Standard Operating Agreement

Purpose:

Determine whether a proposed phase of development accounts for financial risks that are common to the real estate market. Plans will be reviewed by a neutral, third-party consultant to ensure standard, market projections, and to ensure that the interests of UTA are being properly observed.

All financial plans are to be formalized by an Operating Agreement, entered into by both UTA, the development partner, and any other interest involved in the development. Operating Agreements are to explicitly document any and all deal terms involved with a phase of development, as well as ownership percentages.

Scale and Scope:

Financial plans are to account for the cost and income generated by a single phase of development. Costs and income are to be expressed using industry-standard metrics (ie NOI, ROI, NPV, etc), and documented in an industry-standard pro forma.

Roles and Responsibilities:

  • Development partners are to oversee and produce the financial plan materials.
  • UTA TOD Staff is to work alongside its development partners, to accurately communicate UTA’s position and negotiate terms of the Operating Agreement.
  • A third-party consultant will be employed to review market assumptions and methods used to create financial proposals.
  • UTA Internal Audit Staff is to review terms and conditions proposed in operating agreements, to ensure that no conflicts exist, and to make formal recommendations to UTA Board of Trustees.

Approvals:

All financial proposals are to be reviewed by the UTA TOD Departments, a 3rd-Party Consultant, the UTA Internal Audit Department, Executive Committee, TOC-Subcommittee, and UTA Board of Trustees.

End Product:

The end product of the Financial Plan Process is an executed Operating Agreement, as well as any supporting financial materials (ie market research, pro forma, etc) that have been reviewed by a 3rd-party consultant and the UTA Internal Audit Department.

Process:

  • 1. Financial Plan Proposal: Financial plan proposals are to be completed by development partners within the timeframe defined in a project’s Master Development Agreement (MDA).
  • 2. Review of Proposal by TOD Staff: The TOD Department is to review all financial proposals and perform a cost-benefit analysis per standards defined within Title 17B, Chapter 2a, Part 8, Section 804 of the Utah State Code.
  • 3. Does Proposal meet UTA Standards?: If a financial proposal does not comply with the aforementioned standards, the TOD Department is to provide the development partner with a list of findings that may be used to refine the proposal.
  • 4.1-4.2: 3rd Party & Internal Audit Review of Terms: All financial proposals are to be reviewed by a 3rd-party consultant and the UTA Internal Audit Department. 3rd-Party consultants are to primarily review assumptions made in pro forma documents. The Internal Audit Department is to review ownership interests to ensure that no conflicts of interests exist.
  • 5. Does Proposal Meet UTA Standards?: If a financial proposal does not comply with the aforementioned standards, the TOD Department is to work with the 3rd-party consultant and/or the Internal Audit Department to identify any inconsistencies or conflicts, and provide the development partner with a list of findings that may be used to refine the proposal.
  • 6-8. Final Reviews: After financial plans have been reviewed by a 3rd-party consultant and the Internal Audit Department, proposals will be reviewed sequentially by the Executive Committee, TOC Sub-Committee, and UTA Board of Trustees.
  • 9. Execute Operating Agreement:Upon approval by the Executive Committee, UTA Staff and developer partners may finalize any negotiations necessary to finalize and execute the project Operating Agreement and prepare for construction.