Real Estate Development and Investment: A Comprehensive Approach » (New Edition)

Stephen P. Peca, CPA, MRICS, is a Managing Director of Concourse Realty Group, LLC, and is an adjunct assistant professor in the Real Estate Institute of New York University. Before forming Concourse Realty Group, he was with Fleet Securities, Inc. Peca also has extensive experience as a commercial banker, chief financial officer, and property developer. Much of his work extends into overseas markets, and as such, Peca has extensive experience arranging international and cross-border transactions, including corporate, project, and infrastructure finance. Peca has a Certificate in Advanced Management from the University of Chicago and has a BBA in public accounting. He has received the New York University Award for Outstanding Service and is a Member of the Royal Institution of Chartered Surveyors as a Chartered Management Consultancy Surveyor. He is also a member of the Financial Executive Networking Group (FENG) and established and leads the FENG NYC Real Estate Special Interest Group and is a member of CoreNet Global.

Real estate development and investment is an exciting endeavor that offers as many opportunities as it does challenges. In order to achieve success in this evolving field, you have to have a firm understanding of how to operate within it. And while this won't happen overnight, there is a way to shorten the learning curve.

Author Stephen Peca has been involved in the real estate industry and development business in one aspect or another for thirty years. During this time, he's gained some valuable insights into this dynamic discipline and now, with Real Estate Development and Investment, Peca shares them with you.

Written in a straightforward and accessible style, this informative guide skillfully outlines the different phases of the real estate development process-from conceptualization, site acquisition, and construction to financing, leasing, marketing, and investment management and discusses what you need to be aware of in order to keep projects organized and on track. And while leadership, management, control of the development team, and public/private partnerships are featured issues in this volume, Peca also takes the time to address other essential aspects of this process, such as idea refinement, ethics, and branding.

With Real Estate Development and Investment as your guide, you'll quickly gain an appreciation of the functional skills necessary to be successful in this field. Chapter by chapter, you'll become more familiar with:

• The factors affecting demand for different land uses and development

• The need for universal, current, and broad knowledge

• The key legal issues that must be considered by real estate developers

• The importance of environmental considerations in real estate development

• The role of different professionals and companies involved in the development process

• And much more

Once you understand the overall real estate development process, you can pursue this endeavor anywhere in the world—because while the laws may differ, the process is exactly the same. Whether you're an experienced real estate professional or putting your first project together, this reliable resource will show you what it takes to be successful in today's real estate development and investment business.

Preface ix

Acknowledgments xiii

Chapter 1 Overview of the Development Process 1

Economic Perspective 1

Relevancy of Universal Knowledge 6

Ground-Up Development versus Redevelopment 14

The Six Phases of Development 15

Chapter 2 Business Ethics 21

Relevancy to the Real Estate Industry 21

Legislated Ethics 24

Chapter 3 Project and Development Teams 29

Types of Developers 29

Functional Disciplines in the Development Process 30

Factors to Consider When Forming a Development Team 34

Chapter 4 Historical Perspective of Real Estate Development 38

The Beginnings of Real Estate Development 38

Major Events Causing Change in the United States 45

Chapter 5 Market Research 51

Inception of the Idea 51

Markets, Market Research, and Marketing (Analysis of Development Potential) 52

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 74

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

TenantMix and Marketability 96

A Brief Word about Architectural Drawings 103

Chapter 9 Entitlement Process and Public-Private Partnerships 105

Typical Community Approval Process 105

Public-Private Partnerships 107

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

The Importance of Branding 161

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

Index 201