Stage VI & VII: Construction and Completion & Formal Opening Reading: RE Development, Principles and Process. (Chapter 20)

Stage VI & VII: Construction & Completion and Formal Opening Stages VI & VII Time at this level is very crucial Risks are real now as this is where most of them actually may occur >>> higher degree of uncertainty Developer now commits maximum resources Stopping is more difficult and change is very expensive Developers reputation is greatly at stake Focus now shifts to project management to control established constraints Stage VI & VII: Construction & Completion and Formal Opening

Stage VI & VII: Construction & Completion and Formal Opening Procurements Route & Financial Contract Types Major players Building the structure Drawing down the Construction Loan Leasing Space and “Building Out” Construction Stage VI & VII: Construction & Completion and Formal Opening

Decide on Procurements Route Be certain which procurement route to use Traditional Design and build Construction Management Project Management Be certain on the type of financial contract: Fixed price Cost reimbursable (Cost plus) Stage VI & VII: Construction & Completion and Formal Opening

Stage VI & VII: Construction & Completion and Formal Opening Major players A good team is key to project success Players will include: Developer --- Leader and final Arbiter Project manager(s) Design professionals Contractor and Sub-contractors Suppliers Marketing managers Financial officer Property manager Etc… Stage VI & VII: Construction & Completion and Formal Opening

Building the structure MAJOR PLAYERS General & Sub Contractors, Vendors/Suppliers BUILDING STRUCT. Substructure, superstructure, skin, interior, fixtures DRAWING FUNDS Equity first, Bank loan next LEASING SPACE Before and during construction, Tenant Space - built to suit EXTERIOR WORKS Paving, landscaping, exterior lighting, sewer, roads, etc PHASED DEVELOP. 10-20yrs project, construct buildings in phases RISK CONTROL Retainage, Bonds, Arch Supervision, Project Mgmt, warranty etc. COMPLETION & OPENING Financing to Permanent loan, Connecting Utilities, Move In etc Stage VI & VII: Construction & Completion and Formal Opening

Building the structure Total project management: Initiating, planning, executing, monitoring and controlling and then closing General/ Main Contractor Mobilization & Site Preparation Managing Sub-contractors Managing Vendors (Installers) Managing Suppliers (materials) Installation of Cranes, Source controls, Access mgmt, Work sequence, Waste mgmt Stage VI & VII: Construction & Completion and Formal Opening

Stage VI & VII: Construction & Completion and Formal Opening Claims Processing A claim involving a demand for payment or work related to a construction project. The claim may be either from a contractor claiming additional compensation due to changes in a contract or The client asking for compensation or additional work to be completed by a contractor not fulfilling the terms of a contract Managing Claims: Set up procedures for processing claims Claims should be in accordance with conditions of contract. Claim as they occur and within time limit specified by the contract conditions rather than at the end of the project. Assist consultants in the verification of claims. Stage VI & VII: Construction & Completion and Formal Opening

Drawing down the Construction Loan Normally lender will not release all the funds at once: will be done according to a schedule Construction will be commenced using equity and once lenders are comfortable, funds are released Need therefore to determine clearly what the projected cash flow of the project is Certificates for payment are prepared and payment issued as agreed upon The general contractor is responsible for paying the sub-contractor except the contract estates otherwise Stage VI & VII: Construction & Completion and Formal Opening

Leasing Space and “Building Out” If some space remains un-leased even though some might have been leased (anchors) during Stage IV This helps to improve absorption Also, once the physical construction has begun and the anchors have been secured, the development team has an advantage in negotiating rents with new tenants In some cases, money from leases will contribute to cash in-flows which puts pressure on the marketing team Stage VI & VII: Construction & Completion and Formal Opening

Completion and Formal Opening Stage VI & VII: Construction & Completion and Formal Opening

Completion and Formal Opening Activities include: Training operating staff Connecting utilities Beginning on-site operations Final marketing of development Grand opening Tenants moving in Transition of financing from construction loan to permanent loan Other financial arrangements sealed All contracted closed/ dissolved except for marketing and property management Stage VI & VII: Construction & Completion and Formal Opening