Real Estate |
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Trang 4Copyright © 2009 by Stephen P Peca All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada
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Trang 5Contents Preface Acknowledgments CHAPTER 1 Overview of the Development Process Economic Perspective
Relevancy of Universal Knowledge
Ground-Up Development versus Redevelopment
The Six Phases of Development CHAPTER 2 Business Ethics Relevancy to the Real Estate Industry Legislated Ethics CHAPTER 3 Project and Development Teams Types of Developers
Functional Disciplines in the Development Process Factors to Consider When Forming a Development Team
CHAPTER 4
Historical Perspective of Real Estate Development
The Beginnings of Real Estate Development Major Events Causing Change in the United States
CHAPTER 5
Market Research
Inception of the Idea
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vi CONTENTS
Concepts That Define Marketing (and Markets) 56 Using Market Studies and Preparing for Marketability Studies 58 Sources of and Methods for Gathering Information 62 Flaws of a Study 63 Validate the Data and the Importance of Revisions and Updates 64 CHAPTER 6 Marketability Studies 65
Showing That Your Development Concept
Could and Should Be Built 65
Importance of Marketability Studies Revisited 68 Idea Refinement and the Application of the
Marketability Study 69
The Process of Idea Refinement 69
CHAPTER 7
Land Acquisition and Control 7
Nonspatial and Spatial Markets 76
Elements of Design 77
‘Target Markets and Market Share 79
Site Control and Acquisition 81
Public and Private Restrictions on Land Use 86 CHAPTER 8 Land Planning and Siting 91 Value Creation 91 Project Programming and Design 95 Elements of Design—Again 95
Talking to End Users 95
Tenant Mix and Marketability 96
A Brief Word about Architectural Drawings 103
CHAPTER 9
Entitlement Process and Public-Private Partnerships 105
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CHAPTER 10
Budgeting, Financial Analysis, and Capital Structure 113
Preparing for the Financial Analysis and Pro Forma 113
The Development Budget 114
The Operating Pro Forma 115
Review of Common Analytical Measurements 115
Financing and the Capital Markets 119
Short- and Long-Term Financing 122 Financing Cycle—Anticipating Requirements 126
Elements of a Feasibility Study or Deal Book 127
Guarantees 132
CHAPTER 11
Contractors, Consultants, and Construction Contracts 134
Budgeting and Scheduling 134
Contractors and Construction Contracts 135
Risk Management during Construction 136
Preparing for Construction: Bid Proposals and Review 138
Construction Documents and Construction Agreements 139
Risk Management: Part 2 141
Scheduling 142
Bonding and Insurance 142
Construction Monitoring: Draw Meetings,
Managing Change Orders 145
Tenant Improvements and Coordination 148 Construction Closeout 149 CHAPTER 12 Leases and How They Are Used 151 Value Creation 151 What Is a Lease? 151 Common Lease Structures 152 Lease Management and Analysis 154
CHAPTER 13
Marketing Focus of Development 157 Know Your Target Audience 157 Your Essential Vision 160
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Vili CONTENTS
Image, Identity, and Communication 161
Components of Marketing Centers 162
CHAPTER 14
Investment Management 164
Function and Goal of Property Management 166 Function and Goal of Asset Management 167 Function and Goal of Portfolio Management 168
Property Life Cycle 169
CHAPTER 15
The Future 171
Recent History—Where We Left Off 171
Apparent Future Trends 173
Green Development and Smart Growth 174
Social Responsibility and Ethics 177
Glossary 179
Trang 9Preface
have been involved in the real estate industry and development business in one aspect or another now for 30 years I was trained as a CPA, went to
law school for a year, was an accountant, was a chief financial officer, have been part of several development teams, was a commercial banker, was an
investment banker, and now am an entrepreneur and a teacher While these roles seem to be disjointed and unrelated, they are not Virtually all of my roles have been focused on the real estate industry, with a brief departure into corporate banking and project finance When | started in real estate
development, very few academic programs were available to teach people
about the business | was trained, just like everyone else in the industry, by on-the-job training Today, there are many more academic programs—even internationally—proving the demand for the knowledge
This book provides a systematic and practical analysis of the phases of
the real estate development process, including conceptualization, site acquisition, planning and design, the construction process, financing, and
leasing and marketing, followed by investment management The linear process I have outlined for you, the reader, will help you pursue your first
real estate development or redevelopment project, or help the experienced
person refine the process he or she has been using This book, at the very
least, will perhaps help you look at real estate development from an entirely
different perspective The book addresses details of the development pro-
cess, but does not get so detailed as to address the fine points of each area of
the development process, and, as a result, is highly readable
Being a developer, the leader of the development process, requires expe-
rience and thought | try to scatter the book with quotes from famous and
not-so-famous people that should help the reader gain a philosophic under-
standing of the top’
I have been teaching a course on the real estate development process for
more than five years at a major university This book offers an all-inclusive approach; that is, many developers simply focus on the financial or con-
Trang 10x PREFACE
Frankly, real estate development and investment, while exciting and sexy, is still viewed as an odd investment type Major changes have occurred over the years, such as institutional investors directly investing in real estate development projects in the 1990s So, real estate is now consid- ered a solid alternative investment Hedge funds are investing in real estate projects Private equity firms are investing in real estate So real estate has finally come into its own But many still think there is a mysterious element I think the mystery is because the essential way to obtain the knowledge is still by on-the-job training and experience Even as students complete my course on the subject, they have the motivation, they have the knowledge, and now they have to actually go do it
What I hope to accomplish in this book is to impart my knowledge and experience to the reader | will try to get you to think differently when ap- proaching a real estate development Let me point out here that when | am saying real estate development, | am talking about ground-up development, renovation, brownfield development, and everything in between Thus, this book should be of interest not only to the active real estate developer—new or experienced—but also to the institutional investors, hedge funds, private equity firms, commercial banks, and investment banks that are trying to understand the industry so they can make better investments or understand their clients’ activities
Leadership, management and control of the development team, and
public-private partnerships are featured issues The book will take readers
through the development process from historical considerations to financial feasibility to asset disposition by using a number of illustrations and anec- dotes Each chapter finishes with a section on learning points, things that
you should understand after reading each chapter
Useful to all readers is that once you understand the overall develop-
ment process, you can pursue development anywhere in the world Yes, the
laws are different, but the laws are different everywhere—New York, Des
Moines, Beijing, or Kabul—yet the development process is exactly the same So my aim is for you to learn the entire development process, learn a way of thinking, and use this book as a reference as you pursue your exciting career or business in real estate development anywhere in the world Additionally, no matter what the state of the economy might be in a given geographic location, following the development process as | have outlined it will almost always result in a successful development project
Overall, this book has the following learning objectives for readers:
= Understand the key steps in the development process: A key to suc-