Download Lecture Eighteen: Real Estate Development

Lecture 18
Real Estate
Development
Development
Land Development: The improvement of land with
utilities, roads, and services, which makes the land
suitable for resale as developable plots for housing or
other purposes
Real Estate Development: Deals with the improvement of
usable buildings on a specific site, for a specific user
or user-type
Land Development Process
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Identifies Market Needs and Buildable Sites
Secures Proper Zoning, Concurrency, etc.
Determines Most Feasible Way to Divide Land for
Development, and Files Use with Municipality
Clears and Grades Land
Installs necessary utilities, and makes them available
to divided sites
Installs curbs, gutters, paved streets, and other items
to make divided sites accessible
Markets sites to builders, investors, etc.
Lecture 18
Members of the
Development Team
Development Team
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Public Sector Regulators (Government)
Market Researcher
Real Estate Lawyer
Equity Investors and Debt Lenders
Landscape Architect/Land Planners
Architects
Construction Firms/Subcontractors
Brokers
Engineers
Appraisers
Lecture 18
Rewards of Real
Estate Development
Rewards of
Real Estate Development
1. Successfully satisfy the end-user’s needs
2. Successfully coordinate the talents of a wide array of
individuals into a well-functioning development team
3. Profit obtained (entrepreneurial incentive)
4. Networking opportunities
5. Indoor and outdoor work
Lecture 18
Risk Management in
Development
Risk Management Strategies
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Evaluate Internal Strengths/Weaknesses
Keep Investment Low
Repeatedly Evaluate Economic Feasibility
Include Team Members
Define Exit Strategies
Use Additional Risk Control Techniques
Lecture 18
Determination of
Economic Feasibility
Economic Feasibility
1. Determine Property Value After Completion
Potential Gross Income (PGI)
Less: Vacancy/Collection Loss
Effective Gross Income
Less: Operating Expenses
Net Operating Income
Divide: Capitalization Rate
Property Value
Economic Feasibility
2. Determine Project Costs
Site Acquisition Costs
Plus: Improvement Costs
Project Costs
Economic Feasibility
3. Evaluate Feasibility
Develop:
Value > Costs
Do Not Develop:
Value < Costs
Lecture 18
The Development
Process
The Development Process
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Pre-Construction Stage
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Construction Stage
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Post-Construction Stage
Pre-Construction Stage
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Market Analysis
Economic Feasibility Analysis
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Land
Soft Costs
Hard Costs
Site Selection and Analysis
Site Control
Plan Preparation and Permit Approval
Marketing and Sales
Financing
Construction Stage
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Construction
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Marketing and Sales
Post-Construction Stage
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Marketing and Sales
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Property Management
Lecture 18
Current Restrictions
in Development
Current Development Restrictions
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City of Jacksonville Tree Ordinance
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Concurrency (Growth Management)
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Environmental Sensitive Property
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Land Use, Zoning
COJ Tree Ordinance
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Initiated in November, 2000
Designed to combat the loss of mature and maturing
tree species during clearing for land development
Tree loss/destruction must be mitigated by one or
more of the following:
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Planting of replacement trees of the same caliper-inches
Off-site mitigation (planting and nurturing at another site in
Duval County)
Paying a monetary contribution to the City of Jacksonville’s
Tree Protection and Related Expenses Trust Fund
COJ Tree Ordinance
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“Tree Conservation Credits” available for trees
preserved on the development site and identified for
preservation by the developer on a registered tree
survey
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Effect of COJ Tree Ordinance: Developers are willing
to pay less for those properties requiring significant
mitigation costs versus those w/ low or no mitigation
costs
Concurrency
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Initiated by the Growth Management Act of 1985
(Florida State Legislature)
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Requires all State counties and municipalities to devise their
own “Comprehensive Use Plan.”
In 1990, COJ implemented an initial concurrency
program
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Developments that exceeded trip capacities were NOT
allowed
Created “urban sprawl” as developers were having to move
to areas of under-capacity
Concurrency
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In 1995, COJ adopted the “fair-share contract”
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Charges developers impact fees when proposed
developments create over-capacitated areas
Concurrency is determined and assessed by the Jacksonville
City Council
Fees paid by developers are targeted to a specific use that
will benefit the development and surrounding area
Credits allowed to developers for providing improvements
that benefit both the development AND surrounding area
(traffic lights)
Required fees NON-negotiable, and can be arranged on a
payment schedule (typically 3-5 years, 10 years on larger
developments)
Concurrency
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“Fair Share”
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City Council & Planning Dept. study 2-mile radius of
proposed development
Jacksonville considered “restrictive” in its concurrency
requirements
Other Florida municipalities have created “exception areas,”
where no concurrency requirements exist (follows zoning and
land use only)
“Internal Capture” - Created from synergy between
developments
Time period for concurrency approval restricted; developers
can submit “performance schedules”
Environmental Sensitive Property
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Jurisdictional Wetlands (SJRWMD, COE)
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Mitigation
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Habitat for Endangered Species
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Flood Plains
Zoning and Land Use
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Comprehensive Land Use
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Relatively Impossible to Amend
Zoning Districts
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Variance, Zoning Category Change
Planned Unit Development (PUD)
Lecture 18
National Property
Trends
Environment and Safety
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Green Design
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Sustainable Development
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Terrorism
Office Property Market
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Parking
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Energy Supply
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Communication
Other Property Markets
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Warehouse
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Retail
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Single-Family
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Multi-Family