The 4th Stage of Development Management
The 4th step in the process is what I call Pre-commitment. There are 5 key steps in this stage…
Establish Procurement Methodology
There are several ways you can engage with a building contractor including ECI (Early contractor involvement), MC (Managing Contractor), D&C (Design and Construct), and HDT (Hard Dollar Tender). There are also many variants of these approaches. Understanding the best outcome for your project requires a clear understanding of your risk appetite and your relationship with the contractor. Each of these methods are very different and can have very different impacts on risk and financial return if not managed correctly.
Negotiate funding structures & conditions
Since the GFC, lending criteria has tightened remarkably such that significantly more equity is required to complete projects than was ever required in the pre GFC period. This boils down to your need to be very smart about your funding structures and clearly understand different structures including Senior Debt, Junior Debt, Preferred Equity, Mezzanine Funding etc.
Establishment of sales protocol
Assuming you need to sell your product, who is the right person for this job? Not all agents are created equal and it is very much a horses for courses race. Paying excessive commissions does not necessarily guarantee results.
Marketing strategy
There is a big difference between sales and marketing and it’s critical you understand that difference. Your marketing strategy is a branding and story telling exercise, and this is the part that is often considered non-essential…but it can make or break certain types of development.
Achievement of conditions precedent
Conditions precedent include many things from financial structure conditions, to authority approval conditions, to presales and pre-leasing, to many others. It is essential every Condition Precedent is identified and tasked for follow up and sign off. I have seen some big failures in this respect over the years that have cost dearly to fix later in the project.
