By David Christensen AIA Copyright 2007
1. Know thy Neighbor.A successful, retired, Real Estate Developer once commented on the single most important thing he learned over the years. Your neighbor's success is key to your success. Never build next to a bad project you have no control over. It was a consistent way to lose value.
2. It's a Logical Use of the Property.Logic may have nothing to with obtaining development permits. It is crucial to meet with government officials early and to clearly listen to what they are saying, or what they aren't saying. They will be a proponent and take ownership if you include them in on early idea sessions. They can help if you treat them with respect.
3. Have some Sympathy.Try to understand the position government administrators are in. They need to meet the needs of all citizens, both pro and anti-development. Help them. They need to protect their postion with decisions that are backed up by laws and regulations that cover their rear end. They would love to use logic and common sense, but they are many times caught between a rock and a hard place. Understand their need to avoid being sued by a project detractor for "arbitrary" decisions, and you will come to an agreement sooner.
4. Plan for Failure.A Developer once obtained a loan to build an office project for a specific tenant that was willing to pay 50% above current market rates. The pro forma and loan reflected the need for this higher amount to service the debt. The tenant moved out at the end of the lease and it could only be re-leased at rates below that necessary to make the loan payments. The project went back to the Bank. Assume the worst. Your lender does. Or should. If you are the lender and you have a new REO, what do you do? What are the options? Think of alternative uses and realistic market rates to succeed, or don't do the deal. Plan on an exit strategy and worst case scenario.
5. Great Soil, Flat Site.In many parts of the country, poor geo-technical conditions can radically throw off the best Pro Formas. It is the biggest unknown and unexpected site work will kill your budget .Changes in ground elevations can be deceiving. Always perform soils tests and accurate topography surveys for the simplest projects. This will help prevent costly change orders later for more expensive foundations or ADA slope compliances.
6. There goes the Neighborhood.
Knowing the concerns of citizen activists ahead of time is vital. Meet with neighborhood associations and environmental activists to understand their real concerns prior to presenting a development program. As with government officials, let them feel part of the design process through neighborhood Design Charrettes and meetings. Address most all concerns in the final plans and explain why they are, or are not, included. Try for the true win-win. Meet with news reporting editorial boards to clearly explain projects before uninformed "letters to the editor" provide false information. The public is your 3rd party partner. Find out what the underlying concerns are. It may have nothing to do with your specific project.
7. Bad design & over budget.How do you know you are getting the best building design without enormous preliminary design fees? During feasibility periods, select a team of the most creative and innovative consultants you can find in Engineering, Construction, Architecture, Marketing and Finance. Meet for a fast Design Charrette to inexpensively and quickly determine options for project scope, program and cost. Once you have a defined program that explored all the options, you can competively bid services to specialized consultants based on qualifications, fees and schedule more fairly.
8. Bidding Apples and Oranges.Many a developer has sent out a preliminary set of building plans and asked multiple builders for rough cost estimates (Or bids!) If one builder is significantly low, there is usually a reason besides lower profits. They are not bidding the same thing. It costs what it costs. Most contractors will have very similar labor and material costs. If you accept an unusually low bid, it will probably mean ugly change orders later.
A negotiated construction contract in a team (Or "Partnered") atmosphere is most always the best arrangement. How do you select someone from all your builder buddies? With a defined scope of work as generated from a Design Charrette (click here!), you can competively bid General Conditions, Profit, Overhead, Schedule, Change Order Mark-ups and specific project qualifications. After this fair selection process, the whole team can work together to to design a project. You can then meet the goals of aesthetics, cost, schedule and program function before you're into the project too deep. An open, competiitive bid is a set up for an adversarial relationship and cost overuns. A negotiated Contract can determine a maximum price at preliminary design, with a savings clause as an incentive to the team to innovate during the construction process.
9. Let go of your Ego.Decide your project goals at the onset. Is it only done for profit, or are there other intangible public/social benefits that supercede generous returns? Beware. If it's too good to be true, it usually is. If it is too tight to allow room for errors, there will be. Get objective outside opinions. If everyone you talk with, doesn't agree this is a good project, be careful. Don't let your ego take ownership at all costs. It may happen. Don't fudge the Pro Forma. Use outside creative input in a Charrette atmosphere to check all your options and development scenarios. What if interest rates rise? What if a Pro Bono Attorney helps the anti-development group? What if you need to expand, or risk losing a fast growing tenant? Your vision is an asset to getting things done. Make sure you have your eyes checked.
10. When is the Best Building no Building?It's said if you go to an Architect with a problem, the solution usually ends up to be a building. If you're a designer, it's natural to want to design things.