Hiring A Fee Developer - What's Your Process?

Question

I have a residential development project that I am working to tie up. Our civil/architectural firm did a preliminary assessment of the project and it looks like we can get lots of the following sizes built out:

Based on 130’ lot, the following lot frontages could yield:

• 80’ lots – (2.5 u/a) = 51 lots
• 70’ lots – (3.0 u/a) = 61 lots
• 60’ lots – (3.4 u/a) = 70 lots

My next step is to figure out what lot size makes the most sense for our intended exit pricing and product type and to match them to comps in recent years, which are hard to find in this area of town. I also would like to start estimating infrastructure costs for water, wastewater, roads, detention ponds, etc.

I'm really in a better position to raise and organize the capital for the project and to oversee a fee developer who would execute on things and hopefully would assist some with financial modeling as well. If you were going to hire someone for this purpose what process would you put them through to ensure you're dealing with someone reputable and to structure a financial arrangement that creates maximal alignment with the GP?

Greg Dickerson · Answer

There really is no process to put them through. They are not a partner in the GP. A Fee Developer is a professional contractor like any other firm you would hire to perform certain aspects pf the project such as the civil engineers, site contractors, utility contractors, etc. You want to seek out a professional individuals or firms experienced with the type of project you are doing and request proposals. The fee will depend on the amount of services and involvement and can run 5-20% of the total costs of the project. Generally you will pay 20-50% retainer and monthly billing form there.

Bryan Hancock · Answer

I found a few candidate fee developers from my email threads of years past yesterday and called one to talk to him a bit. In general once the project is set up and underwritten I'm looking for someone to help to execute and manage the project along with each of the professionals engaged in the project. I'm guessing looking through his checklists and documentation would be the most helpful, but that doesn't account for alignment or for his reputation.

Hiring A Fee Developer - What's Your Process?

2 Replies