7U4X0 Realization, Exploitation and Transformation (7U4X0)
Summary
Summary for final exam - REUD part 7U4X0 / 7U1B10
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Course
7U4X0 Realization, Exploitation and Transformation (7U4X0)
Institution
Technische Universiteit Eindhoven (TUE)
This document represents a summary of all lectures of the 7U4X0 course, part of the Real Estate and Urban Development. It includes all the necessary information, each with enough details provided.
7U4X0 Realization, Exploitation and Transformation (7U4X0)
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1.1. Types of real estate: Characteristics of real estate:
- Commercial - Immovable
- Social - Capital-intensive
- Residential - Long development period
- Industrial - Long life span
- Stockpiling
Phases of the property development process:
a. Initiation
→ Starts with a location (a parcel of land considered suitable for a different or more intensive use)
and an idea (an increased level of demand)
→ Initiators can be:
o Public parties – municipality
o Private parties – project developer, land/property owner, investor
o Government policy is leading
→ Main stakeholders are landowners with the main motive of selling and/or improving the value of
the land
b. Investigation and analysis of the viability
→ Detailed market research needs to be undertaken
→ An analysis of viability needs to be done:
o It should be conducted prior to committing to the property development
o It is crucial to the successful completion of a development
o It needs constant re-evaluation
A positive outcome of investigation and viability analysis will determine
the decision to proceed by the developer
c. Acquisition
→ Stages of preparation prior to acquisition needed:
o Legal investigation
o Physical inspection and examination – enough load-bearing
soil? Biological problems of soil? Check electricity, water,
cables, etc.
o Finance
d. Design and costing
→ Design and costs are interlinked – iterative process
→ Design and costing stages involve contributions from all members of the professional team
→ Design is influenced by the client’s brief, public perception, current architectural styles
→ Design is a continuous process
e. Consent and permission
→ New development may require a change of land use
→ Every development requires planning consent or permission
→ A detailed application needs to be submitted
→ Other legal consents may be necessary – all legal permission hurdles need to be cleared before
full commitment
f. Commitment
→ ‘Due diligence’ checks are needed prior to commitment
→ Reconsider the development proposal
→ After granted permission, contracts can be signed
,→ Signing contract includes to:
o Purchase or lease the land o Engage building contractor
o Secure the required finance (with the o Confirm professional team
bank)
g. Implementation – construction of the building
→ The primary aim is to ensure that the completion of the development is within the allocated
timeframe and the financial budget but there may appear delays which can increase costs
→ The project manager is appointed to coordinate the design and building process
→ Developer takes a substantial interest in running the project and its overall promotion
h. Leasing/managing/disposal
→ Final stage but relevant from initiation of development
→ A development has value only when it is sold or leased at the estimated price or rental value
and within the period originally forecasted in the evaluation
→ Tenants are usually locked in and confirmed before the commencement of a development
→ The role of the developer is whether he retains ownership or sells it and realizes a profit
Main stakeholders in the development process:
a. Landowners – appears in the initiation stage
→ Land ownership can be:
o Traditional – church, landed gentry o Corporate – industrial companies
o Financial – financial institutions (banks), pension funds, insurance companies
b. Developers
→ Can range from single-person entities to global multi-nationals
→ The main objective is to make a profit and maximize financial return for stakeholders
→ Trader vs. Investor:
o A developer can be either a trader and sell the project or an investor and keep the
ownership
→ The type of developers varies since the developments can also vary
c. Public sector/government
→ Are rarely directly involved, constrained by financial resources, and limited by legal power
→ Government participation depends on whether the government seeks to encourage or control
development (e.g. can make sure that public transport or parking space will exist)
→ Government assists developers with site identification, site reclamation, the provision of
infrastructure, and sometimes financial grants (e.g. can provide permission)
d. Planners
→ The objective is to monitor and control the use of land in alignment with the public interest
→ Government vs. Planners:
o The government is regarded as politicians, and municipality, while planners refer to
professionals who make plans
→ Planning applications are determined in the light of legislation, local and regional plans,
government policy, etc.
→ Successful application is achieved by prior consultation and negotiation with authorities
e. Financial institutions and lenders (e.g. pension funds, insurance companies, etc.)
→ Types of money needed to complete a development:
o Short-term finance – if the developer sells the ownership
o Long-term funding – if the developer keeps the ownership
→ Financers seek to minimize risk and maximize future yields to achieve capital growth
→ Investment in a property is a relatively long-term investment
, f. Building contractors
→ Is employed by the developer and their task is to physically construct the development
→ The objective is to have direct financial gain and profit
→ Some development companies employ their own building contractors
g. Real estate agents
→ Will sell real estate/real property
→ Need details knowledge of the property market (the demands) and personal contact with
stakeholders (‘the property industry is all about people’)
→ The motivation is to make a financial profit
h. Professional team
→ Developers employ a range of professionals because they don’t have all the expertise in-house:
o Planning consultants o Engineers – e.g. for construction
o Market research analysts/economic o Project managers
consultants / valuation surveyors o Solicitors – for legal expertise
o Architects o Accountants
o Quantity surveyors
i. Objectors
→ Have the right to provide input on the viability of the proposed development
→ There are two types:
o ‘amateurs’ / self-interested neighbors (e.g. NYMBYs = ‘not in my backyard’)
o well-organized professional – local / regional / national (e.g. environmental organizations)
→ A prudent developer accounts for objectors when evaluating the likelihood of the development
proposal receiving planning permission
j. Occupiers
→ Occupier is known or unknown before development starts
→ Different occupiers have different real estate requirements and priorities
→ Future requirements need to be researched at the beginning of the process
→ Financial institutions seek highest quality specifications with a layout to suit the widest possible
range of tenants, so the occupier might not be forced to compromise
Types and private developers and stages:
1. Initiation – independent developer – the aim is to make a profit
2. Design – developing architect – the aim is to design
3. Realization – developing contractor – the aim is to build
4. Financing – developing financial institution – the aim is to produce a return on their
investments
5. Lease/sell – developing real estate (RE) agent – the aim is to lease or sell properties
6. Investment – developing investor – the aim is to invest
7. Exploitation – developing housing association – the aim is to compensate for other
unrewarding activities
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