Real Estate Development Flashcards
most real estate transactions are entirely driven through _____ transactions with no active participation from the public sector
private sector
public sector participates in the _____ process for approvals like zoning, building, parking, etc
regulatory
______ is development that serves the economy, community, and environment
smart growth - how and where should development be accommodated
mixed use refers to combining
multiple land uses in a single district (residential, office, retail)
common tenets of mixed use development
office, hotel, retail, housing spaces together
walkable communities
promotion of vertical vs. horizontal developments
consideration of environmental costs
incorporation of multiple forms of movement into a single development (transit, auto, walking, biking)
the information age makes it easier for companies to locate where
land and office are least expensive
the information age has contributed to increased
suburban and greenfield development
explain lifestyle centers
like a town center - shopping spaces without roofs or anchor tenants; open air and typically smaller than the typical mall
green building refers to a trend that pays more attention to
environmental awareness, attention to the bottom line of energy costs and building costs, observation that “greener” workspaces attract talent
four primary types of development and redevelopment
build-to-suit
spec development
greenfield development
redevelopment/reuse
build-to-suit=
business hires a contractor or developer to build a customized structure
speculative development =
a facility is build prior to securing a tenant
greenfield development =
takes place on larger tracts of land previously undeveloped in rural or suburban areas
redevelopment or reuse =
takes previously developed property or areas to higher, more productive use; encourages infill rather than sprawl
list the phases of the real estate development process
- predevelopment
- market, financial, political feasibility
- site and engineering analysis
- financing
- contractor negotiations
- construction
- marketing
- building occupancy and management
- predevelopment
developer or business considers multiple sites - OR - they have a site and are considering building sizes, uses, or layouts; if all is well with a site the developer will secure control
- market, financial, political feasibility
three concerns addressed:
- there is sufficient MARKET demand
- there will be sufficient return on FINANCIAL investment
- project will be approved by the public sector POLITICALLY
public sector feasibility
can help determine the most efficient use of public funds and help shape a projects direction
private sector feasibility
helps with financing and shapes development programs and trajectories
market studies answer these questions
what products are appropriate for this market?
what will customers demand int he future?
what is the appropriate timing for this project?
what is the appropriate quantity and mix of uses?
are there financial considerations that the market won’t bear?
how can this project be best positioned for the competitive market?
financial feasibility addresses questions directly related to _____
the level of investment a project is likely to receive or the variety of metrics investors use to evaluate multiple real estate deals against each other
financial feasibility testing models may include
residual land value
discounted cash flows
rates of return
residual land value
what would a private developer play for this land under my project if it is developed as proposed
discounted cash flows
if my project receives income over time and I have to build it today, what is the present value of the project, taking into account the cost of borrowing money today and the recognition of income for years ahead
rates of return
there are multiple ways to measure the relationship between dollars spent (cash, equity, debt) and dollars received (bulk sales, ground lease, vertical lease, distributed profits), and different entities will value these returns differently
political feasibility
will the public sector approve a viable project in a reasonable amount of time?
the site and engineering process is intended to result in
a development plan on paper that can be discussed and submitted for the planning process
shovel-ready certification programs help economic developers identify sites that are
immediately ready for development
real estate financing is challenging because (3 reasons)
- large capital requirements are usually bigger than the assets of the developer or investor
- risky nature; long-term and relatively illiquid
- while land is considered a durable asset buildings are depreciable
two types of finds that can be used to get projects going
debt capital and equity capital
debt capital
money loaned to be paid back in fixed installments on a fixed schedule;
there can be more than one lien (EDOs can provide second loan)
banks no longer offer 80% of total costs or appraisal, now more like 40%
equity capital
ownership investment into a project with no predetermined schedule for payback;
can bridge the gap between dept capital and the project cost;
subordinate to debt finacning so the lenders get paid back first
contractor negotiations and public approvals involve setting up
development agreements (if public land is involved);
getting final permitting approvals
securing financial commitments including financing and construction loans
setting up construction contracts
negotiating prelease agreements
major public approvals include
zoning
subdivision
site plan review
building permits
major private developer agreements include
land acquisition contracts lender commitments architect and engineering agreements construction contracts lease/sale contracts insurance agreements
cosntruction is the
actual development or construction of the site or building
marketing to potential tenants and purchasers typically starts _____
before construction (Deepwater and I-95 Industrial Center)
management of includes ____ and____ management
property and asset
property management =
marketing, leasing, maintenance
asset management =
capital improvements, refinancing, sale
brownfields
real property, the expansion, redevelopment, or reuse of which is complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant
what are the two types of potential property contamination
land or building
site assessment is the process of determining
whether or not a property is contaminated and if so with what
what does VCP and who has them
voluntary cleanup program; all states
what parties might be interested in the redevelopment of contaminated sites
buyers and sellers
technical experts
citizens
government
determining if cleanup is feasible financially should include considering
environmental consultants tests legal costs remediation costs and additional timing larger loan requirements environmental monitoring costs
while site assessment is paid for by developers remediation may be funded by___-
the public sector
transferring a perperty with ______can be extremely complex
contamination
most brownfield transactions are facilitated by a _____ or _______
lawyer or environmental expert trained in legal, environmental, or real estate matters
while there are multiple remediation options for some sites, always consider how they will affect ____-
the neighborhood
a covenant not to sue (CNTS) or ____ are crucial to maintain when the project is complete
no further action (NFA)
public participation, especially with incentives, is genrally based on a “____” test. Meaning the development wouldn’t happen _____ the provision of incentives
but for
but for example one: low income housing
there is no current market support or the likelihood of adequate market support in the future to justify the costs
but for example two: grocery stores or hotel convention centers
current market support is inadequate to justify development but there is reasonable probability that if the property is developed it will generate revenues to repay it total cost or a portion of them
another type of public sector involvement comes into play with money generation when the public owns a property that is ______ to a developer
uniquely valuable
the majority of development regulations are handled by
cities, counties, and other local governments according to statute
key public sector players in development regulations
planning and zoning departments
public works
building inspectors
public agencies can facilitate development through
regulatory approvals
partial financing
provision of infrastructure
improving streetscape
when the public is facilitating, the developer is ____
leading
if a developer is leading the development process they will
acquire or lease property, identify the land use, conduct pre-development activiites
if the EDO is the initiator they ____ or _____ the property for developmern
acquire or own
Public initiator roles can be helpful in small towns or rural areas where the private sector ___
is unwilling to invest
what are the four general classes of transaction structures
front-end assisting without offsetting
front-end assistance with guarantee
performance oriented assistance with initial explicit denomination
performance oriented assistance without formal denomination
front-end assisting without offsetting
most commonly grants that write-down the cost of land
front-end assistance with guaruntee
a write-down that requires partial or total repayment
performance-oriented assistance with initial explicit denomination
developers can get the public funds they generate (example TIF)
performance-oriented assistance without formal denomination
similar to TIFs but there is no formal denomination as part of the contract
