This past summer, I dusted off my trusty notebook and pen and headed north to Cambridge, Massachusetts for a two-day course in Real Estate Development Fundamentals. Administered by the Harvard University Graduate School of Design’s Executive Education Program, this course was designed for those of us who are involved at various points along the way during the real estate development process.
As planners and designers, it is very easy to see the world as if we are at the center of it; after all, we pride ourselves on seeing the big picture! This course was enlightening because it helped me understand how planning and design fits in to an even bigger picture of real estate development, including the role of the real estate developer. Here are a couple of key takeaways from the course.
Site Control is Fundamental
When a developer is first considering a site, obtaining legal control of the property is a crucial first step to protect the site from other potential land buyers while analysis is being conducted. During this stage, the development team will go through visioning, due diligence, preliminary feasibility, and proforma projections. At RVi, we are often involved in this phase of development, looking at the physical attributes of the property, understanding the legal and regulatory restrictions, and making projections for how the site could be developed. In the Real Estate Development Fundamentals Class, we did an exercise where we analyzed a simple tract of land that had certain defining characteristics. Based on the development restrictions, we determined what we could physically do with the site, including projected square footage of buildings, number of parking spaces, and the like. I then had the opportunity to see how this information is plugged into proforma calculations to determine whether or not the market would support the development of the site in the way we had projected. This phase of development culminates in a “go/no-go” decision by the developer on whether or not to move forward with purchasing the property.
The Developer Conducts the Orchestra
As planners and landscape architects often acting as the prime firm, we are familiar with coordinating large teams of sub-consultants on our projects, so we can relate to the developer’s job. For the developer, however, the level of team coordination is amplified. Much like the conductor of an orchestra, the developer has to set the pace, know the score, understand the type of players needed for the team, and be able to recognize and secure talent to pull the whole thing off. The developer’s team extends far beyond design – including disciplines like brokers, lenders, general contractors, marketers, public relations experts, lawyers, and many others.
In the end, the biggest takeaway for me was the fact that while we may see a project as “a planning project” or “a landscape architecture project,” in actuality, planning and landscape architecture are just small pieces of a much larger project. At the same time, we as planners and designers must understand the importance and value of our contribution to a development team. And as trusted advisers to our clients, our value will be even greater when we can understand what it’s like to stand in their shoes, conducting the orchestra and searching for the next big deal.