Ten Steps to Master in the Land Development Process
This multi-part Blog series will highlight how to mitigate risk and avoid issues that commonly plague land development projects. We will help you understand how to properly navigate the main phases of the land development process to help avoid cost overruns and delays (and a whole lot of stress and anxiety). This is a collection of observations, recommendations, and advice from the perspective of a civil engineer who has worked side-by-side with a diverse set of developers on hundreds of land development projects over the past 25 years.
If you are a real estate developer, broker, or land use attorney you will find the series to be of particular interest.
Topic 4: Assembling the Right Team
In my last blog, we talked about the importance of performing an appropriate level of preliminary site design before diving into full design and permitting efforts. Doing so will inevitably save time and money in various ways. You will have used this preliminary design information to refine your development pro forma and your project timeline. Now it’s time to get your full project team in place and push forward. This blog discusses those steps.
Assembling the Right Team:
Land Development is a team sport. You may consider yourself a “lone wolf” developer or you may be part of a large international development company. Regardless of your level of in-house resources or experience you are going to need to rely on a team of skilled professionals to get your project done. Below is a list of likely players you will need on your design/permitting team:
• Civil/Site Engineer
• Land Use Attorney
• Geotechnical Engineer
• Environmental Engineer
• Traffic Engineer
• Contractor (yes, you should get one involved now!)
This list is in addition to the non-design/permitting team members such as lenders/bankers, appraisers, title companies, insurance agents, real estate brokers, etc. Needless to say, choosing the right team members is key. A few things to consider in this regard:
• Regional/Local Experience: In my experience, this is especially applicable to your choice of a land use attorney since a good one with local experience can guide you on political considerations, opposition risks, etc. Design professionals need to know the local and regional permitting requirements, applicable codes, and ideally have a good working relationship with the municipal and agency professionals that will be reviewing their work.
• Project-Type Experience: Make sure your team members have experience in the type of project that you are undertaking, especially your design team and contractors. This applies to both the scale of your project as well as the market sector. For instance, if you are developing a 500k-sf distribution facility, make sure your designers know industry standards for the design of such facilities such as truck bay sizes, trailer parking needs, loading dock heights, etc. Similarly, each market sector has its own design and permitting nuances from walk-out basement townhouse grading considerations to accommodating proper vehicle sizes for retail loading and trash pick-up. Overlooking such nuances (or simply getting them wrong) will only lead to more costs, lost time, and a lot of frustration. Similarly, a firm that claims significant residential experience, but all of this is for urban or smaller townhouse projects, may not be the best firm for your 250-lot single family project. Ask them to show you representative projects.
• Workload Capacity: Press your consultants on this – a good one will be honest about their ability to proactively handle what you need done.
• Specific Person: Remember to inquire about specifically who will be handling your project. The reputation and experience of a firm or company is important, but you need to make sure sure that the individual that is heading up your project embodies that reputation and experience. Talk to that person and get comfortable with them, not just the salesperson or head of the firm. Also, if you anticipate that your project will involve public hearings and presentations, be sure to ask who will be doing the presentation/testimony and get comfortable on that person’s ability to think on their feet and present well. Ask for references in this regard.
• Reporting/Communications: As a developer, it is essential that you know the status of your project and if such status is consistent with what it needs to be to meet project goals. Are there things that are holding up progress? Are there issues that have come up that will impact timing or costs? You need to know how such status and issues are going to be consistently communicated to you by your project team. Will you receive weekly status updates? Will there be regularly scheduled calls/meeting? Get this set up front. You want proactive consultants that you can count on to keep you up-to-date and alert you of issues; not ones that you have to constantly chase down and wonder if all is going as planned.
• Get Referrals – Most good consultants and professionals have worked in the industry for years and have a long list of successful projects and satisfied clients. Therefore, getting a referral or reference should not be a problem. You can do this by asking the professional to supply you with references, but you can also ask around to your development colleagues for their experiences and opinions. In addition, talk to your professionals that are already on your team regarding their experience with the other professionals you are still considering. For instance, most land use attorneys and engineers have worked with one another in a given region many times.
• Price vs Value – Obviously price is a consideration when hiring professionals for your project. However, most competent professionals should be relatively close in price/fee for the same scope of work. When you are spending millions of dollars on a land development project, this is not the time to select the low cost provider. Instead, you want to assemble the team that provides the best value; and by that I mean the ones that will give you the best advice, have the best experience, and can get your project designed, permitted and to construction as quickly and efficiently as possible. Deciding to go with a lesser quality professional to save a few bucks can ultimately cost you months and possibly the entire deal.
• Firm Size – The size of firm that you select can sometimes be a factor depending on the specific project and needs. For a civil engineer for instance, large firms often offer the perceived benefit of having various specialty services under one roof such as traffic, geotechnical, environmental, etc. However, those in-house individual specialty groups may not individually be best suited for a given project (or be of the same quality/reputation as others). Therefore, it sometimes makes sense to handpick the appropriate design consultants for that project based on the various factors previously noted above. Obviously, you want to ensure that a given company has adequate horsepower to handle the project as needed. On the other hand, beware large firms where your project can get lost in a shuffle of larger “more important” projects/clients that they may have. Larger firms also tend to have more staff touching a given job then smaller firms, which often leads to higher billings and more opportunities for mistakes.
• Honest discussions and expectations on costs – When reviewing proposals and contracts for your professional team, be sure to have open and honest discussions with them in regard to overall budgeting considerations. Realize that it is often impossible to obtain a lump sum guaranteed fee for any design permitting service since the nature of land development is that there will be changes, revisions, and other things that come up that will alter the scope and effort required. However, a seasoned professional should be able to give you a reliable range that you can then utilize within your development pro forma to ensure that you have realistic expectations for such soft costs. For instance a common mistake that I often see is when an inexperienced developer looks at a consultant proposal and simply inputs the numbers from that proposal into their pro forma, not realizing that significant revisions, hourly meeting time and reimbursable expenses will result in extra fees. In such cases you should ask the consultant what type of fees should be anticipated in that regard. Having these discussions up front will inevitably save considerable conflict and stress down the road.
With the right team in place, you then need to fully leverage their experience and expertise. The members of your team should collectively have worked on hundreds, if not thousands of land development projects. This deep experience is often an untapped (or at least under-tapped) resource by developers. Key project strategy and decisions shouldn’t be made in a vacuum by the developer – this is the time to press your consultants/professionals for their perspectives and recommendations. A good developer will then take into consideration this information and these viewpoints in formulating the best strategy/decision possible.
A key time to do this is before diving into permitting. Procuring land development permits and approvals is not a linear, set process; rather it is one that can be executed in different steps, phases or levels depending on many project-specific factors. Since this process can take years to navigate, it behooves the developer to spend the appropriate time to fully assess the best way to execute this phase of the project. This is an essential time to consult with your team members. Make sure they understand your project goals, constraints, etc and then talk to them, meet with them and listen to them. Communication is key. Doing this should ensure that you then launch into the design/permitting phase of your project with a team that understands your goals for the project, the strategy to achieve them, how status and issues will be communicated and cohesively drives things forward.
You now have done your homework, performed the appropriate level of preliminary design, and assembled the right team that has assisted you in crafting the proper strategy. It’s design time. For some insights on land development design, stay tuned for our next blog.
The above article is the fourth in our series of “10 Steps to Master in the Land Development Process”. Previous articles are linked below. Subscribe to the Blog to be notified of future articles in the series.
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