Real Estate Development and Reuse Flashcards
What are the steps in the basic real estate development process?
phase 1: Predevelopment
phase 2: market, financial, and political feasibility
phase 3: site and engineering analysis
phase 4: financing
phase 5: contractor negotiations and public approvals
phase 6: construction
phase 7: marketing
phase 8: building occupancy and management
What are the four primary types of development and re-development?
build-to-suit: business retains a contractor or developer to build a customized structure.
speculative development: when a facility is built prior to securing a tenant. “spec”
greenfield development: takes place on large tracts of previously undeveloped land in rural and suburban areas.
redevelopment/reuse: taking previously developed property to a higher, more productive use.
What are the five components to any quality market study?
subject site analysis economic and demographic analysis competitive supply analysis demand analysis development recommendations
residual land value
what would a private developer pay for this land underneath my project if it was developed as proposed?
discounted cash flows
what is the present value of this project, taking into account the cost of borrowing money today and the recognition of income for years down the road
rates of return
there are multiple ways to measure the relationship between dollars spent and dollars received
facilitator role
efforts include public agencies or non-profits facilitating regulatory approvals, providing infrastructure, improving streetscapes
initiator role
the EDO acquires or owns the property for development. In order for the EDO to initiate development there needs to be a strong need to develop a specific property, political will, agency with expertise and resources to develop the property
A consultant can be selected through what three processes?
- Sole-source: selected without a formal competitive process.
- List of pre-qualified candidates: there is no official announcement. They ask candidates to submit a statement and interview them.
- RFP: advertise it and explains the project specifications.
RFPs: What are the steps to finding a developer?
- First you formulate the project concept, goals and objectives, market analysis, conceptual design, financial analysis and funding options.
- Form the solicitation document. Solicit developers, issue the RFP
- Market the solicitation document
- Evaluate and select the developer
- Developer negotiations
What is the two stage process for developer negotiations?
- draft a memorandum of understanding (MOU). Purpose is to clarify early on both parties’ intentions. Be approved by board.
- disposition and development agreement is drafted. This refines previous agreements, and defines and establishes a schedule for subsequent contracts required for development.
What does a market study provide?
Provides a determination for highest and best use of the development site;
determines the overall mix and quantity of uses viable on the site;
confirm or establish the market value of the projects in terms of land value;
achievable rents and/or achievable prices for occupied assets;
project out phasing and absorption of the project in the competitive marketplace;
establish key competitive and strategic guidelines
Primary market area
the area from which 80% of the demand at the subject site is likely to emanate
Competitive market area
the area in which the subject site will most actively compete for market share
What recommendations come out of a market study?
highest and best land use orientation and target consumer market positioning pricing construction type features and amenities absorption/sales profitability
What two components does the community involvement strategy include?
- goals for the process
2. an assessment of the community (area history, affected parties, community leadership and vision)
How should an EDO run a community meeting?
promote the meeting targeted choose a convenient location provide written materials before the meeting take notes during meeting support staff should attend meeting build consensus provide food and refreshments follow up publicize and promote success
What are the three conflict resolution techniques?
Facilitation
Mediation
Arbitration
job multiplier
the total increase in jobs for all industries per new job created in the given industry.
economic and fiscal impact analysis are influenced by what?
timing type of job if indirect, induced, and dynamic impacts are measured jurisdictional boundaries land use incentives
What are two commonly used fiscal impact measures?
- cost per job; the cost to the public sector for creating a job.
- leverage; the amount of private-sector funds that are invested per dollar of public investment.
common financial projections
development costs;
sources and uses of funds;
operating pro forma;
supportable debt & equity.
hard costs
costs which include labor and materials; “brick and mortar” costs.
i.e. site preparation, building construction, tenant allowance
soft costs
include professional fees for engineering and architecture services, taxes, interest, permitting fees, insurance, etc.
How is total capital requirements calculated?
development costs + land acquisition
dev. costs (hard costs, soft costs, contingency)
tenant improvements
costs of finishing out the building; includes carpeting, lighting, floorboards, etc.
operating pro forma
the standard format that shows projected revenues, expenses, and cash flows to be generated by a project.
debt service
the money needed to meet the current payments of principal and interest on an amortized loan.
calculated by taking the stabilized year operating income and dividing it by a factor or coverage ratio that the lender determines.
What are the three approaches appraisers use to value a property?
- cost approach: based on the rationale that no one would pay more for a property than it would cost to buy the land and built the structure that occupies it.
- market or sales comparison: “comp” compares a property with similar properties recently sold
- income capitalization: based on rationale that investors will pay a price that reflects the value of the stream of income the property would produce.
capitalization
based on the rationale that at any given time, a property will be valued according to its current net operating income.
capitalized value: net operating income / capitalization rate
cap rate
NOI / Property’s sale price
