For investors, real estate development has the potential for good ROI. For end users, it can support a business or mission. For municipalities, it can drive economic growth. As can be expected, these returns come with increased financial risk, a longer time to complete, and much greater complexity than the acquisition of existing real estate. Especially in today’s market, new developments can be difficult to start or move forward with, or may require strategic repositioning efforts.
To optimize financial investment, increase ROI, and minimize risk, organizations or public entities (“owners/investors”) can hire real estate development consultants (also called “development advisors”). But what is a development consultant and how can they help owners/investors reach their goals? In this article, we will cover:
- The responsibilities of a development consultant
- The valuable role of a development consultant on a project team
- When to hire a development consultant
What is a real estate development consultant?
Real estate development consultants offer the specialized knowledge, experience, and capacity to help owner/investors manage every phase of the development process.
Development consultants have experience with predevelopment, financing, design, construction, and operations. They often also have specialized experience in the development of certain asset types (e.g., apartments or hotels). Because they understand all the factors driving a project forward and the challenges developments face, the owner/investor can rely on them to guide the project with the his or her best interests in mind, from project conception through closeout.
Development consultants can be a valuable resource whether you have internal staff with development experience or not. Many times, owners/investors don’t have the internal staff with the specialized knowledge and resources to vet, plan, and manage a development project because it’s not a frequent enough activity to require in-house capabilities. Similarly, established development companies may want to augment their staff or gather additional expertise or guidance on their more challenging projects.
What does a real estate development consultant do?
In terms of roles, development consultants are not the decision-maker — the control over the project remains with the owner/investor. Instead, the consultant is responsible for the process, coordinating the development team, and acting as a trusted advisor for key decisions along the way.
During project conception and predevelopment, development consultants help with strategy and defining the project so it aligns with the owner/investor’s goals. This includes tasks such as:
- Analyzing feasibility for the highest and best use for the asset or land
- Perform in-depth financial underwriting, including a conceptual budget and cash flow pro forma
- Procuring financing and debt, and ensuring covenants are met
- Identifying and procuring incentive and grant programs
- Reviewing property due diligence
- Coordinating entitlements and permitting
- Planning the scope, phasing, and project delivery method
- Managing the bidding process for the project team (such as architects and construction managers)
- Operations and asset management planning
With the strategy and team in place, development consultants usually also act as owner’s representatives to keep the project team on track through the construction and closeout phases. They monitor the scope, budget, and schedule to protect the investments made so far — up to and including a successful move-in and being of operations or lease-up.
- Overseeing design and construction
- Mitigating risk
- Assessing change orders and issues while constantly reconciling with the budget and schedule
- Developing a marketing and lease strategy
- Closing out the project so items don’t linger after completion
A development consultant has experience with both the strategic and daily tasks to avoid common project issues or remove roadblocks to move the project through each phase as efficiently and effectively as possible.
How do development consultants fit in with others on the project team?
Development consultants are the funnel through which communication and coordination with all other project team members flow. Like the quarterback on a football team, they provide the owner/investor, and the team, with expert analysis, advice, and clarification to make each play (phase) of the project successful at moving game (project) forward. For example, when a lender provides potential term sheets, the consultant will analyze and negotiate them to ensure the owner/investor moves forward with the best debt option to fit their project and needs.
When should you hire a real estate development consultant?
Financing mechanisms and covenants, operational and site construction nuances, entitlements and zoning changes — every project is unique and can bring its own set of tasks and challenges. The challenges have only increased with the advent of the coronavirus pandemic. When development consultants are brought in early in the planning process, they can help define the project and determine the exact list of tasks needed, when they need to be planned for, and how they affect the overall scope of the project. They can also help you hire the right team for your project, including the architect and construction manager. Bring a development consultant in the earliest conceptual stages — they’ll help you determine the scope of the project, avoid unnecessary risk, and minimize costs.
Development consultant: An expert resource for owners and investors
For some, the benefits of a real estate development will come in the form of optimizing profitability. For others, it may manifest as a driver for economic growth or a new purpose for an underutilized building. But with the right development advisor, your project will start out — and stay on — the road to success.
If you’re considering a real estate development project, contact our team today to learn more about how our development consultants can help you from conception through completion. We have experience and expertise helping anyone with a viable piece of land or property for development:
- Businesses across industries (senior living, higher education, health systems, etc.)
- Nonprofit organizations
- Real estate investors
- Corporate real estate teams
- Municipalities
- Public-private partnerships
- Developers and landowners
- Religious and faith-based
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