Land Development – Financial Institutions and Analysis

Real Estate Development
  • What Are Capital Markets and How do They Work?

Real Estate competes with other investments on a risk/return basis.

Debt ranges from 0-100%, and normally 50-80%; equity ranges from 20-50%.

Debt is repaid from project proceeds before equity.

  • Four Types of Real Estate Investments

Public Private
Equity Equity REIT Individuals
Debt Mortgage REIT Banks

Real Estate Development Drivers, Risks, and Risk Mitigation

Land Use Development, Planning, Real Estate Development
  • Real Estate Development Drivers

DEMAND FACTORS:

Housing (retail): demolitions, population growth, reduction of household size, shifting of household type toward non-family, increase proportion of middle-age and seniors, etc.
Commercial and Industrial: employment growth, etc.

SUPPLY FACTORS:

increase of land prices and supplies, increase of material prices, reduction of mortgage rates, increase of labor costs, etc.

OTHER FACTORS:

Cultural values and attitudes, infrastructure, etc.

  • Mega Trends

High housing vacancy

Rapid growth of seniors

Flat per capita income growth

Potential post-recession surges in employment and housing starts

Fastest growth in medical, office and educational occupations

Job leadership by small establishments

Strong inflation in steel prices

Real Estate Development Process and Major Players

Land Use Development, Planning, Real Estate Development

“[…] developers must understand the users and their needs. Without users, buildings – no matter how aesthetically pleasing or how theoretically functional – have no value.”

  • What is Real Estate Development/Land Development?

Real estate development is the continual reconfiguration of the built environment to meet society’s needs.

  • The 8 Stages Non-linear Process of Real Estate Development

Inception of an Idea: market research, problem solving, creating
Refinement of the Idea: site selection, project design
Feasibility: public and private review
Contract Negotiation: contractors, tenants, regulators
Formal Commitment: contracts and entitlements
Construction: building
Completion and Formal Opening: marketing , sales
Property, Asset, and Portfolio Management” tenants and technology