to ensure the proper sales proceeds are received. Each property has its own deposit account. Cash is concentrated to the Fund level concentration account automatically based on pre-established target balances, which sweep excess cash through Sentinel’s treasury workstation. Available balances are invested in overnight instruments typically collateralized by treasury securities, commercial paper, other government securities, certificates of deposit, time deposits, banker’s acceptances and repurchase agreements. Rental checks are collected by the property manager and deposited daily in a local bank account for each property. This is accomplished either by electronic check scanning or physical deposit to the bank. Copies are made of all payments received and are filed for support/review. Check scanning images are retained in the accounting system. Rents received via credit card or ACH payment are imported into the accounting system and electronically deposited into the local bank account for each property. These amounts are swept into our concentration bank and invested. The cash receipts are recorded in the accounting system by the on-site bookkeeper. There are no petty cash accounts maintained at the properties.
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Resident rental and other charges are created in the tenant ledger on the accounting system (Yardi). Payments received are recorded against the open ledger charges at the property. The ledger is automatically updated into the property general ledger. Each day, the property manager reconciles amounts received against charges in the ledger balance using reports generated in Yardi.
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Exhibit A
Sentinel Green Program A Feasible and Marketable Green Framework
Index
Green Program’s Origin Green Program Content Green Program Market Strategy Green Program Market Strategy Green Builders
GREEN Program’s Origin g g —LEED
U.S. Green Building Council g LEED Rating System Portfolio LEED for LEED f New Construction & Major Renovations
LEED for Existing Buildings
LEED for Commercial Interiors
LEED for Core & Shell
The American Society of Interior Designers (ASID) Foundation and the U.S. Green Building Council (USGBC) have teamed up to release the first nationwide green residential remodeling guidelines, the Regreen Program. The Program is dovetailed as much as possible with LEED for Homes rating system, but not to the extent any sort of rating or certification can be applied to projects completed using this program applied to projects completed using this program.
The Sentinel 2009 Green Program is designed to incorporate environmentally responsible programs into property operations and renovation programs, as well as resident programs targeted at conservation and recycling well as resident programs targeted at conservation and recycling.
LEED for Homes
REGREEN 2008 Residential Remodeling Guidelines
LEED for Neighborhood Development
GREEN Program Content g Green Home Performance Green Kitchen G Green Bathroom B h Green Bedroom Green Living & Working Green Checklist
GREEN Home Performance Guidelines Green Home Performance Green Kitchen G Green Bathroom B h Green Bedroom Green Living & Working Green Checklist
GREEN Home Performance General Design and Renovation/Operation Strategies • ID—Ensure durability • ID—Manage noise • ID—Renovate with air quality in mind • ID—Renovate for a sustainable lifestyle • ID—Renovate for a sustainable lifestyle • MR—Manage construction and demolition waste • IEQ—Control the spread of pollutants • IEQ—Test for, and appropriately handle, hazardous materials where applicable • IEQ—Conduct lead‐safe work • ID—Provide appropriate insect control • ID—Design and maintain a practical and useable recycling system
HVAC • EA—Install programmable thermostats • EA—Properly commission new (or tune existing) 13 seer or better HVAC systems • EA—Properly seal and insulate HVAC distribution • EA—Properly seal and insulate HVAC distribution system • EA—Make sure ducting is clean • IEQ—Install CO and smoke alarms where necessary
Building Energy Conservation • EA—Optimize energy performance EA O i i f • EA—Install attic insulation where practical • EA—Consider an additional radiant barrier in the attic where possible • EA—Upgrade existing windows when renovating • EA—Upgrade • EA Upgrade existing exterior doors when renovating existing exterior doors when renovating • EA—Weather strip doors and windows when renovating or performing turnkey work
Lighting and Electrical • EA—Install energy‐efficient lighting fixture/light bulbs EA I ll ffi i li h i fi /li h b lb • EA—Manage phantom loads/Unplug unused appliances
Wall and Ceiling • MR—Install environmentally preferable interior sheathing • IEQ—Use non‐paper‐faced gypsum board in moist areas
Plumbingg • EA—Choose a high‐efficiency water heater • EA—Insulate hot water pipes • EA—Insulate water heater
Use • AE—Educate • AE Educate residents for green living residents for green living • AE—Take advantage of any city/State green rebate program Renovation
Operation
ID=Innovative Design EA=Energy & Atmosphere MR=Materials & Resources WE=Water Efficiency IEQ=Indoor Environmental Quality AE=Awareness & Education
GREEN Kitchen Guidelines Green Home Performance Green Kitchen G Green Bathroom B h Green Bedroom Green Living & Working Green Checklist
GREEN Kitchen Renovation and Operation Strategies • ID—Ensure durability • ID—Manage noise • ID—Employ universal design • ID—Design for storage and include pantry space • ID—Design for storage and include pantry space where possible • MR—Manage construction and demolition waste • IEQ—Control the spread of pollutants Plumbingg • EA—When possible reconfigure plumbing to distribute domestic hot water efficiently • WE—Install low water‐use kitchen faucet • MR—Include a plumbing access panel • WE—When practical install water shut off valves HVAC • IEQ—Provide effective kitchen ventilation • IEQ—Provide appropriate venting of all combustion‐ based heating and water heating equipment • EA—Make • EA Make sure ducting is clean sure ducting is clean Wall and Ceiling • IEQ—Limit use of wall coverings in high moisture areas • IEQ—Use low‐ or zero‐VOC interior paints and finishes IEQ • MR—Use appropriate sheens for paints and finishes
Lighting and Electrical • EA—Provide day lighting/Not blocking windows • EA—Install energy‐efficient electric lighting Appliances • EA—Install an energy‐efficient refrigerator • EA—Choose an energy‐efficient dishwasher • EA—Install energy‐efficient cooking appliances • EA—Manage phantom loads/Unplug unused appliances pp Floors and Flooring Products • MR—Consider reuse of existing flooring and subflooring • MR—Refinish wood floors using environmentally preferable processes and products f bl d d • IEQ—Choose hard‐surface flooring • MR—Consider flooring made from certified or reclaimed wood • MR—Consider flooring made from natural or rapidly renewable materials renewable materials • IEQ—Avoid carpeting in high moisture areas or where spills could occur Renovation
Operation
ID=Innovative Design EA=Energy & Atmosphere MR=Materials & Resources WE=Water Efficiency IEQ=Indoor Environmental Quality AE=Awareness & Education
GREEN Kitchen Furniture and Fittings • MR—Select cabinets made from greener materials • MR—Evaluate use of cabinetry made from particleboard or MDF(Medium Density Fiberboard) • MR—Install environmentally preferable countertops • MR—Install environmentally preferable countertops that are bacteria resistant • MR—Select materials that are easy to clean Use • EA—Set water temperature no higher than necessary p g y • IEQ—Use environmentally preferable cleaning materials and strategies • EA—Properly maintain equipment • IEQ—Install CO and smoke detectors where necessary
Renovation
Operation
ID=Innovative Design EA=Energy & Atmosphere MR=Materials & Resources WE=Water Efficiency IEQ=Indoor Environmental Quality AE=Awareness & Education
GREEN Bathroom Guidelines Green Home Performance Green Kitchen G Green Bathroom B h Green Bedroom Green Living & Working Green Checklist
GREEN Bathroom Renovation and Operation Strategies • ID—Ensure durability • MR—Manage construction and demolition waste • ID—Manage noise • ID—Design for storage • ID—Design for storage • IEQ—Control the spread of pollutants Lighting and Electrical • EA—Provide day lighting/Not blocking window • EA—Install energy‐efficient lighting fixture/light gy g g g bulb • EA—Manage phantom loads/Unplug unused Plumbing • WE—Install toilets with low gallon per flush • WE—Install low‐water‐use showerheads WE I ll l h h d • WE—Install water‐conserving bathroom faucet aerator • MR—Where possible include a plumbing access panel • EA—Choose • EA Choose a high a high‐efficiency efficiency water heater with water heater with drain and drain pan • EA—When practical reconfigure plumbing to distribute domestic hot water efficiently Floors and Flooring Products • MR—Consider reuse of existing flooring and subflooring • IEQ—Avoid carpeting in high moisture areas • IEQ—Choose hard‐surface flooring
HVAC • IEQ—Install effective bath ventilation • EA—Make sure ducting is clean Wall and Ceiling Finishes Wall and Ceiling Finishes • MR—When necessary frame for installation of future grab bars • IEQ—Limit use of wall coverings in high moisture areas • MR—Consider tile and tile trim pieces with recycled p y content • IEQ—Use low‐ or zero‐VOC interior paints and finishes • MR—Use appropriate sheens for paints and finishes Laundry • MR—Install readily‐accessible single‐throw shut‐off MR I ll dil ibl i l h h ff valve • EA—Install drain and drain pan for clothes washer • EA—When practical select a high‐efficiency, H‐axis clothes washer • EA—Provide • EA Provide air air‐lock lock dryer vent dryer vent
Renovation
Operation
ID=Innovative Design EA=Energy & Atmosphere MR=Materials & Resources WE=Water Efficiency IEQ=Indoor Environmental Quality AE=Awareness & Education
GREEN Bathroom Furniture and Fittings • MR—Evaluate use of cabinetry made from particleboard or MDF • MR—Select materials that are easy to clean • MR—Select cabinets made from greener materials • MR—Select cabinets made from greener materials • MR—Install environmentally preferable countertops Use • EA—Set water temperatures no higher than necessaryy • IEQ—Use environmentally preferable cleaning materials and strategies
Renovation
Operation
ID=Innovative Design EA=Energy & Atmosphere MR=Materials & Resources WE=Water Efficiency IEQ=Indoor Environmental Quality AE=Awareness & Education
GREEN Bedroom Guidelines Green Home Performance Green Kitchen G Green Bathroom B h Green Bedroom Green Living & Working Green Checklist
GREEN Bedroom Renovation and Operation Strategies • ID—Ensure durability • ID—Manage noise • ID—Renovate with air quality in mind • ID—Renovate for a sustainable lifestyle • ID—Renovate for a sustainable lifestyle • MR—Manage construction and demolition waste HVAC • IEQ—Provide fresh air as part of ventilation system • EA—Make sure ducting is clean g Lighting and Electrical • EA—Provide day lighting/Not blocking window • EA—Install energy‐efficient electric lighting • IEQ—Provide controllable window shading • EA—Manage phantom loads/Unplug unused EA M h l d /U l d appliances Wall and Ceiling • MR—Select environmentally preferable interior doors • IEQ—Use • IEQ Use low low‐ or zero or zero‐VOC VOC interior paints and finishes interior paints and finishes • MR—Consider natural finishes • MR—Use appropriate sheens for paints and finishes • IEQ—Limit use of VOC emitting wall‐coverings
Furniture and Fittings • IEQ—Minimize use of porous materials • IEQ—Select window treatments with health considerations in mind Floors and Flooring Products • MR—Consider reuse of existing flooring and subflooring • MR—Select wood subflooring that is FSC‐certified and low‐formaldehyde • IEQ—Choose hard‐surface flooringg • MR—Consider flooring made from certified or reclaimed wood • MR—Consider flooring made from natural or rapidly renewable materials • MR—Refinish wood floors using environmentally preferable processes and products f bl d d • MR—Choose environmentally preferable carpet and rug products • MR—Select carpet cushion that does not contain brominate flame retardants Use • IEQ—Use environmentally preferable cleaning materials and strategies Renovation
Operation
ID=Innovative Design EA=Energy & Atmosphere MR=Materials & Resources WE=Water Efficiency IEQ=Indoor Environmental Quality AE=Awareness & Education
GREEN Living & Working Guidelines g g Green Home Performance Green Kitchen G Green Bathroom B h Green Bedroom Green Living & Working Green Checklist
GREEN Living & Working g g Renovation and Operation Strategies • ID—Encourage bike use and install bike racks • ID—Encourage energy efficient or hybrid vehicles use • IEQ—Encourage smoke‐free interior • MR—When renovating plan for the future with wiring • MR—When renovating, plan for the future with wiring and cabling needs Landscape • WE—Install soil moisture irrigation sensors • WE—Plant xeriscape where applicable p pp • MR—Use nontoxic additives in lawn care and snow/ice removal HVAC • IEQ—Provide fresh air as part of ventilation system • IEQ—Provide for additional ventilation and air IEQ P id f ddi i l il i d i conditioning needs in certain activity areas • EA—Make sure ducting is clean Lighting and Electrical •• EA EA—Provide Provide day lighting/Not blocking windows day lighting/Not blocking windows • EA—Install energy‐efficient lighting fixture/light bulb • EA—Provide adaptable lighting for multi‐use spaces • EA—Manage phantom loads/Unplug unused appliances • IEQ—Provide controllable window shading
Floors and Flooring Products • MR—Consider reuse of existing flooring and subflooring • MR—Select wood subflooring that is FSC‐certified and low‐formaldehyde • IEQ—When possible, choose hard‐surface flooring • MR—Consider flooring made from certified or reclaimed wood • MR—Consider flooring made from natural or rapidly renewable materials • MR—Refinish wood floors using environmentally preferable processes and products • MR—Choose environmentally preferable carpet and rug products Use U • AE—Provide recycled or recyclable bag with company logo when lease signed • AE—Paper reduction • IEQ—Use real plants in offices and clubhouses • AE—Encourage • AE Encourage recycling recycling • AE—Plan “Green” activities for residents, i.e. recycling days, guest speakers for environmental topics, newsletter articles on energy conservation Renovation
Operation
ID=Innovative Design EA=Energy & Atmosphere MR=Materials & Resources WE=Water Efficiency IEQ=Indoor Environmental Quality AE=Awareness & Education
GREEN Checklist Guidelines Green Kitchen Green Bathroom Green Bedroom Green Living & Working Green Finished Basement Green Finished Basement Green Home Performance Green Checklist
GREEN Checklist–Property p y ‐‐Create our own list to evaluate Property Performance
GREEN Checklist–Resident ‐‐Encourage and educate resident Green Life Style
Possible Marketing Strategy g gy—highlight Green achievement g g
Possible Marketing Strategy g gy—highlight Green achievement g g
Local Emerging Green Builders Contact List g g
Local Emerging Green Builders Contact List g g
Local Emerging Green Builders Contact List g g
Local Emerging Green Builders Contact List g g
Local Emerging Green Builders Contact List g g
Exhibit B
Sentinel Green Newsletter First Quarter 2015
Adding electric car charging stations in our communities Sentinel started to install electric car charging stations in our communities since late December of 2014. The charging stations at the first property installed already have been charged 241 times in 2 months. This represents savings of 908.86 KG of greenhouse gases and 271.576 gallons of gasoline off the road. Adding more electric car charging stations is one of our major green efforts in 2015. We use ChargePoint’s built-in system where residents can simply start a charge, track real time charging status and receive notifications from a mobile app. It’s a great amenity to have in areas where electric cars are becoming popular.
Top 10 home energy saving tips Small action can create big change, especially when it comes to energy savings. Here are 10 no or lowcost ways to make a difference.
1. Adjust temperature settings Turn down your thermostat to 68 degrees in winter. For every degree you lower your heat in the 60degree to 70-degree range, you'll save up to 5% on heating costs. Wear warm clothing like a sweater and set your thermostat to 68 degrees or lower during the day and evening, health permitting. Set the thermostat back to 55 degrees or off at night or when leaving home for an extended time, saving 5%-20% of your heating costs.
2. Seal up the leaks Check leaks around your weather-stripping, windows and doors. Look for places where you have pipes, vents or electrical conduits that go through the wall, ceiling or floor. We are here to help you save energy, so please call us if you find a gap at the point where the pipe or vent goes through the wall, and we will come and seal it for you. Savings up to 10% on energy cost.
3. Change laundry settings If you could wait until you have a full load and then do your laundry on cold wash (BRIGHT COLOR SETTING). It not only extends the lifespan and vibrancy of your clothing it also saves 90% of the energy that would have been used to heat the water.
5. Other ways to cook Don't overlook the other cooking appliances beyond your oven. Fast and efficient microwave ovens use around 50% less energy than conventional ovens, and they don't heat up your kitchen.
6. Look for ENERGY STAR-qualified TVs They’re up to 30% more efficient than noncertified models.
7. Unplug devices Make sure your chargers, adapters and small appliances are all unplugged when you leave the apartment. Phantom energy is the electricity that electronic devices pull from the outlet while plugged in. Even when the device is off, it can waste as much as 10% of your home’s energy.
8. Manage power settings Make sure your computer isn’t wasting any unnecessary energy. Set your power management settings to Energy Saver Mode and get rid of the screen saver. This cuts energy consumption and prolongs the computer’s battery life.
9. Consider LEDs Consider swapping out incandescent and CFL bulbs for LED bulbs in your table, desk and floor lamps. LEDs are 90% more efficient, contain no harmful gases and can last up to 20 years!
4. Clear vents
10. Use your blinds
When the temperature in your room doesn’t match your thermostat, please check if you are blocking the air registers or maybe the filter needs to be changed.
Use daylight wisely, by keeping blinds open during the day to let in the warm rays and closed at night to keep out drafts.
Sentinel Green Newsletter Second Quarter 2015
Think LED Recently, the cost of LED light bulbs has dropped significantly. You will find a pack of 2-60W equivalent LED bulbs for only $4.97 in major home improvement stores. LED light bulbs provide advantages over other types of light bulbs:
Source: http://www.ecopowerlighting.co.uk/led-lighting.html
• • • •
Longer life: 10+ years, which means both cost savings and lower maintenance. Instant on: no wait time for lights to get bright. High tolerance for frequent switching on and off without damaging light fixtures. Significant cost savings on utility bills: approximately 85% savings compared with incandescent bulbs and 35% savings compared to CFL bulbs.
Update on Electric Car Charging Stations Sentinel started to install electric car charging stations in our communities in December of 2014. The charging stations at the first property installed were charged 813 times in the first five months. This represents savings of 2,932 KG of greenhouse gases and 876 gallons of gasoline saved just in that short period. Adding more electric car charging stations is one of our major green efforts in 2015. We use a built-in system where residents can simply start a charge, track real time charging status and receive notifications from a mobile app. It’s a great amenity to have in areas where electric cars are becoming popular.
Top 10 home energy saving tips Small action can create big change, especially when it comes to energy savings. Here are 10 no or lowcost ways to make a difference.
1. Adjust temperature settings Turn down your thermostat to 68 degrees in winter. For every degree you lower your heat in the 60degree to 70-degree range, you'll save up to 5% on heating costs. Wear warm clothing like a sweater and set your thermostat to 68 degrees or lower during the day and evening, health permitting. Set the thermostat back to 55 degrees or off at night or when leaving home for an extended time, saving 5%-20% of your heating costs.
2. Seal up the leaks Check leaks around your weather-stripping, windows and doors. Look for places where you have pipes, vents or electrical conduits that go through the wall, ceiling or floor. If you find a gap at the point where the pipe or vents goes through the wall, we can seal it up for you. Savings up to 10% on energy cost.
3. Change laundry settings If you could wait until you have a full load and then do your laundry on cold wash (BRIGHT COLOR SETTING). It not only extends the lifespan and vibrancy of your clothing it also saves 90% of the energy that would have been used to heat the water.
5. Other ways to cook Don't overlook the other cooking appliances beyond your oven. Fast and efficient microwave ovens use around 50% less energy than conventional ovens, and they don't heat up your kitchen.
6. Look for ENERGY STAR-qualified TVs They’re up to 30% more efficient than noncertified models.
7. Unplug devices Make sure your chargers, adapters and small appliances are all unplugged when you leave the apartment. Phantom energy is the electricity that electronic devices pull from the outlet while plugged in. Even when the device is off, it can waste as much as 10% of your home’s energy.
8. Manage power settings Make sure your computer isn’t wasting any unnecessary energy. Set your power management settings to Energy Saver Mode and get rid of the screen saver. This cuts energy consumption and prolongs the computer’s battery life.
9. Consider LEDs Consider swapping out incandescent and CFL bulbs for LED bulbs in your table, desk and floor lamps. LEDs are 90% more efficient, contain no harmful gases and can last up to 20 years!
4. Clear vents
10. Use your blinds
When the temperature in your room doesn’t match your thermostat, please check if you are blocking the air registers or maybe the filter needs to be changed.
Use daylight wisely, by keeping blinds open during the day to let in the warm rays and closed at night to keep out drafts.
Exhibit C
Updated: January 2017 Sentinel Due Diligence Procedures Checklist for Acquisition Team
I
Checklist for Asset Management Team
II
Lease Audit Procedures
III
Property Inspection Questionnaire
Exhibit A
Legal Due Diligence Procedures
Exhibit B
Survey Requirements
Exhibit C
Engineering Procedures – Property Condition Assessment
Exhibit D
Environmental Procedures - Enhanced Phase I Environmental Assessment
Exhibit E
1
Due Diligence Checklist for Acquisition Team _____ Request due diligence information from seller pursuant to the purchase and sale agreement. _____ Obtain construction plans: approved plans for pre-sale property due diligence; as-built plans for existing property. _____ Working with Transaction Counsel, hire local counsel to complete Local Legal Due Diligence - Provide Legal Due Diligence Procedures and Survey Requirements – Exhibits B and C. _____ Arrange for site inspection by the Physical Engineer - Provide Engineering Procedures – See Exhibit D. _____ Arrange for site inspection by the Environmental Engineer - Provide Environmental Procedures – See Exhibit E. _____ Work with counsel to arrange for the formation of title-holding entities and fictitious name filing. _____ Work with accounting to establish necessary bank accounts.
For Pre-Sale Properties: _____ Review the seller’s policies with respect to tenant approvals and confirm that all planned rental rates, security deposits and other fees are consistent with the terms of the purchase and sale agreement. _____ Review the seller’s lease form. _____ Review any planned long-term vendor or service contracts under consideration for the property. _____ Confirm the projected rental rates for each unit type and complete a market update for existing competitive properties and any planned new construction in the submarket.
For Existing Properties and as Pre-sale Properties are Completed: _____ Review the current budget, YTD financials and the most recent year-end financials. _____ Review the current rent-roll.
2
_____ Schedule on-site lease audit. Tie to the rent roll. Regularly up-date lease audit. _____ Determine the existence of any lease specials or concessions. _____ Review lease qualifications for new residents. _____ Review all maintenance files and tenant/landlord insurance claims. _____ Obtain all information for on-site employees including compensation, benefits, job position, duties, qualifications and capabilities. Interview the staff pursuant to terms of the purchase and sale agreement. _____ Review all existing service and vendor contracts in detail including terms, obligations, notice periods and current or future restrictions on the property. Confirm that the contract files are complete and include all addendums. _____ If not provided by the seller, arrange for a termite inspection and certificate. _____ Review the current tax assessment, franchise tax requirements. Review local assessment and re-valuations scheduled that may impact the property. Confirm the current tax bill and the tax payment dates. _____ Audit the utility bills. Contact the utility companies that service the property. Obtain from the seller the list of all house-account numbers and the contact person at each utility provider. Obtain all utility bills from each provider for the past 12-month period. If possible, obtain the historical trend and any scheduled rate increases.
In Preparation for Closing: _____ Notify accounting and the portfolio manager of the anticipated closing date and an estimate of funding requirements. _____ Review the as-built survey and title with transaction counsel. _____ Review and confirm that all certificates of occupancy have been received. _____ Arrange for a unit-by-unit walk of each apartment, both occupied and vacant, and complete a checklist of each unit’s status. Segregate down units and abnormal wear and tear to be valued for possible closing adjustments. _____ Create a punch list if required. _____ Confirm the inventory list included in the purchase and sale agreement and identify all items listed. _____ Update list of any pending insurance claims.
3
2-3 Days Prior to Closing: _____ Prepare rent prorations including prepaid and delinquent rents. _____ Prepare a list of existing pet and security deposits. _____ Include an interest expense credit for future payments where appropriate. _____ Finalize utility readings and arrange for deposits where necessary. _____ Prepare or review expense prorations. _____ Advise payroll of new employees and complete Personnel Status Change Forms (PSCs). _____ Prepare or review rent prorations including prepaid and delinquent rents _____ Prepare a list of existing pet and security deposits. _____ Include an interest expense credit for future payments where appropriate. Finalize utility readings and arrange for deposits where necessary. Prepare or review expense prorations. _____ Advise payroll of new employees and complete PSCs. _____ Finalize closing prorations for real estate taxes and any existing vendor contracts.
At Closing: _____ Provide closing statements, wire instructions and notifications to investors. _____ Distribute tenant notification letter. _____ Secure artwork for brochures, website and promotion. Make arrangements for transfer of current property URL and all social media accounts. If that is not possible, arrange for acquisition of a new URL. Confirm that seller will discontinue current website and social media accounts upon closing. _____ Confirm that Sentinel insurance is in place.
4
Due Diligence Checklist for Asset Management Team The following items will need to be completed as part of property due diligence. It is recommended that this checklist be reviewed by the Acquisition Officer and the Regional Director on a regular basis. Several of these items will require more research once the unit inspections and the lease audit are completed. All noted schedules are attached in numerical order in accordance with the Listing Schedule Sheet at the end of this checklist.
Lease Audit: _____ Acquisition Officer notifies seller of dates(s) of proposed audit _____ Regional Director will schedule personnel to perform the lease audit. _____ Obtain a copy of seller's rent roll and apartment ledgers. _____ Verify fees (Application, Deposits, Pet, Keys, Garage, Carports, Alarms, Washer/Dryer, Month to Month, etc.) _____ Obtain copy of Rental Standards and Market Survey. _____ Confirm lease terms and renewal policy. _____ Confirm and list any corporate leases or senior citizen discounts. _____ Obtain a current rental summary to include specials, concessions and/or deposits. _____ Obtain a Resident Profile. If none is available, a more detailed review of the leases will need to be completed in order to produce one. _____ Obtain information on resident referral programs – names of services, term and fees. _____ Verify property inventory associated with additional income (i.e. washers/dryers, garages, etc.) _____ Obtain a blank copy of the lease agreement and all addenda, including all community policies and pet policies. _____ Review copies of leasing activity logs. _____ Review delinquency trends. Obtain legal policy for evictions.
5
Unit Inspection: _____ Confirm residents have been notified of unit inspection by current management. _____ Walk all occupied and vacant units. Identify and note pervasive problems for review. Complete unit-by-unit Property Inspection Questionnaire – Exhibit A. _____ List apartments that were not available to enter. _____ Review maintenance call log to determine any recurring maintenance complaints (i.e. roof leaks, HVAC, appliances, etc.)
Service Contracts: _____ Obtain a copy of seller’s current service contracts from Acquisition Officer. _____ Review all current service contracts. List contractors and terms on Sentinel’s Contractual Service Log. Double check cancellation clauses, expiration dates and automatic renewals. Pay particular attention to those contracts that generate additional income or create obligations for the property. _____ Obtain a copy of the most recent monthly contractual services invoices. _____ Confirm termite bond. _____ Review collection agency accounts. Coordinate with Acquisition Officer to determine if Sentinel will be contractually responsible for accounts after the closing. _____ Request a copy of turnover rates for the prior two years. _____ Determine current turnover procedures, including if any items are completed in-house. _____ Obtain copies of all advertising.
Inventory: _____ Review and confirm inventory items against inventory in purchase and sale agreement. _____ Confirm all items owned are on inventory and determine if any of these items have a maintenance agreement. _____ Review any leased equipment including name, address, terms, item leased and the monthly charge, if the lease will be ongoing.
6
Financial: _____ Confirm with the Acquisition Officer that the current year financial statements and three prior years are available. _____ Request a copy of the current budget including the capital programs. _____ Review with the Acquisition Officer the property’s projected income and expense numbers. _____ Review major capital improvements made in the past three years and confirm completion.
Insurance/Legal: _____ Request copies of any insurance claims and tenant lawsuits (excluding evictions). _____ Ensure that all required permits and licenses are current. _____ Establish local counsel for tenant/landlord work.
Marketing: _____ Regional Director must shop the competition and establish a recommended marketing program.
Signage: _____ Review signage for visibility. _____ Check for adequate lighting. _____ Make arrangements to have the Sentinel signage package installed.
Lighting: _____ Property must be driven/walked at night to determine if there is sufficient lighting and if there are any parking problems.
7
Capital Programs: _____ Acquisition Officer and Regional Director must prepare a five-year capital improvement schedule based on the Sentinel on-site inspections and a review of the engineering report.
Payroll: _____ Regional Director must review current and pro forma staffing levels and costs with Acquisition Officer.
Operational: _____ Obtain a list of property addresses and apartment numbers for each apartment. _____ Obtain a list of the name, address and contact for each utility company and a list of each account number. _____ Obtain paperwork from utility companies to schedule rollover versus disconnect. _____ Arrange for final reading of utilities the day before closing and confirm this with the Acquisition Officer. _____ Confirm utility deposits or bond requirements have been made. _____ Complete the Brochure/Stationery order form and submit to the Graphics Department along with the current brochure, site plan, directions and photographs. _____ Complete the Website Implementation questionnaire as early as possible and work with Sentinel’s Website Administrator to facilitate going live with the website. _____ Using the Sentinel Contractual Services Log as a vendor list, obtain Tax ID numbers and Certificates of Insurance for all vendors. _____ Order supplies: safety manuals, insurance forms, 401K packets, employment applications, Personnel Status Change Forms. _____ Order all necessary computer equipment for the property. _____ Request set-up of overnight delivery and telephone accounts. _____ Order nametags (Sentinel logo and first name) for all office employees. _____ Order/arrange for picture ID badges for all Maintenance staff.
8
_____ Order uniforms.
Post Closing: _____ Change vendor billings to property to reflect address and correct ownership. _____ Schedule Fair Housing training and provide Fair Housing signage for leasing office. _____ Schedule on-site employee training. _____ Review and change all property ads and promotional items. Design new brochure. _____ Finalize the budget (and asset plan where required), rent schedule and property fact sheet. _____ Assign a real estate tax service to monitor assessments and recommend appeals if necessary. _____ Prepare post-closing memo regarding any warranty issues. _____ Complete Sentinel closing memo.
9
Lease Audit Guidelines The Acquisition Officer will arrange the dates for the lease audit and provide a copy of the rental standards that are included in the purchase and sale agreement. In completing the lease audit, the Asset Management team must: 1.
Establish the number of employees who will walk all units and inform the property that you will need the same number of their employees to accompany us to each apartment. There should be at least two Sentinel employees doing the lease audit.
2.
Be sure all employees are familiar with the form, and ask them to be specific if a problem is found in an apartment.
3.
Using the rent roll, ledger card, lease file and resident profile worksheet, verify information from actual current lease. Make a list of all discrepancies found. Use ledger card to determine concessions, especially dollar amount and when offered.
4.
Once all information is documented, turn to the application and place information on the resident profile worksheet (i.e. name, sex, age, pets, children, employer and income).
5.
Rental standards and credit guidelines should be used to determine if resident has qualified for occupancy.
6.
In most cases, maintenance files are located with lease files and the maintenance files should be reviewed for major problems and recurring complaints.
7.
Lease files need to be reviewed and documented for each occupied apartment and each pending applicant file.
8.
After each unit has been walked and all files reviewed, a report of your findings must be prepared. See Exhibit A.
10
Exhibit A
Property Inspection Questionnaire
PROPERTY NAME: Building No.___________
Unit No.___________
Inspection Date:
Unit Type __________ Pets:
Yes _____________
Inspector: Number ___________ Type __________________
Reggie
Humberto
Condition of Apartment: Good _____ Fair _____ Poor _____
CARPETING/NOTES
WOOD FLOORING/NOTES
TILE FLOORING/NOTES
VINYL FLOORING/NOTES
APPLIANCES Refrigerator Dishwasher Disposal Stove Vent Hood Washer Dryer Microwave
BRAND
NOTES
KITCHEN/NOTES
PATIO/BALCONY RAILINGS/NOTES
LIVING/DINING ROOM/NOTES
Due Diligence Inspection.xls
11
Building No.___________
Unit No.___________
BEDROOM 1/NOTES
BEDROOM 2/NOTES
BEDROOM 3/NOTES
DEN/NOTES
BATHROOM 1/NOTES
BATHROOM 2/NOTES
BLINDS/NOTES
SPRINKLER HEADS/NOTES
WINDOWS/NOTES
WATER LEAKS/NOTES
Fire Extinguisher
Yes
No
Location(s)?
Security System
Yes
No
Location(s)?
CO Detector
How many?
Location(s)?
Smoke Detector
How many?
Location(s)?
HVAC
Brand:
Water Heater NOTES:
Brand:
Condition: Gallons:
Leaking?
COMMON AREA/NOTES:
Due Diligence Inspection.xls
12
Yes
No
N Replace?
G
F Yes
RP No
Exhibit B Legal Due Diligence Procedures
The following items are the questions that our client has requested that we investigate as a condition precedent to its final determination to buy certain commercial property in your state. 1.
Compliance with Laws
(a) What municipality (City, County, etc.) and what agencies of that government administer and enforce the principal body of police power regulations applicable to the property? (b) Is there a zoning ordinance (or a site approval or subdivision ordinance) now applicable to the property? What are the requirements such as use, density, setback restrictions, parking, height, etc. of the zoning ordinance applicable to the real property? If the construction of the improvements has been completed, has there been any significant change in those requirements since the construction of the property? If the property does not now conform to the ordinance as a result of such changes, will the owner be able to maintain (or in case of fire, restore) the property in its present form? (c) We will need a complete record of the steps taken by the developer (or prior owners) for the satisfaction of zoning, site plan or building code requirements, etc., including, without limitation, any agreements that the developer may have entered into with the governmental authorities having jurisdiction, unless (or to the extent that) that record is unavailable through lapse of time. Please obtain copies of: (i)
the relevant zoning provisions,
(ii) all proceedings for the necessary zoning, site plan, subdivision etc. approvals taken prior to the issuance of the building permits, (iii)
any
relevant
agreements
or
stipulations
with
the
governmental authorities and (iv) the permits (including the building permits if not attached to the contract) required for the construction of the property and the certificates (including certificates of occupancy if not attached to the contract) required for the complete occupancy and operation of the property (or if construction is not completed, identification thereof). (d) If the improvements are under construction (or have been recently completed) please describe the inspections reasonably anticipated to be made by governmental authorities prior to issuance of certificates of occupancy unconditionally permitting use of the improvements for their intended purposes.
13
If the municipality did not issue certificates of occupancy at the time of construction, please advise what information would be available with respect to governmental approval of the initial construction and operation of the property. (e) Please search appropriate municipal records, or obtain a statement from the proper official agency, that there does not exist any violations of record of the building, fire, sanitary or other safety or environmental protection codes of the municipality. (f) Does your state have construction requirements for access for the handicapped that are more rigorous than the federal requirements? (g) Will the proposed transfer of title require inspection by governmental agencies for code compliance or for the issuance of new certificates or permits? 2.
Environmental Protection Laws
Our client will undertake a "Phase 1 environmental assessment" inquiry about the property, and if that inquiry raises further questions, a Phase 2 study, including soil borings, etc. In that connection, we anticipate the environmental consultants will review the available public information about the prior uses of the property, particularly the possibility of hazardous wastes disposal at or near the property. For purposes of these inquiries you can assume our client's general familiarity with the federal environmental protection statutes and any state statutes complementary to those federal laws. However we recognize that several states are adopting pre-closing clearance, registration, disclosure, super lien and other statutes that have a broader or different scope than the federal statutes and that may impact on the prior history or the current use of the property. (a) With respect to the foregoing, is there any such state or local legislation of general application, enacted or imminently pending, that we should consider during the due diligence period? (b) Generally, describe the environmental studies and environmental clearances that the developer of this property should have obtained in connection with the development, and whether such information is practically available from the public agencies during the due diligence period? (c) Will the seller, or the buyer, have to obtain any pre-closing clearances from any governmental agency? (d) If the seller has obtained permits evidencing compliance with environmental protection laws, will those permits be transferred to the buyer by virtue of a general assignment of certificates, permits, etc.? or will we have to register the transfer and have a new permit issued by the subject governmental agency?
14
(e) Are there any filings, reports, etc. (other than covered by (c) and (d)) required in connection with the closing and the transfer of title? 3.
Taxes.
(a) What is the current real estate tax assessment for the property? If improvements are being constructed on the property, when is the property assessed to give effect to the completion of construction? Is the current assessment subject to automatic (or highly probable) revaluation by reason of the sale either for the current year or for the next tax year? Does the assessment reflect full market value or a consistent percentage of full market value? As a matter of law or custom, what is the period used for purposes of prorating real estate taxes at the closing? (b) Does your state impose a tax on tangible personal property and, if so, what are the tax assessment date and the tax fiscal year? (c) Does your state impose any other taxes, e.g. corporate franchise taxes that automatically become liens against the property? (d) Does your state impose any other taxes which if unpaid and after enforcement action may become liens against the property? (e) In the regular course of title examination, would the title company search disclose all of the liens referred to in (a) through (d) above and, if not, how can searches be undertaken to reveal all such liens? 4.
Tenant Liabilities.
Under the proposed contract, we will assume the existing leases and become responsible for the security deposits. With respect to the security deposits: (a)
Are the tenants' deposits refundable, regardless of name (e.g., pet, cleaning)?
(b) Must refundable deposits be segregated from other funds? Must interest be paid on such deposits? Are there any other requirements with respect to the maintenance of those deposits? (c) When a tenant leaves, what are the landlord's obligations if it intends to retain all or part of the refundable deposit for non-payment of rent or damage to the premises? (d)
Is there any rent control legislation in force or pending?
(e) Other than the landlord's liabilities under the leases, or as a matter of law for matters arising after closing, is there any legal requirement to be satisfied at closing by reason of the transfer of title or to avoid a transferee liability?
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5.
Contract and Conveyancing.
Under the terms of the contract, we will accept a special warranty deed subject to the restrictions appearing in the title policy and other exceptions generically described (e.g., restrictions of records). Please advise us whether that proposed form of deed is customary and satisfactory if we have obtained title insurance in the full amount of the purchase price. Please also describe the legal or customary method of allocating the burden of real estate transfer or documentary stamp taxes, if any, title insurance premiums, survey costs or recording fees. Are there any provisions of the contract that are ineffective in your state or which impose an unfair liability upon the purchaser and that are not apparent on the face of the contract? 6.
Mechanic Liens.
If we have advised you that the property is now under construction, we need to consider the possibility of unpaid contractors, subcontractors, materialmen or professionals, such as architects and surveyors, all having the power to file liens against the property for work done during the course of construction and not paid for by the developer, either before or after the closing of title. We will seek title insurance in the amount of the purchase price without exception for filed or unfiled mechanics liens. Is such title insurance normally available without additional premium if the closing occurs immediately after completion of construction? Independently of that assurance, please advise regarding the following: (a) What procedures are regularly employed in your state to confirm that all contractors, etc. are being paid currently? (b) If a contractor performs work prior to the closing and is not paid, will he be entitled to file a lien for the amount of the unpaid work after recording of the deed to us and payment in full of the purchase price? (c) If a contractor was employed during the construction of the improvements and was fully paid for all work performed prior to the closing, but is retained for the performance of additional work after the closing, does he have a lien for the cost of the work relating back to the commencement of construction? (d) Other than the procedures referred to in (a), are there other techniques, i.e. payment in full under a general contract so that the subcontractors are relegated to claims against the general contractor, that might have been or may be used to insulate the purchaser or the property from the imposition of a mechanics lien?
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Exhibit C
Survey Requirements These items are to be included and shown on the survey: a)
A plat of the subject property made in accordance with the ''Minimum Standard Requirements for ALTA/ACSM Land Title Surveys,” jointly established and adopted by ALTA, ACSM AND NSPS in 1997, and including items 1 through 4, 6, 7(a), 7(b)(1), 7(b)(2) [to the extent required pursuant to Item (a)(ii) below], 8 through 11 and 13 of Table A thereof. Without limiting the foregoing, the plat shall show the following: i)
The boundary line of the subject property and all appurtenant easements by courses and distance showing the area of the subject property, and each parcel thereof, in square feet. If the subject property is composed of all or portions of several lots or other legal subdivisions, the boundaries of each should be indicated by dotted lines and the proper lot number or legal subdivision designation shown. If the survey comprises more than one parcel, it should show interior lines and facts sufficient to ensure contiguity. Points of beginning used in the description of the subject property should be identified.
ii)
The location and type of all buildings and other improvements on the subject property, the dimensions and area thereof and the distances therefrom to the nearest facing exterior property lines of the subject property. Building heights must be shown as specified in Item 7(c) of Table A if legal or private height restrictions apply to the subject property.
iii)
The location of all easements and rights-of-way affecting the subject property (each of which must be identified by reference to the volume and page where located).
iv)
The location of all required building set back lines on the subject property.
v)
All encroachments, conflicts or protrusions.
vi)
All abutting dedicated public streets providing access to the subject property showing the width and the name thereof and all sidewalks, parkways, curbs and driveways adjoining the subject property. All street address numbers should be shown as and where they exist.
vii)
All fences (both perimeter and cross) and all walls and other improvements along the property lines with dimensions. All party walls of buildings or other structures on the property line indicating the thickness of the portions thereon on each side of the property line and the nature of the use of said walls on each side.
viii)
The location of any railroad tracks and boundaries of railway rights-of-way affecting the subject property.
ix)
All wires and cables crossing, entering or leaving the subject property, indicating the amount of cross arm or wire overhang and all anchors or guy wires affecting the subject property except ordinary wire service drops. 17
x)
The location of all parking areas on the subject property reflecting striped parking stalls, the number of parking spaces provided by such parking areas and the number of parking spaces required by applicable zoning ordinances and/or private covenants, conditions and restrictions (as disclosed by the title report or commitment) for such improvements based on the intended use of such improvements.
xi)
The scale, the north direction, the beginning point, the distance to the nearest intersecting street and point of reference from which the subject property is measured.
xii)
Flood zone designation. State whether or not the subject property appears on any U.S. Department of HUD Flood Insurance Boundary Map, and if so, further specify map number and panel and whether or not the property appears in the "Flood Hazard Area" shown on the map.
xiii)
The location of all utilities to the subject property.
xiv)
The zoning classification of the subject property.
xv)
The location of all vegetation on the property.
b)
A written legal description of the subject property, which must coincide with the boundaries shown on the plat.
c)
A certification signed and sealed by the surveyor, which must be in substantially the following form: CERTIFICATION
The undersigned, a land surveyor, duly registered and licensed in the State of _________ hereby certifies to SENTINEL ACQUISTIONS CORPORATION and (name of title company) and their respective successors and assigns that: (i)
This land survey plat has been prepared based upon fieldwork conducted on ___________________ on 2000;
(ii)
The description of the property shown hereon corresponds to the boundaries of the property shown on the survey, and such description closes by engineering calculation;
(iii)
The survey plat correctly shows the locations and dimensions of all improvements, setback lines, party walls, ditches, flood plains, waterways, bodies of water, fences, easements, rights-of-way, above-ground utilities, streets, alleys, roadways, curbs, gutters, driveways, curb cuts, traveled ways, above-ground or otherwise apparent disposal sites, and other significant items, located on, adjacent to, appurtenant to, or affecting the subject property, that are of record, discoverable upon visual inspection, or otherwise known to me;
(iv)
All information shown hereon is true, correct, and complete;
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(v)
The subject property contains______ [square feet] [acres] and striped parking stalls [note location, e.g., "as shown on the survey"; "under the building"; etc.];
(vi)
Ingress to and egress from the subject property is provided by [names of streets], the same being paved, dedicated public rights-of-way maintained by [name of maintaining authority];
(vii)
No portion of the property shown hereon lies within the ffcv 100-year flood plain or any area subject to special flood hazards as designated by the Federal Emergency Management Agency, the United States Department of Housing and Urban Development, or the Flood Insurance Administration except: __________________(if none, so state);
(viii)
No improvements upon or adjacent to the property (or under the property to the extent known to me or ascertainable upon physical inspection without excavation) constitute or are subject to encroachments, overlaps, or overhangs, except (if none, so state);
(ix)
No covenants, restrictions, or easements that are of record, discoverable upon visual inspection, or otherwise known to me appear to me to have been violated in any respect except: __________________ (if none, so state); and
(x)
This map or plat and the survey on which it is placed were made (i) in accordance with the "Minimum Standard Requirements for ALTA/ACSM Land Title Surveys," jointly established and adopted by ALTA, ACSM and NSPS in 1997, and includes Items 1, 4, 6, 7(a), 7(b)(l), 7(b)(2), 8 through 11 and 13 of Table A thereof, and (ii) pursuant to the Accuracy Standards (as adopted by ALTA and ACSM and in effect on the date of this Certification) of an Urban Survey, and also in all respects meets the requirements of all applicable laws.
(xi)
[TEXAS SURVEYS ONLY] This map or plat and the survey on which it is based were also made in accordance with the requirements of the Texas Society of Professional Surveyors for a Category I A, Condition 11 survey.
_______________________ Date
________________________________________________ Signature
SEAL Registration No. ________ All revisions to the survey subsequent to the date of its initial certification must be identified thereon by date.
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Exhibit D
Engineering Procedures – Property Condition Assessment In order to qualify to perform Property Condition Assessment services for Sentinel Acquisition Corporation, the engineering/architectural firm must: • • •
Demonstrate experience and competence in the area of pre-acquisition apartment property condition assessments. Carry an errors and omissions insurance policy and general liability of not less than $1,000,000; Represent that it has not worked previously on the subject property or for the current owner in order to avoid any potential conflicts of interest.
THE PROPERTY CONDITION ASSESSMENT REPORT SHOULD INCLUDE THE FOLLOWING: I.
In-Office Plan and Specification Review The following documents will be sent to the engineer's office for review and comments prior to the site inspection (if available): • • • • • • • • • • • • • • • •
Plans and Specifications/Survey(s) Architectural Civil Electrical Mechanical (HVAC) Plumbing Landscaping Prior engineering Environmental reports Soil Tests/Geotechnical Report(s) Title Zoning and Building Codes (to be obtained by engineer) Certificate(s) of Occupancy or Equivalent (each structure per jurisdiction) Fire Department Inspection Report Fire & Life Safety Systems Inspection/Test Reports Boiler &/or Elevator Certificates
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II.
Local Regulations Review The inspector will need to visit the local building department that oversees the regulation of building, zoning and fire codes for the jurisdiction in which the property is located. The review must include: •
III.
Search the public building records for past or current violations.
On-Site Property Condition Review The on-site evaluation should include a detailed analysis of the current physical improvements, their construction in accordance with the plans and specifications, existing defective construction conditions and items of deferred maintenance and maintenance items that will need to be addressed immediately and in the future over a ten (10) year term. The on-site inspection should include a complete walk-about of the exterior of every building, all the common areas and facilities and a random sample of approximately 10% of the apartment unit interiors. An interview with the on-site personnel will be also be required to determine if there are any physical problems with the property that may not be apparent by visual inspection. If the project is brand new and in the lease-up phase, a more extensive in-unit inspection and punch list may be required.
THE ENGINEERING REVIEW SHOULD ANALYZE THE FOLLOWING: A.
Site Construction • Topography and Drainage (Including analysis of on-site lakes, ponds and retention areas for evidence of proper storm-water drainage and past flooding damage) •
Review FEMA flood maps and identify in which flood zone the property is located
•
Evidence of existing mines, undermining or other regionally prevalent conditions, which may affect the improved property
•
Soils Conditions
•
Paving/Parking Areas (including ingress and egress to a public street, adequacy of parking, traffic circulation or hazards).
•
Landscaping/Irrigation (including identifying area of irrigation coverage and operational condition)
•
Utilities
•
Lighting
•
Security (to include property fences, access gates and intrusion alarms, etc.) 21
•
B.
ADA and Fair Housing accessibility regulation compliance (Federal & Local Regulations) must include, but not be limited to: –
Unit interior measurements to confirm compliance with all interior provisions of the FHA and local regulations. Comments must include a statement of confirmation of adequate exterior access and entry elevation to those units or identification of the noncompliant conditions with associated opinions of cost to correct.
–
Sidewalk slope measurements must be taken when the engineer visually suspects non-compliance.
–
Detailed review of all common amenity areas (i.e.: pool, clubhouse, fitness center, tennis courts, mail centers, trash collection centers, common area laundry, cinema rooms, business centers, public restrooms, leasing and management areas etc.) and facilities including, but not limited to, curb cuts, ramps, stair and ramp railings, cane detection rails, trash area and mail centers.
–
Accessibility from parking areas to all ground floor units and common areas.
–
If elevators are present, all units must be accessible and must be compliant.
Building Construction • Architectural Features •
Structural Systems
•
Seismic Zone/Wind Resistance (Review if subject property is built to accommodate additional construction requirements as a result of higher risk associated with its zone, where applicable.)
•
Building Exterior/Finishes
•
Roof Material and Installation (Inspection of a representative sampling of roofs for items like roof design, construction, flashings, drainage & venting)
•
Insulation Ratings and Installation
•
Mechanical, Electrical and Plumbing Systems, HVAC Systems including maintenance access.
•
Elevators (In most cases, a separate elevator inspection report will be required and included as an exhibit within the engineer’s property condition report.)
•
Apartment Interiors and Interior Public Areas
•
Fire and Life Safety Systems including Firewall Construction
•
Trash Collection Areas and Equipment
•
If required by Sentinel, an analysis of the energy efficiency of the buildings including a rating as to their level of efficiency. 22
C.
Recreation and Service Facilities • Clubhouse Pool/Hot tub • Tennis/Sports Courts • Exercise Facilities • Maintenance and Storage Areas • Garages/Carports (address FHA accessibility as appropriate) • Business Centers • Clubhouse • And all other amenity areas
D.
Water Intrusion/Mold An inspection must be made for evidence of any water intrusion throughout the interior and exterior of the property. Visible signs of water damage or mold must be conveyed verbally to the Acquisition Officer within 24 hours of the on-site inspection. The Water Intrusion/Mold Investigation (Mold Screen) should include: •
Interview/Questionnaires – Interview property management and maintenance personnel regarding current and past history of property relative to water/moisture/mold problems.
•
Documentation Review – Review prior engineering or environmental reports for mold-related issues
•
Visual Assessment – Observe interior surfaces of approximately 10% of the apartment units for visible signs of water damage, staining or mold/mildew. Observations of typical problem areas such as roof, exterior wall and mechanical/plumbing areas.
•
If water infiltration is suspected, and if authorized in advance by Sentinel, invasive observation of typical hidden areas behind walls, above ceilings and in mechanical/plumbing chases maybe necessary. Air sampling for mold spores may also be required.
Construction Progress Inspections for Newly Constructed Properties Depending on at what point in the construction process the consulting firm is retained, site inspections are required based on the following general guidelines: 1) Inspections monthly or more often if required by the construction schedule, which identify the status of construction, make note of any construction related problems or issues, and give an estimate of the percentage of completion at present and a forecast for when the project is expected to be 100% completed. Photos showing the construction status should be included in the monthly reports.
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2) When 100% of the property has received certificates of occupancy or equivalent, make a final inspection and create a punch list of construction items that remain to be completed by the developer. Additional inspections and reports maybe required at the direction of the Acquisition Officer. Report Requirements Verbal Report Within 48 hours of completing the on-site inspection, the engineer should call the Acquisition Officer with a preliminary verbal report. The purpose of this report is to alert Sentinel of any concerns and to identify problems of a sufficient magnitude, which could potentially jeopardize the transaction. Written Report Within five (5) business days of completion of the on-site inspection, the engineer should submit a preliminary report that assesses the general condition of the property and identifies construction related items that need to be addressed. This preliminary list is the skeleton of the list of observations and recommendations that will be included within the consultant’s final report. Within two (2) weeks of completion of the on-site inspection, the consultant should submit a complete text-only draft report that includes the following, for review and approval by Sentinel:
1)
Project name and address complete with zip code.
2)
Name and address of engineer or architect who was the on-site observer(s) and consulting firm that prepared the report.
3)
Date of on-site inspection
4)
Site Location Maps
5)
Site plan
6)
Floor plans
7)
Location/general description of site and property
8)
Gross and net rentable square footage of apartments; gross square footage of common areas and other facilities.
9)
Number of buildings
10)
Date construction of property was completed (or projected date of completion)
11)
Land area
12)
Parking spaces/carports/garages physical count
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13)
A detailed description of the property addressing all areas reviewed during the on-site inspection and, in particular, identifying areas where the property improvements do not conform to the plans and/or specifications.
14)
The fully articulated list of observations and recommendations of current capital improvement needs at the property and associated costs, along with a ten (10) year projection for the costs of future capital improvement needs.
15)
Color copies of captioned photographs documenting general conditions and observed defective conditions.
The Engineer’s Scope of Work and Report Requirements on any particular property may be adjusted or revised by Sentinel based on company or client requirements.
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Exhibit E
Environmental Procedures - Enhanced Phase I Environmental Assessment In order to qualify to perform environmental auditing services for Sentinel Acquisition Corporation, the environmental firm must: •
Demonstrate experience and competence in the area of pre-acquisition apartment environmental assessments.
•
Agree to stand behind its workmanship and carry an errors and omissions and general liability insurance policy and of not less than $1,000,000.
•
Represent that it has not worked previously on the subject property or for the current owner so as to avoid any potential conflicts of interest.
The Phase-1 environmental review must be performed in accordance with the American Society for Testing and Materials (ASTM) Standard Practice Designation E 2018-08, including, but not limited to the following: I.
In-Office Review of Prior Environmental Reports An in-office review of all prior environmental, soils or geotechnical reports provided to the Environmental Engineer must be conducted prior to the site visit. Any environmental concerns identified as a result of this review should be raised with the Acquisition Officer prior to the site visit. If appropriate based upon the review, the Environmental Engineer may need to recommend a more extensive scope of work than stated below.
II.
Phase I Environmental Review A.
Site History / Land Use Review (1)
Review historical maps and aerial photographs
(2)
Review regulatory agency records and archives, including without limitation: • Fire Department • Water Department • Power Company • Health and Environmental Agencies • Fish and Wildlife Agencies 26
• • • •
B.
C.
Regional Water Quality Control Board Building Department Superfund Registry County Agricultural Agency
(3)
Review historical documents, newspaper clippings and city directories.
(4)
Determine site history and zoning changes. Obtain and review a 50-year chain of title.
(5)
The Environmental Engineer will interview present owner’s staff to confirm that all available information regarding the site including any prior environmental, soils or geotechnical reports have been provided.
Site Visit (1)
Observe the vegetation, soils and surface water for contamination.
(2)
Observe and assess potential contamination sources, i.e.: drains, tanks, vents, pipes, insulation, transformers, capacitors, etc. In the case of electrical transformers, determine their ownership and outline the procedure for determining if they are PCB or Non-PCB containing transformers.
(3)
Observe and assess present use and evidence of former uses of the site and neighboring properties.
(4)
Interview past/present owners, managers, maintenance staff, residents and neighbors, as appropriate.
(5)
Determine if the site contains or impinges upon any jurisdictional wetlands or upon areas that may be the habitat for protected or endangered animals or plants.
(6)
Interview on-site staff regarding past or current presence of mold.
Evaluate Potential Contaminant Migration Patterns (1)
Characterize the hydro geological and geological setting of the site from public records.
(2)
Evaluate adjacent properties for their potential to contaminate the site. Check for underground storage tanks and any State or Federal Superfund sites within a 1-mile radius of the property. 27
D.
Water/Soil Review Tap water tests, to identify the presence of lead, should be conducted in no less than one unit per residential building and will be determined by property size and design. In the event that the water source for the property is not provided by a regulated municipality, extended parameters for water testing should be recommended by the Environmental Engineer. Samples of any surface water such as lakes, ponds or streams should be tested for TRPH (Total Recoverable Petroleum Hydrocarbons). Additional testing should be recommended if site conditions warrant broader parameters. Samples of the soil and ground water may also be requested by the Acquisition Officer, should the decision be made to proceed to a Phase II evaluation.
E.
Review of Building Plans and Specifications and Construction Material The building plans and specifications, if available, should be reviewed for any indication of asbestos containing materials, or any other potentially hazardous substances, and the location of such materials. A preliminary evaluation, and possible sampling, should be conducted of accessible building materials that are suspected of containing hazardous substances such as lead based paint. Lead Based Paint Sampling In certain instances, and generally for properties that were constructed prior to 1978, the Acquisition Officer may request lead based paint sampling. The testing should include random in-unit sampling, of walls, and any other suspected surfaces that could potentially contain lead based paint. If during the on-site visit the Environmental Engineer suspects any areas of the property may contain asbestos, samples should be taken and tested. Asbestos Sampling In certain instances, and generally for properties that were constructed prior to 1980, the Acquisition Officer may request asbestos sampling. The testing should include random in-unit sampling, of walls, ceilings and floor coverings and any other material that could potentially contain asbestos. If during the on-site visit the Environmental Engineer suspects any areas of the property may contain asbestos, samples should be taken and tested.
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F.
Compile Inventory of Hazardous Materials A complete chemical inventory should be taken of all hazardous materials stored or used on the property in conjunction with its day-to-day operations. The engineer should also comment and make recommendations regarding the adequacy of the storage methods currently being used.
G.
Radon Testing Radon gas tests should be conducted within at least one ground-floor unit per residential building and will be determined by property size and design. Short-term (2- to 4-day) tests should always be undertaken; and long-term (30-day) tests should be conducted at the request of the Acquisition Officer. The Environmental Engineer should recommend additional testing where deemed appropriate based upon the location of the property within EPA radon zones.
H.
Geological Hazards The property and the surrounding area should be reviewed for hazardous geological conditions. In California and other earthquake prone areas, geological fault lines, and their location relative to the property, should be identified.
J.
Mold Review and Screening Inspection and Review o Interview property management and maintenance personnel regarding current and past history of property relative to water/moisture problems. o Interview property staff to identify any complaints of health related issues raised by property occupants as a means to identify the presence of potential environmental contaminants. o Review prior engineering or environmental reports for mold-related issues. o Take representative air samplings, typically one sample per residential building, of indoor and outdoor (control) air must be taken. Sampling must also be done in any units that have known existing or previous mold related issues.
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Identification of Mold If areas of concern are identified in the Mold Screening, provide recommendations for additional assessment and/or testing. If little to no evidence of water infiltration or mold is observed, a positive confirmation of no evidence of water intrusion as observed in areas inspected must be stated in the report. Report Requirements Within 48 hours of the site visit, the engineer should call the Acquisition Officer with a complete verbal report. This report should alert the Acquisition Officer to potential site problems that could jeopardize the transaction. As a general rule, we will not proceed with any property acquisition that has potential environmental problems. Nevertheless, at the request and direction of the Acquisition Officer, we may proceed to a Phase II environmental audit. If as a result of the verbal report the decision is made not to move forward with the acquisition, the engineer should prepare only a summary of the verbal report and the testing and written report will not be required. If the decision is made to move forward with the acquisition, the engineer should submit a written evaluation within 2 weeks of the site inspection. The report should document the tests and procedures performed and the findings, including all supporting data. If no evidence of an environmental concern has been found, the engineer should render a professional opinion as such. The Engineer’s Scope of Work and Report Requirements on any particular property may be adjusted or revised by Sentinel based on company or client requirements.
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