SAN FRANCISCO-Distressed real estate is about the only realestate game in town these days. And there’s lots of it. One of thekeys to knowing whether to take it back or invest in it isassessing its value. And according to Howard Ellman, an attorney inthe San Francisco office of Buchalter Nemer, when the real estateis a broken development project, the project’s value dependsentirely on how it can be used. How it can be used, in turn,depends on what government agencies have permitted. And accordingto Ellman, those permits are not simple, static or free.

GlobeSt.com: What is the status of the entitlements?Are some at risk of expiring? What will it take to get anextension? Is one possible, legally andpolitically?

Ellman: The various entitlements necessary tobuild a project are never all issued at the same time. Particularlybefore construction commences, knowing which entitlements have beenobtained, and which have not that could be show-stoppers, iscritical. Many entitlements have an automatic expiration if somesubsequent hurdle is not crossed. These include subdivision maps,use permits and building permits. Automatic expiration means theentitlement—and the real value that entitlement created—is lost. Itis critical to understand when the entitlements expire and what itwill take to prevent expiration. The government may or may not havethe legal authority (or political will) to extend or reissue theentitlement. Extending or reissuing also may not be free; thegovernment may want additional fees or exactions in return. Lastly,government extension or reissue of an entitlement triggersenvironmental review under the California Environmental QualityAct. That review may be perfunctory or extensive, short or long,cheap or costly. Review at all exposes the project to legalchallenges by any lurking opponents of the project (neighborhoodgroups, environmentalists, etc.).