A request for approval & authority is a standard & routine matter for all commercial real estate professionals.  The recommendation letter/memo/email  template CRE professionals use varying but the necessary content remains the same.  However your company may name the method, you are 1) framing a decision and 2) asking for approval & authority.  Your format may be as informal as an email, or, like my standard template, a formalized & structured document. 

My standard for communication is the Recommendation Letter.   The template is a letter containing four major sections and a signature block.   The four sections are “History and Background”, “Evaluation & Alternatives”, “Recommendations” and “Authority & Approval”.   Add what is necessary, two pages or ten pages, whatever is essential, to get the job done.  This template is a framework, not a fill-in-the-blank form. 

The purpose is 1) transportable information, 2)  sufficient to “make a decision” through the chain of command, 3) under each player’s delegations of authority.  The goal is to obtain a client decision, without further communication outside the Recommendation Letter. 

My Recommendation Letter presents a decision matrix and asks for approval and authority to execute the decision.  Typically I am asking for client approval for specific reasons-- 1) approval/authority limitations constructed into the management agreement, 2)  project/expenditure is unplanned/unbudgeted, or 3) legal/liability issues require client acceptance/acknowledgement/instructions.  These matters require me to address both my company's internal approval & oversight functions and the client's review & approval structure.

My Recommendation Letter complies with Event Based Management construction protocols from the applied management science of real asset management.  These protocols are:  data container, decision vehicle, information agent. 

Data Container:  the relevant data related to the subject event is fully contained into a single entity/location. No references to external sources a essential to understanding the event.  Reading the event data provides a substantive understanding of the event. Simply, the letter describes the event completely so the reader can understand the situation.

Decision Vehicle:  All necessary supporting entities are attached to or linked to the data container.  The data content requests a decision. Third parties may validate data content by auditing references.  Data in a decision vehicle is actionable-- a validated decision can be made from the content. Again, simply, the letter asks for action (a decision) and contains all the references to other documents that include important information (leases, contracts, association documents) allowing any reader to understand the event and make a decision to approval  or disapprove. 

Information Agent:  The decision vehicle is energized to travel the necessary approval & authority chain of sub-events.  Dates and times of transmission are documented and audit-able.  Interim approval events are expressed and the decision process in an unbroken chain of sub-events.  

First Section:  "History & Background"

Create an understanding of the event for anyone reading the letter.  Provide a “history” of the event.  Describe the sequence of events creating the situation.  Create a timeline to provide an understanding of development of the event.  Give the dates so any reader can orient their understanding without requesting additional information. 

Provide specific dates and times.  Reference specific documents and cite provisions of leases, contracts, agreements, budget and legal issues.  Attach any necessary references as attachments for review and validation by others.  Try to avoid having decision makers ask you for additional research to validate your work. 

Tell The Backstory

This section provides the backstory for the event.  Describe why the problem has not been resolved.  Describe why the solution is necessary.  The reasons might be 1) limits imposed by the management agreement, 2) limits imposed by the budget, 3) complexity of the incident, 4) economics and/or financial constraints, and/or 5) legal and regulatory constraints. Describe why a solution is necessary.  

Second Section:  "Evaluation and Alternatives"

This section provide an evaluation of the economic effects of each, both in direct costs and impact in asset value.  This section talks about market impact, leasing efforts and deal making issues.  Here I do the math, that is, provide quantifiable data as well as qualifying information.  I clearly define any assumptions used in my evaluation.

After your analysis, list the alternatives and name the alternate scenarios, i.e., No Action, Short Term Fix, Intermediate Fix, Long Term Solution”.  Provide the consequences of each alternate scenarios, in both relationship terms and economic terms. Present a full range of alternatives, not just your recommended solution. 

Keep the appearance of objectivity, otherwise you will lose your credibility.  The potential for embarrassment to you and your asset manager is heightened when someone else presents an obviously superior alternative. 

Paternal Advice......

Why name the scenarios?  Discussing the "Short Term Fix" option is much easier than discussing "number four on your list".  The shorthand facilitates your client's expression of approval, "your Short Term Fix is approved." 

Always provide the “No Action scenario”, even if the scenario is not viable.  Describe the consequences of "no action."  You will invariably be asked if "we" really need to do anything.  Communicate in writing that doing nothing is not a viable option, if only to cover your legal/liability exposure. 

Clearly state any fees your company receives in all alternatives.  Don't get caught with the appearance of self-dealing.  This will truly end your credibility and your assignment's long term viability. 

Section Three:  "Recommendations"

Make a decision based on your evaluation.    State your recommended alternative clearly.  This is one paragraph, “I recommend that we implement the …….“.   Recommend the start date and estimate the completion date based on a set approval date, if dates are applicable. 

Why?  If you have fully resolved your recommendation letter as an information agent, there is no technical reason for a delayed decision.  You have, as they say, put the ball back into your client's court. You have performed in compliance with any agreements, ending this event. 

Now, any decision from your client, whether or not they agree with your recommendation, is the start of a new performance event.  Delays in decisions are now clearly a client matter, resolving/mitigating any legal/risk/compliance/performance your company might face. 

Details Matter

Provide the specific actions & resources necessary to implement your recommendation.  Don't be afraid to repeat a few line items from Evaluation & Alternative.  Provide definitive amounts, estimates and/or ranges.  If possible, name the parties, tenants, service providers and/or resources necessary.  If applicable install estimated dates and schedules for goals.

"As part of the Short Term Fix we recommend entering into a fixed price contract with XYZ Contractors in an amount not to exceed $XX,000 within five days from approval & authorization for completion within 10 days of the executed agreement.  We recommend waiving the three bid requirement in the management agreement. for this contract"

Section Four:  "Authority and Approval"

Request both approval and authority for your course of action, budget amounts and tasking.   Ask for specific authority to execute documents, hire/fire, exceed management operating limits, alter relationships. 

Don"t find yourself in a situation where an asset manager can state that they approved the course of action but did not provide authority to sign something.  Explicitly ask for authority to exceed the limits of the property management’s operating authority. 

Don't Embarrass Anyone!

Remember each asset manager has limited delegated authority.  Don’t get sideways with the asset manager’s internal politics. Don't embarrass your client rep by providing poor information that your asset manager feeds to their superior, or, whoa, to the investment committee, woe! 

A fully formed Recommendation will flow through both the company & client decision apparatus, reaching the required decision maker.  And will return with the necessary instructions, approvals and authorizations to meet your compliance thresholds.  And, importantly, a fully resolved Recommendation stave off embarrassment- to your company, to your asset manager and your client point of contact.  If you don't have a formal structure in place, here is a short drafting to start your policies and procedures statement.

Policy & Procedure Promulgation

The purposes of this Statement is to formalize the process for obtaining “operating authority” to 1) execute the duties required in any management agreement, 2) comply with client instructions and 3) evidence Property management company due diligence in the performance of the company and staff in the discharge of its duties.   Operating authority refers to the transfer of rights to action provided by the terms of the management agreement and/or the instructions and consent of an authorized representative of the client. 

Goal-  create a fully resolved description of a management event, clearly communicate the recommend course of action to the client and provide a clear operating authority to complete the course of action. 

Objective-    demonstrate an understanding of the chain of command and delegation of authority sufficient to deliver the recommended course of action appropriately to achieve the desired approval and authority.  

Objective-  create a fully resolved independent document capable of being moved through the property management company delegation of authority without supplemental communication and through the client delegation of authority for action without additional communication. 

Objective-  clearly document due diligent efforts to resolve a management event and document the transfer of approval and authority from the client to act within the requirements of the management agreement and industry standard practices. 

Objective-   provide a documented, defensible position for any asset manager or special servicer to present to the ultimate owners/investors and any applicable regulators.