Table Of Content

E1FFIRS_1 03/16/2009 15:37:53 1 E1FFIRS_1 03/16/2009 15:37:53 1 Real Estate Development and Investment E1FFIRS_1 03/16/2009 15:37:53 2 Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, AustraliaandAsia,Wileyisgloballycommittedtodevelopingandmarket- ing print and electronic products and services for our customers’ profes- sionalandpersonalknowledgeandunderstanding. TheWileyFinanceseriescontainsbookswrittenspecificallyforfinance and investment professionals as well as sophisticated individual investors andtheirfinancialadvisors.Booktopicsrangefromportfoliomanagement to e-commerce, risk management, financial engineering, valuation and financialinstrumentanalysis,aswellasmuchmore. For a list of available titles, please visit our Web site at www.Wiley Finance.com. E1FFIRS_1 03/16/2009 15:37:53 3 Real Estate Development and Investment A Comprehensive Approach STEPHEN P. PECA John Wiley & Sons, Inc. E1FFIRS_1 03/16/2009 15:37:53 4 Copyright#2009byStephenP.Peca.Allrightsreserved. PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey. PublishedsimultaneouslyinCanada. Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedin anyformorbyanymeans,electronic,mechanical,photocopying,recording,scanning,or otherwise,exceptaspermittedunderSection107or108ofthe1976UnitedStatesCopyright Act,withouteitherthepriorwrittenpermissionofthePublisher,orauthorizationthrough paymentoftheappropriateper-copyfeetotheCopyrightClearanceCenter,Inc.,222 RosewoodDrive,Danvers,MA01923,(978)750-8400,fax(978)646-8600,oronthewebat www.copyright.com.RequeststothePublisherforpermissionshouldbeaddressedtothe PermissionsDepartment,JohnWiley&Sons,Inc.,111RiverStreet,Hoboken,NJ07030, (201)748-6011,fax(201)748-6008,oronlineathttp://www.wiley.com/go/permissions. LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbest effortsinpreparingthisbook,theymakenorepresentationsorwarrantieswithrespecttothe accuracyorcompletenessofthecontentsofthisbookandspecificallydisclaimanyimplied warrantiesofmerchantabilityorfitnessforaparticularpurpose.Nowarrantymaybecreated orextendedbysalesrepresentativesorwrittensalesmaterials.Theadviceandstrategies containedhereinmaynotbesuitableforyoursituation.Youshouldconsultwithaprofessional whereappropriate.Neitherthepublishernorauthorshallbeliableforanylossofprofitorany othercommercialdamages,includingbutnotlimitedtospecial,incidental,consequential,or otherdamages. Forgeneralinformationonourotherproductsandservicesorfortechnicalsupport,please contactourCustomerCareDepartmentwithintheUnitedStatesat(800)762-2974,outside theUnitedStatesat(317)572-3993orfax(317)572-4002. Wileyalsopublishesitsbooksinavarietyofelectronicformats.Somecontentthatappearsin printmaynotbeavailableinelectronicbooks.FormoreinformationaboutWileyproducts, visitourwebsiteatwww.wiley.com. LibraryofCongressCataloging-in-PublicationData: Peca,StephenP. Realestatedevelopmentandinvestment:acomprehensiveapproach/StephenP.Peca. p. cm.—(Wileyfinanceseries) Includesindex. ISBN978-0-470-22308-6(cloth) 1. Realestatedevelopment. 2. Realestateinvestment. II. Title. HD1390.P43 2009 333.33—dc22 2008047052 PrintedintheUnitedStatesofAmerica 10 9 8 7 6 5 4 3 2 1 E1FTOC_1 03/16/2009 10:35:41 5 Contents Preface ix Acknowledgments xiii CHAPTER1 OverviewoftheDevelopmentProcess 1 EconomicPerspective 1 RelevancyofUniversalKnowledge 6 Ground-UpDevelopmentversusRedevelopment 14 TheSixPhasesofDevelopment 15 CHAPTER2 BusinessEthics 21 RelevancytotheRealEstateIndustry 21 LegislatedEthics 24 CHAPTER3 ProjectandDevelopmentTeams 29 TypesofDevelopers 29 FunctionalDisciplinesintheDevelopmentProcess 30 FactorstoConsiderWhenFormingaDevelopmentTeam 34 CHAPTER4 HistoricalPerspectiveofRealEstateDevelopment 38 TheBeginningsofRealEstateDevelopment 38 MajorEventsCausingChangeintheUnitedStates 45 CHAPTER5 MarketResearch 51 InceptionoftheIdea 51 Markets,MarketResearch,andMarketing (AnalysisofDevelopmentPotential) 52 v E1FTOC_1 03/16/2009 10:35:41 6 vi CONTENTS ConceptsThatDefineMarketing(andMarkets) 56 UsingMarketStudiesandPreparingforMarketability Studies 58 SourcesofandMethodsforGatheringInformation 62 FlawsofaStudy 63 ValidatetheDataandtheImportanceofRevisions andUpdates 64 CHAPTER6 MarketabilityStudies 65 ShowingThatYourDevelopmentConcept CouldandShouldBeBuilt 65 ImportanceofMarketabilityStudiesRevisited 68 IdeaRefinementandtheApplicationofthe MarketabilityStudy 69 TheProcessofIdeaRefinement 69 CHAPTER7 LandAcquisitionandControl 74 NonspatialandSpatialMarkets 76 ElementsofDesign 77 TargetMarketsandMarketShare 79 SiteControlandAcquisition 81 PublicandPrivateRestrictionsonLandUse 86 CHAPTER8 LandPlanningandSiting 91 ValueCreation 91 ProjectProgrammingandDesign 95 ElementsofDesign—Again 95 TalkingtoEndUsers 95 TenantMixandMarketability 96 ABriefWordaboutArchitecturalDrawings 103 CHAPTER9 EntitlementProcessandPublic-PrivatePartnerships 105 TypicalCommunityApprovalProcess 105 Public-PrivatePartnerships 107 E1FTOC_1 03/16/2009 10:35:41 7 Contents vii CHAPTER10 Budgeting,FinancialAnalysis,andCapitalStructure 113 PreparingfortheFinancialAnalysisandProForma 113 TheDevelopmentBudget 114 TheOperatingProForma 115 ReviewofCommonAnalyticalMeasurements 115 FinancingandtheCapitalMarkets 119 Short-andLong-TermFinancing 122 FinancingCycle—AnticipatingRequirements 126 ElementsofaFeasibilityStudyorDealBook 127 Guarantees 132 CHAPTER11 Contractors,Consultants,andConstructionContracts 134 BudgetingandScheduling 134 ContractorsandConstructionContracts 135 RiskManagementduringConstruction 136 PreparingforConstruction:BidProposalsandReview 138 ConstructionDocumentsandConstructionAgreements 139 RiskManagement:Part2 141 Scheduling 142 BondingandInsurance 142 ConstructionMonitoring:DrawMeetings, ManagingChangeOrders 145 TenantImprovementsandCoordination 148 ConstructionCloseout 149 CHAPTER12 LeasesandHowTheyAreUsed 151 ValueCreation 151 WhatIsaLease? 151 CommonLeaseStructures 152 LeaseManagementandAnalysis 154 CHAPTER13 MarketingFocusofDevelopment 157 KnowYourTargetAudience 157 YourEssentialVision 160 TheImportanceofBranding 161 E1FTOC_1 03/16/2009 10:35:41 8 viii CONTENTS Image,Identity,andCommunication 161 ComponentsofMarketingCenters 162 CHAPTER14 InvestmentManagement 164 FunctionandGoalofPropertyManagement 166 FunctionandGoalofAssetManagement 167 FunctionandGoalofPortfolioManagement 168 PropertyLifeCycle 169 CHAPTER15 TheFuture 171 RecentHistory—WhereWeLeftOff 171 ApparentFutureTrends 173 GreenDevelopmentandSmartGrowth 174 SocialResponsibilityandEthics 177 Glossary 179 Index 201

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Real Estate Development and InvestmentA Comprehensive ApproachWritten by real estate industry veteran Stephen Peca, this timely guide skillfully outlines the various phases of the real estate development process and addresses some of the most important issues associated with this discipline.Using nu
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E1FFIRS_1 03/16/2009 15:37:53 1 E1FFIRS_1 03/16/2009 15:37:53 1 Real Estate Development and Investment E1FFIRS_1 03/16/2009 15:37:53 2 Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, AustraliaandAsia,Wileyisgloballycommittedtodevelopingandmarket- ing print and electronic products and services for our customers’ profes- sionalandpersonalknowledgeandunderstanding. TheWileyFinanceseriescontainsbookswrittenspecificallyforfinance and investment professionals as well as sophisticated individual investors andtheirfinancialadvisors.Booktopicsrangefromportfoliomanagement to e-commerce, risk management, financial engineering, valuation and financialinstrumentanalysis,aswellasmuchmore. For a list of available titles, please visit our Web site at www.Wiley Finance.com. E1FFIRS_1 03/16/2009 15:37:53 3 Real Estate Development and Investment A Comprehensive Approach STEPHEN P. PECA John Wiley & Sons, Inc. E1FFIRS_1 03/16/2009 15:37:53 4 Copyright#2009byStephenP.Peca.Allrightsreserved. PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey. PublishedsimultaneouslyinCanada. Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedin anyformorbyanymeans,electronic,mechanical,photocopying,recording,scanning,or otherwise,exceptaspermittedunderSection107or108ofthe1976UnitedStatesCopyright Act,withouteitherthepriorwrittenpermissionofthePublisher,orauthorizationthrough paymentoftheappropriateper-copyfeetotheCopyrightClearanceCenter,Inc.,222 RosewoodDrive,Danvers,MA01923,(978)750-8400,fax(978)646-8600,oronthewebat www.copyright.com.RequeststothePublisherforpermissionshouldbeaddressedtothe PermissionsDepartment,JohnWiley&Sons,Inc.,111RiverStreet,Hoboken,NJ07030, (201)748-6011,fax(201)748-6008,oronlineathttp://www.wiley.com/go/permissions. LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbest effortsinpreparingthisbook,theymakenorepresentationsorwarrantieswithrespecttothe accuracyorcompletenessofthecontentsofthisbookandspecificallydisclaimanyimplied warrantiesofmerchantabilityorfitnessforaparticularpurpose.Nowarrantymaybecreated orextendedbysalesrepresentativesorwrittensalesmaterials.Theadviceandstrategies containedhereinmaynotbesuitableforyoursituation.Youshouldconsultwithaprofessional whereappropriate.Neitherthepublishernorauthorshallbeliableforanylossofprofitorany othercommercialdamages,includingbutnotlimitedtospecial,incidental,consequential,or otherdamages. Forgeneralinformationonourotherproductsandservicesorfortechnicalsupport,please contactourCustomerCareDepartmentwithintheUnitedStatesat(800)762-2974,outside theUnitedStatesat(317)572-3993orfax(317)572-4002. Wileyalsopublishesitsbooksinavarietyofelectronicformats.Somecontentthatappearsin printmaynotbeavailableinelectronicbooks.FormoreinformationaboutWileyproducts, visitourwebsiteatwww.wiley.com. LibraryofCongressCataloging-in-PublicationData: Peca,StephenP. Realestatedevelopmentandinvestment:acomprehensiveapproach/StephenP.Peca. p. cm.—(Wileyfinanceseries) Includesindex. ISBN978-0-470-22308-6(cloth) 1. Realestatedevelopment. 2. Realestateinvestment. II. Title. HD1390.P43 2009 333.33—dc22 2008047052 PrintedintheUnitedStatesofAmerica 10 9 8 7 6 5 4 3 2 1 E1FTOC_1 03/16/2009 10:35:41 5 Contents Preface ix Acknowledgments xiii CHAPTER1 OverviewoftheDevelopmentProcess 1 EconomicPerspective 1 RelevancyofUniversalKnowledge 6 Ground-UpDevelopmentversusRedevelopment 14 TheSixPhasesofDevelopment 15 CHAPTER2 BusinessEthics 21 RelevancytotheRealEstateIndustry 21 LegislatedEthics 24 CHAPTER3 ProjectandDevelopmentTeams 29 TypesofDevelopers 29 FunctionalDisciplinesintheDevelopmentProcess 30 FactorstoConsiderWhenFormingaDevelopmentTeam 34 CHAPTER4 HistoricalPerspectiveofRealEstateDevelopment 38 TheBeginningsofRealEstateDevelopment 38 MajorEventsCausingChangeintheUnitedStates 45 CHAPTER5 MarketResearch 51 InceptionoftheIdea 51 Markets,MarketResearch,andMarketing (AnalysisofDevelopmentPotential) 52 v E1FTOC_1 03/16/2009 10:35:41 6 vi CONTENTS ConceptsThatDefineMarketing(andMarkets) 56 UsingMarketStudiesandPreparingforMarketability Studies 58 SourcesofandMethodsforGatheringInformation 62 FlawsofaStudy 63 ValidatetheDataandtheImportanceofRevisions andUpdates 64 CHAPTER6 MarketabilityStudies 65 ShowingThatYourDevelopmentConcept CouldandShouldBeBuilt 65 ImportanceofMarketabilityStudiesRevisited 68 IdeaRefinementandtheApplicationofthe MarketabilityStudy 69 TheProcessofIdeaRefinement 69 CHAPTER7 LandAcquisitionandControl 74 NonspatialandSpatialMarkets 76 ElementsofDesign 77 TargetMarketsandMarketShare 79 SiteControlandAcquisition 81 PublicandPrivateRestrictionsonLandUse 86 CHAPTER8 LandPlanningandSiting 91 ValueCreation 91 ProjectProgrammingandDesign 95 ElementsofDesign—Again 95 TalkingtoEndUsers 95 TenantMixandMarketability 96 ABriefWordaboutArchitecturalDrawings 103 CHAPTER9 EntitlementProcessandPublic-PrivatePartnerships 105 TypicalCommunityApprovalProcess 105 Public-PrivatePartnerships 107 E1FTOC_1 03/16/2009 10:35:41 7 Contents vii CHAPTER10 Budgeting,FinancialAnalysis,andCapitalStructure 113 PreparingfortheFinancialAnalysisandProForma 113 TheDevelopmentBudget 114 TheOperatingProForma 115 ReviewofCommonAnalyticalMeasurements 115 FinancingandtheCapitalMarkets 119 Short-andLong-TermFinancing 122 FinancingCycle—AnticipatingRequirements 126 ElementsofaFeasibilityStudyorDealBook 127 Guarantees 132 CHAPTER11 Contractors,Consultants,andConstructionContracts 134 BudgetingandScheduling 134 ContractorsandConstructionContracts 135 RiskManagementduringConstruction 136 PreparingforConstruction:BidProposalsandReview 138 ConstructionDocumentsandConstructionAgreements 139 RiskManagement:Part2 141 Scheduling 142 BondingandInsurance 142 ConstructionMonitoring:DrawMeetings, ManagingChangeOrders 145 TenantImprovementsandCoordination 148 ConstructionCloseout 149 CHAPTER12 LeasesandHowTheyAreUsed 151 ValueCreation 151 WhatIsaLease? 151 CommonLeaseStructures 152 LeaseManagementandAnalysis 154 CHAPTER13 MarketingFocusofDevelopment 157 KnowYourTargetAudience 157 YourEssentialVision 160 TheImportanceofBranding 161 E1FTOC_1 03/16/2009 10:35:41 8 viii CONTENTS Image,Identity,andCommunication 161 ComponentsofMarketingCenters 162 CHAPTER14 InvestmentManagement 164 FunctionandGoalofPropertyManagement 166 FunctionandGoalofAssetManagement 167 FunctionandGoalofPortfolioManagement 168 PropertyLifeCycle 169 CHAPTER15 TheFuture 171 RecentHistory—WhereWeLeftOff 171 ApparentFutureTrends 173 GreenDevelopmentandSmartGrowth 174 SocialResponsibilityandEthics 177 Glossary 179 Index 201

Description:
Real Estate Development and InvestmentA Comprehensive ApproachWritten by real estate industry veteran Stephen Peca, this timely guide skillfully outlines the various phases of the real estate development process and addresses some of the most important issues associated with this discipline.Using nu
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