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Corporate Level

NOTE: All of these files are free to download for registered users. Registration is free.

• Development Firm Decision Tree: Few people think about the corporate decisions and strategic positioning that a development firm does. This decision tree will help you think through what those are, whether you’re an employee or entrepreneur.
• Corporate Risk and Mitigation: As many veterans will tell you, development has a significant risk profile. Here we consider what those risks are at the corporate / firm level and how some of them can be mitigated. 
• Project Risk and Fiduciary Responsibility: If you’re an ethical person, the inherent risks of development can make the prospect of leading deals, and the fiduciary responsibility that entails, daunting. Here are some notes we’ve compiled on risk and its mitigation for the faint of heart. 

Project Level

• Project Folder Template (2023): Every developer has a slightly different but similar way of organizing the many files in each project. We described one in The Birth of a Building and have iterated on the structure since then. Click here to download the latest greatest. 
• Sample Capital Budget: What are all of the things that have to go into a full development budget? Here’s the template we use. There’s no perfect way to skin this cat, and there’s a tension between brevity and precision. If we’ve missed anything important, let us know!
• Predevelopment Burn: Not all of your costs will apply in the time leading up to closing, but the ones that do apply are acute. You fund them with cash, and you’ll want to understand how that cash is going to “burn” during predevelopment. Here’s a subset of the capital budget for only those items spent before closing.
• Project Legal Structure: It can be a doozy to interpret how all of the different companies are related in a real estate development project. But if you can look at this diagram without getting cross-eyed, you’ll be way ahead of the pack in intuiting how everything is interrelated.
• Debt and Equity Decision Tree: Every deal is like a race car in need of fuel. What are the decisions, and paths, you can go down searching for that much-needed fuel? This decision tree will help you think about it comprehensively.
• Capital Flyer: As part of our course on capital, we developed this simple flyer for use when marking a project to debt and equity providers.
• Guide to Change Orders: From the moment you begin construction, “change orders” threaten to derail the budget you agreed to with your partners. It’s often challenging to know how to deal with large change orders and this flow is our attempt to map the things to think about and weigh.
• Net Effective Rent: How do you compare the economics of prospective tenant term sheets that have different rent and TI needs? Or how do you accommodate a tenant who wants to increase their TI, or drop their rent? You use a net effective rent calculation. Here’s our template for that super helpful exercise.

Theory

• Value Creation: Is your building worth more or less than it cost you? That’s the most important, basic question. The easiest way to conceptualize it is to think about it relatively. If you build for a 6% income-to-cost (i.e., yield on cost), and can sell for 5%, you’ve made 6/5 = 20% value. This table compares such configurations.
• 3 Ways to Model: There are three conceptual ways to run a financial model. First, traditional comparison of income to cost. Makes sense but you need those inputs, and getting real cost numbers requires spending a lot on design. Second, assume income and return requirement, solve for cost. Third, assume cost and return requirement, solve for income required. Here’s a simple side-by-side comparison.
• The Grammar of Design: This chart provides a framework by which to evaluate a set of architectural plans. It looks at the drawings in a set (X-axis), stages of design (Y-axis), and provides examples of each type of consideration. Once you have the basic idea down, you’re able to ask these questions on the fly.
• Guide to Zoning Reform: Property owners don’t have an incentive to support new development. They have an incentive to stop it. Local officials respond by stopping new development. Only the state is properly incentivized and has a stake in the overall economic well-being of whole regions. Here’s our list of reforms for them.
• Construction Cost Factors: Man oh man, this is from the archives from grad school, when I was trying to understand the costs that go into construction. Not exactly the sort of thing you’ll use every day but an interesting thought experiment nonetheless.
• The Entitlement Spiral: We shared this table in The Birth of a Building to illustrate how the entitlement process often works. We’re posting it here by popular demand!