Fractional Dutch Auctions of Commercial Income-Producing Real Estate Properties - TIC Plan Ownership Syndications

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Due Diligence Documentation "Exhibit C-7"

Value Engineering Services Agreement

The following notes are provided pertaining to this exhibit:

  1. What: the Design/Builder is a contractor.  One of the prime jobs of the contractor is to estimate the costs of construction together with the corresponding charges for Owner's General Conditions, Contractors Office & Overhead Allowance and the Contractor's Profit or Construction Management Fee.  There is an inherent conflict-of-interest in this process so an outside estimating firm reviews the architectural design documents and outline construction specifications and comes up with an independent estimate of the costs of construction.  The Design/Builder and the value engineering firm assigned to independently confirm the construction costs budget resolve their differences and the cost of construction is thus fixed.

  2. When: towards the end of the pre-construction phase after the Schematic Phase Architectural Documents and Schematic Phase Outline Construction Specifications are completed.

  3. Why: the contractor has a conflict-of-interest regarding the pricing of construction and this process is used to provide arm's-length pricing of the construction process.

  4. Where: these services are performed off site at the value engineering firm's offices.

  5. How: electronic file transfer and review.

  6. What's important: the value engineering firm cannot be owned by the contractor or an affiliate of the contractor.  The process must provide independent accounting of construction cost estimates and then resolve the differences between the contractor's pricing model and the value engineering firm's model.

  7. This exhibit is not required for syndications of existing properties that do not contemplate any new construction.

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