Fundamentals of Real Estate Lecture 14 Spring, 2002 Copyright © Joseph A. Petry

2 The Creation of Real Estate – Development of land improvements to land – streets, utilities, zoning improvements on the land – bring developed land to improved state such that land & buildings are ready for occupancy – Developer a person or firm that both develops land and constructs improvements on developed parcels create streams of cash flows at locations where no cash flows existed before Introduction to Development—Ch. 11

3 The Creation of Real Estate (cont’d) create value by developing projects where the value exceeds the total cost of development and construction developer acts as both – entrepreneur: who commits time and money for uncertain returns – project manager: who assembles and administers the resources necessary to ensure project success a key to success is the formation of a development team – members related to the provision of financial capital – members related to provision of construction and project related services Introduction to Development

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5 The Development Process – Economic development is as much art as science, and varies dramatically by deal... but an attempt at describing a process of development is still useful. – Stage 1: The idea – Stage 2: The site--acquiring development rights – options contracts – contracts for sale with contingencies – binders – letters of intent Introduction to Development

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7 The Development Process – Stage 3: Feasibility – Stage 4: Contracts & Approvals – contracts with lenders, partners – contracts with contractor/construction manager, architects, engineers – zoning approvals, building permits – Stage 5: Improvements – two major concerns during this stage: rapid and sustained progress successful marketing effort Introduction to Development

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10 The Development Process – Stage 6: On to the Next Project For some this is triggered by issuance of Certificate of Occupancy (CO) For other developers, a longer relationship with the project may involve on-going ownership and management Introduction to Development