What I've learned in re-development---your team matters.

Question

It's a banner week for our fledgling development business. After  3.5 years we have permits for a 17 unit redevelopment project.

We had hopes that we would break ground within a year of buying the property....that fell by the wayside for 2 reasons:

1) we had worked with the city to increase density through an affordable housing scheme that did not go as planned. One of the project neighbors slowed the project by 6 months by appealing the staff decision through design review, planning and zoning and city council. The city nor our architect understood the structure of the affordable housing regime that allowed this delay.

2) our architect was incompetent in moving the project forward. This is something you can't always know before you start...he came recommended by others. But it turns out that he is a serial sand-bagger. Slowly moving projects when forced to by clients.

I should have fired him 2 years ago but I was pot committed and didn't have the balls to start over with a new consultant.

What I learned is that moving on quickly from an underperforming consultant is vital.

Stuart Udis · Answer

@Robert Frazier Land entitlements are difficult and seems you've now been exposed to appeals and design professional challenges. These are battle scars that will make your processes better and more efficient in the future. Keep in mind, no matter how many round trips you do with entitlements you will always face some degree of adversity because there are so many variables, many of which are unknown until you start your process. For instance how the particular municipality examiner will interpret and review the plans, how your neighbors or someone with standing may respond through an appeal etc. etc.

The more round trips you complete, particularly in markets you work in repeatedly, the easier it will become because you become familiar with the traps and also get a better feel for what design firms are best suited for the particular project. When successful it is quite rewarding and can lead to favorable basis and financing opportunities but there are certainly risks and its important to have plenty of reserves and be realistic with time frames.

You will benefit from better rates and lower cost lumber now, so that will help make up for some of the added carry and perhaps the market conditions have even improved?  Last piece of advice is to avoid shortcuts on the development phase in an effort to make up for the added carrying costs.

Nik Moushon · Answer

@Robert FrazierUnfortunately, you will find those consultants at every level and aspect of development. This won't be your last incompetent or slow moving consultant. Just remember though, that you also build your own reputation as a developer, and if you get know for being too pushy and inconsiderate that these consultants have other clients to serve too, or that you fire too quickly...you will run out of people to work with. All the consultants talk about their clients and give recommendations just like developers give recommendations for GCs, architects, and engineers. I'm not saying that you need stick around with someone no matter how bad they are, just that you need to be mindful on your projects going forward. One other thing to look for in a future architect, is one that has a track record of working with developers AND knows the entitlement processes for the very specific type of development you are doing. Affordable housing, which means Fed funds, is a very tricky type of development for everyone involved. Most architect do not help with entitlements of the land....for ANY type of development, let alone the tricky ones with lots of hoops to jump through like affordable housing. Architects rarely have any of the land consultants under their contract for this very reason. There is too man unknown variables with land entitlements that we do not want that liability for. That is why the surveyor, civil, geo tech, etc are almost always under direct contract with the owner and not the architect. The architect will facilitate the coordination of everything.  I dont know what your contract was with your architect, but it sounds like, at least part of the problem, was they were expecting you to lead the entitlement process while you were expecting them to lead the entitlement process. Again, just my guess. Finding an architect that really understands the developers mindset is very difficult. There are not many out there that do. Part of it is that for the longest time, it was considered professionally unethical for an architect to do any type of development themselves. Design Build, lead by an architect, was not only taboo but could get your licensed revoked. So many just stayed away from it and its really just been in the last 10-20 years that that has started to really change and take hold in the architectural profession.

The firm I work at, for example, has repeat developer clients that have been coming back for the last 10-30 years! Doing everything for little 2-6 unit townhouses all the way to 300+ unit apartment complexes and 5-over-1 mixed used buildings with 200 units over 20k sf of commercial and structured parking. They come back because we understand their process, not only the developer as a whole but them specifically and their specific requirements and needs. That relationship gets built over time and not every project is successful, from their end or our end. Got to take the lows with the highs. But trust me, when you find that architect that understand your processes, your life and projects will become exponentially easier, the projects will turn out better, and you will make more money in the end.

Robert Frazier · Answer

GC's have been great. Helpful and knowledgable. Our new permitting/entitlement company is killing it on our second project.

Jaycee Greene · Answer

Hey @Robert Frazier! That is a very valuable lesson! What other consultants have you been working with on this project, presumably the ones that have "overperformed"!

Jaycee Greene · Answer

Consider yourself lucky with having great GC's - that's most of my clients' issues. Wish I knew some P/E companies in your area! Good luck.

Robert Frazier · Answer

We're doing multi-family redevelopment and the architect is taking 6 months with constant hounding to respond to notes from the plan reviewer. It's not unreasonable expectations.

Jared W Smith · Answer

In commenting on your 2nd point, an Architect familiar with development vs an Architect that does other types of work each have different skill sets @Robert Frazier.

Having worked in corporate architecture firm for 13 yrs before opening my own firm, I understand your basis @Jay Hinrichs and it's totally accurate. Some are more cumbersome than others with project schedules but that comes down to project types and size of firm. I respect your many years of experience Jay but want to bring some perspective from the other side of the table.

In a corporate office which is running 10, 20 or even 50 projects at once (depending on the firm size), what is the benefit for the Architect to drop their other projects to jump on yours quicker? Have you paid their standard fee (or beat them up to lessen it further) or a premium to cut the line when updates or revisions are needed? Most have not done the latter. Therefore Bill & Jane's vacation house in the Hamptoms or the ABC Company tenant 10,000 SF commercial build out is ahead of your development.

Robert- If you do have the correct Architect for your project, then the problem is: they aren't incentivized to change anything. Especially if you haven't went into detail about how you want things to occur and what the project schedule is. The turnaround time should be in your agreement so they have priced things accordingly to achieve what it is you need. If it is not spelled out in the agreement, then they're abiding by the stipulated scope and your gripe may be with an unknown expectation or one which was not ironed out from the start. Nowadays and for most firms, no one client has paid to have 100% of your undivided attention for their project.

What I've learned in re-development---your team matters.

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