Essentials of the Development Process (Dev1)

During this opening session, we'll explore all the factors involved in making the investment decision to proceed with a development project. This includes defining the development process and looking at real estate from an investment viewpoint. We will discuss real estate investment risks and explore the variables that accompany two different types of development projects: a site looking for a use or a use looking for a site.

The second stage focuses on finding a feasible opportunity for development. We'll start by defining the investment objective(s). Then we'll discuss all aspects involved in selecting a site including financial analysis, cost estimates, valuation, governmental controls and infrastructure. We'll also explore the various purchase options available for development projects.

We'll begin this session by defining feasibility and then address how to initiate a feasibility study. We will define the due diligence process, along with the intended outcomes, players, final outcomes and budget resources. Lastly, we will examine the factors involved in conducting a property analysis, which include understanding environmental regulations and geotechnical areas of concern; identifying access and transportation issues; and assessing proximity to other uses.

In this session, we'll provide an overview of real estate economics and macro level determinants of supply and demand. In addition, we'll discuss land use regulations and the impact of the political/legal environment. Course participants will learn to perform a highest and best use analysis and will demonstrate comprehension of information presented by reviewing a case study and completing assigned homework.

In this session, we'll discuss the process that commences once the developer enters into contracts with various development team members. We'll examine the eight steps in the acquisition process agreements, which include: offering the property for sale; agreement of business terms/Letter of Intent (LOI); definitive agreements; due diligence agreements; feasibility approvals; the pre-closing; the closing; and the post-closing.

This segment focuses on the roles and responsibilities of each team member and presents examples of effective negotiations strategies.

We will identify the various formal commitments entered into following the negotiation process. Contracts that are finalized at this stage may include joint venture agreements, construction loan agreements, permanent loan commitments, construction contracts, exercise of land purchase options, purchase of insurance and pre-lease agreements. We'll also define the elements of a contract and identify standard language and clauses frequently used in real estate contracts. Finally, we will discuss loan documents and look at several standard contracts seen in development deals.

This session will explore the three primary influences on the construction process: cost, schedule and quality. We’ll define the developer’s role and the roles of other project team members during the construction phase and discuss general contractors versus construction managers. We will learn how to develop a project timeline using the “Critical Path Method” and strategies for keeping a project on schedule. Students will also become familiar with vital construction documents along with pertinent building codes and regulations.

In this final session, we’ll discuss the last two stages of a development project: completion and formal opening, and property, asset and portfolio management. In the timeframe leading up to the completion and formal opening of a project, we’ll look at the importance of having a project timeline for operations, drawing up a property management contract and creating a manual of standard operating procedures. In addition, we'll discuss the roles and responsibilities of the property asset team and talk about how developing a thorough marketing plan increases advertising for the completed project. Other aspects involved in preparing for the formal opening include obtaining local approvals for occupancy, ensuring that all necessary utilities are connected and, finally, facilitating tenants’ move in. In the property, asset and portfolio management phase, we’ll discuss ensuring the construction loan is paid off, obtaining permanent loan financing, maximizing investment objectives, overseeing leasing activity and property management, and reconfiguring remodeling and remarketing space as necessary to extend its economic life.