Lecture 18 Real Estate Development Development Land 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 l l l l 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 l l l l l 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 l l l 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 l Pre-Construction Stage l Post-Construction Stage

Pre-Construction Stage l l Market Analysis Economic Feasibility Analysis – – – l l l Land Soft Costs Hard Costs Site Selection and Analysis Site Control Plan Preparation and Permit Approval Marketing and Sales Financing

Construction Stage l Construction l Marketing and Sales

Post-Construction Stage l Marketing and Sales l Property Management

Lecture 18 Current Restrictions in Development

Current Development Restrictions l City of Jacksonville Tree Ordinance l Concurrency (Growth Management) l Environmental Sensitive Property l Land Use, Zoning

COJ Tree Ordinance l l l 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: – – – 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 l “Tree Conservation Credits” available for trees preserved on the development site and identified for preservation by the developer on a registered tree survey l 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 l Initiated by the Growth Management Act of 1985 (Florida State Legislature) – l Requires all State counties and municipalities to devise their own “Comprehensive Use Plan. ” In 1990, COJ implemented an initial concurrency program – – Developments that exceeded trip capacities were NOT allowed Created “urban sprawl” as developers were having to move to areas of under-capacity

Concurrency l In 1995, COJ adopted the “fair-share contract” – – – 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 l “Fair Share” – – – 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 l Jurisdictional Wetlands (SJRWMD, COE) – Mitigation l Habitat for Endangered Species l Flood Plains

Zoning and Land Use l Comprehensive Land Use – l Relatively Impossible to Amend Zoning Districts – – Variance, Zoning Category Change Planned Unit Development (PUD)

Lecture 18 National Property Trends

Environment and Safety l Green Design l Sustainable Development l Terrorism

Office Property Market l Parking l Energy Supply l Communication

Other Property Markets l Warehouse l Retail l Single-Family l Multi-Family