CEcD POSSIBLE ESSAY MATERIAL: Real, Finance, BRE

Process- (Format) Formal citizen committees and advisory groups typically come in four types:

(1) Standing committees based on geography (often referred to as community planning organizations); (2) Standing committees based on function (e.g. a parks committee); (3) Temporary committees based on geography (e.g., an ad hoc committee on revitalizing a downtown area); and (4) Temporary committees based on function (e.g. a task force to oversee redevelopment of a particular site).

Impact fees typically cover:

., Roads; ., Parks; ., Storm drainage; ., Schools; ., Public Safety; ., Water & sewer; High utility connection fees mayor may not be impact fees.

The resulting strategy should reflect both the goals and the community. Factor that should be considered are:

1. Area History: a. What is the culture and history of the area in which the project is located? b. Have there been other attempts at development? c. What kind of attitude does the community have toward change? 2. Community Leadership and Vision: a. Who are the leaders in the, community? b. Are there community leaders who may not be part of a formal organization? c. Does the leadership change often? 3. Affected Parties: a. Who are the stakeholders in the community? b. Are the stakeholders represented by organizations? c. What are the characteristics of those organizations? 4. Project Funding: How is the project being funded? 5. Project Size and Complexity: a. How large is the project or proposed redevelopment area? b. How many neighborhoods does it affect? c. Who or what entity is driving the process? d. What motives are driving the process? e. Who has power to stop the project or plan? 6. Existing Plans and Studies: a. If a project, is the site included in an existing plan (e.g., neighborhood plan, revitalization plan)? b. If a redevelopment plan, has there been a previous planning effort? c. What was the result? d. Are there ideas for the site from previous plans or efforts? 7. Staffing: What is the institutional capacity to undertake the proposed project?

MEETINGS Most community involvement processes involve meetings. Although the type of meeting will vary according to the strategy, some aspects should remain constant. For instance, the EDO (or other convener) should:

1. Choose a convenient location for all participants, preferably transit and handicapped accessible. 2. Promote the meeting as targeted as possible. 3. Provide written material and graphics (if appropriate) to participants before the meeting. 4. Take notes and ensure that notes taken during small group activities are collected at the end of the meeting. 5. Provide food and refreshments. 6. Attend the meeting. 7. Support staff should attend the meeting. 8. Build Consensus. 9. Follow up. 10. Publicize and promote success

Real Estate Development and Reuses Objectives:

1. Understanding of the development process; 2. A familiarity with the policies and programs that state, local, and public private economic development organizations and agencies can use to encourage and help finance development; 3. An understanding of how to analyze cash flow and income statements, and how to assess project feasibility; 4. Knowledge of site analysis and land assembly; 5. A familiarity with current environmental rules and regulations; 6. An understanding of regulatory constraints and incentives; 7. An understanding of the process to solicit and select a developer.

Financing Process (Phase IV):

1. Financing from the Developer's Prospective 2. Methods for Structuring the Deal 3. Gap Financing

RFP Outline A successful developer RFP should be well put together and easy to understand. The average RFP includes the following components:

1. Front Material; 2. Introduction; 3. Setting and Site; 4. Public Agency Development Program; 5. Public Agency Project Objectives; 6. Proposal Requirements; 7. Selection Process; 8. Supplemental Items.

List main components of an RFP:

1. Front material (cover, intro letter, RFP summary, TOC) 2. Intro (objectives, background, site overview) 3. Setting & site (regional/local/site with maps & demographics) 4. Public agency development program (origin & hx, general goals/obj, other project info, disposition) 5. Public agency project objectives (requirements, preferences, terms, resources/support) 6. Proposal requirements (developer credentials, project proposal: what? when? how much?, terms, responsibilities) 7. Selection process 8. Supplemental items (contacts, restrictions, certifications, confidentiality)

The real estate development process has eight distinct phases:

1. Phase I: Predevelopment 2. Phase II: Market, Financial, and Political Feasibility 3. Phase Ill: Site and Engineering Analysis 4. Phase IV: Financing (Debt Capital, Equity Capital) 5. Phase V: Contractor Negotiations & Public Approvals 6. Phase VI: Construction 7. Phase VII: Marketing 8. Phase VIII: Building Occupancy and Management

RFPs: Steps to Finding a Developer:

1. Project Concept & Objective 2. Solicitation Document. 3. Marketing the Solicitation Document 4. RFP Outline 5. Evaluation & Selection 6. Developer Negotiations 7. Disposition & Development Agreement

Consultants can be selected through several processes:

1. Sole-source 2. Pre-qualified Candidate List 3. Request for Proposal (RFP)

While the methodologies may vary, there are five key components to any quality market study:

1. Subject Site Analysis - Where is the project located, and how do its physical characteristics, including planning, zoning, access, adjacency, topography, etc. impact its overall feasibility? 2. Economic and Demographic Analysis - What is the regional forecast for jobs and household growth, and how much of that growth may impact the market conditions for the project? 3. Competitive Supply Analysis - What other projects will compete with this project for market share, and how competitive will this project be visa-a-vis those projects in terms of quality of execution, price, timing, positioning, etc.? 4. Demand Analysis - How deep is the overall pool of customer (residents, tenants, etc.) for this project in the marketplace? Is the demand growing or shrinking? Are the needs of the market changing over time? 5. Development Recommendations - How do the above factors play against each other and inform recommendations as to product program, timing/phasing, implementation strategy, prices/rents, and product types?

(gap financing) Funding tools:

A number of local funding tools exist for economic developers in gap financing. These are: Tax Increment Financing (TIF), General Obligation (GO) Bonds, Revenue Bonds, Industrial Revenue Bonds, Tax Abatements, Loan Guarantees, Federal Grants & Loans for Local Development, as well as others.

Political Feasibility (Phase II) INENTIFY AND INVOLVE KEY PLAYERS AND STAKEHOLDERS:

: It is imperative to identify and involve key players and stakeholders in the politically feasibility study early as needed. While the public sector players are entities that will police or approve the subject site or development plans, stakeholders are anyone who's effect by the project. Stakeholders might include citizens, community associations, neighborhood groups, state and local government, landowners, developers, business owners, major employers, chambers of commerce, faith institutions, financial institutions, educational institutions, and utility companies. Within the contexts of identifying stakeholders, an EDO or Developer should look for capable community leaders who can make a time commitment. They should become leaders and representatives for the plan. EDO should be able to assess political support, involve the community, and promote the project's value to stakeholders.

2. Land Use Plans:

A comprehensive plan is a land use plan that describes the desirable ways in which a community should develop over a 10 to 20 year period. It includes a set of written development goals and policies, supplemented by maps. It may be advisory or legally binding depending on state enabling status. A sector plan or small area plan is a land use plan that focuses on a manageable area (a section of a community) and considers the land use, transportation, environmental, and infrastructure needs unique to that portion of the community. It avoids the generalities of a comprehensive plan and also avoids a single-issue, narrow outlook of planning.

Market Feasibility Basics (Phase II):

A market feasibility study determines the depth and condition of a particular real estate market and its ability to support a particular development. The market study provides a basis for identifying business development opportunities and forming realistic development plans. In cases where preconceived ideas about development exist, the market study provides a basis for evaluating those ideas and development alternatives. In cases where there is no clear development plan, the market study is a starting point for identifying opportunities and limitations. Finally, market feasibility helps to determine if the project will satisfy lenders enough to provide a loan. In addition to this, market feasibility helps to determine if the project will satisfy lenders enough to provide a loan. Much of the market analysis must evaluate the project and project area in the same fashion that potential occupants of the project will.

A subject site analysis:

A subject site analysis assesses a project location, and how do the physical characteristics, including planning, zoning, access, adjacency, topography, etc. impact its overall feasibility. A good market analysis takes into account the site within the context of its neighboring land uses, patterns of regional growth, planning/zoning considerations, and role within the regional economy. Specifically, the analysis should address the, size, topography, layout & constraints, surrounding land uses, proximity to employment and services, an area prestige/ reputation, access, visibility couple with the frontage and any planned infrastructure improvements

The public approval process:

An important part of the property development project involves gaining necessary approvals from various governmental bodies. This includes building permits, zoning approvals, and business licensing. Obtaining the various required permits can be a time-consuming and often frustrating process. Any delays in the approval process may become "deal-kiIIers" because it is expensive for developers to wait. Communities are developing various techniques to facilitate this process and ensure that the approval process does not inhibit the development. Two examples are a one·stop business assistance center and a facilitated approval process.

Summary to Community Involvement and Strategy:

As state earlier, EDOs should plan for community involvement for each development project or plan. Community involvement is integral to the success or failure of a project. Because of community opposition, areas or parcels slated for development often remain undeveloped or are developed only after costly delays. Although the idea of development may be welcomed, the specifics might be challenged. Before the community involvement process is implemented, a strategy must be adopted. Both are predicated on the nature, size, culture and the task needed for a development or plan. In a community with citizens actively involved in developments and strong astute organizational leadership, an organized public dialogue may be deemed necessary. The greater the change, the more opportunity the community will have to review and comment on development plans and the more important it will be to implement a well-organized public participation process. Conversely, communities were citizens are less engage with identifiable effective leadership, a small group meeting should be appropriate.

Political Feasibility (Phase II) IMPORTANCE:

As stated above, a community involvement process is important for a number of reasons. First, public input can generate development ideas, concepts, and issues not identified by EDOs or developers alone. This inclusive process will help to galvanize support for or lessen opposition to the project. Once community members become engaged in the process and its outcome, they are more likely to accept or support it. Conversely, if community members are not involved in the process, they may become suspicious and confrontational and work to stop the project. Third, if public funding is used, community members might insist that information be provided and that they have a voice in the decision-making process. The community involvement process increases public sector accountability and responsiveness. Finally, involving the community in the development process helps to build capacity for ongoing participation. Once this is done, a process and a constituency are in place to facilitate the redevelopment of other sites.

Methods for Structuring a Deal:

As stated earlier, the transaction structure can dictates the level of risk in a publicly supported development project, more than the tool used in the financing. There are four general classes of transaction structures for a publicly supported development, front-end assistance without an off-setting guarantee, front-end assistance with a guarantee, performance-oriented assistance with initial explicit denomination, and performance-oriented assistance without formal denomination. The most common type of assistance for a front-end assistance without an off-setting guarantee is a land write down. Other forms can be infrastructure funds, direct initial operating subsidies, planning assistance, land clearance, and remediation. Funding for such activities typically comes from federal and state grants and tax increments. Due to tighter money, fewer communities are able to provide this type of front-end assistance. Conversely, there is a commitment to repay all or part of the financial assistance provided if a front-end assistance with a guarantee is in place. The commitment to repay is not the same thing as a subsidy recovery. The commitment to repay may involve higher taxes or the providing of certain amenities. An example of this type of transaction is low interest loans, which represent a front end subsidy with some potential recovery.

Growth Management Restrictions:

As states and local jurisdictions have struggled to fund and build capital improvements to accommodate rapid growth, they have enacted laws that slow growth. While these laws generally target greenfield development, they can and do impact redevelopment. Sometimes there are restrictions on development until adequate public facilities are funded or constructed. Many jurisdictions levy impact fees and exactions (see below) to pay for public facilities and infrastructure. There are environmental restrictions, such as federal restrictions on air quality or restrictions on construction near rivers and lakes to limit non-point sources of water pollution caused by runoff. Growth management requirements may include an incentive, such as transfer development rights, as well. Transfer development rights limit density in one area or parcel of land but allow owners there to sell density rights to someone in another designated area or land parcel where greater density can be accommodated or is desired.

Developer Negotiations

Because of the complexity of large public-private deals and the need for greater flexibility during development, the selection of the developer is more likely to establish a broad framework. Typically, the selected developer is designated the preferred developer, subject to satisfactory negotiations. If the negotiations with the preferred developer are not successful, the developer of the second-best proposal is offered a chance to close a deal. Negotiations often take a two stage process. In the first stage, the development agency and developer draft a memorandum of understanding (MOU). The purpose of the MOU is to clarify early on both parties' intentions. Since it is non-binding, it can be negotiated relatively quickly. The MOU would clearly define the project's performance and schedule, obligations, and the responsibilities of various parties, including who will secure financing. It would set performance guarantees, option payments, and specify termination provisions. The MOU would be mutually executed as a non-binding document, establishing firm principles for binding negotiations.

STRATEGY AND FACTORS TO CONSIDER:

Before strategy is developed, an EDO or Developer should consider several relevant goals of the community involvement process and the evaluation of the community.

The Steps in Financing Property:

Commercial real estate finance boils down to three "main events": money, property, and transactions in which money gets turned into property or property gets turned into money. Financing, including the acquisition, development, redevelopment, and construction of a site, is typically accomplished through securing temporary and permanent financing through commercial lending institutions. The typical, a developer obtains or contracts to purchase or lease a parcel of land and then prepares a development plan. The developer is expected to provide equity for a certain percentage of the project costs. Usually, a developer secures a letter of intent from an anchor tenant promising to locate in the building when the construction is completed. The letter of intent is then used to secure a long-term, fixed-interest rate mortgage from a long-term lender or institutional investor, such as an insurance company. With a long-term lending commitment in place, the developer will go to a commercial bank to obtain a short-term loan for construction or operating capital. Construction loans are drawn down as construction proceeds. Once construction is complete, long-term capital is used to pay off the construction loan. A developer may prearrange a budget for the project once it is completed and operating in a stable manner.

Community Development Block Grants (CDBGs) in the scheme of gap financing:

Community Development Block Grants (CDBGs) are another example of public support. These funds are available to communities of over 50,000 and can be used for land acquisition, land preparation, infrastructure development, and historic renovations. This scheme ties in with the HUD Section 108 loan scheme. A HUD Section 108 loan can be borrowed to a value five times greater than the annual value of a community's CDBG. The loan can have a payback period up to 20 years; the loans are backed by HUD. The HUD Brownfield Economic Development Initiative is a grant component of this scheme, which is designed for use in the same ways as the CDBG but must be dedicated to the development of brown fields.

Competitive Supply Analysis:

Competitive Supply Analysis should answer the question what other projects will compete with this project for market share, and how competitive will the subject project be visa-a-vis those projects in terms of quality of execution, price, timing, positioning, etc. Understanding existing real estate project performance is perhaps the most critical element in feasibility testing. Knowing whether and why projects have succeeded or not can yield keys to success or suggest that there are unforeseeable market challenges. It can also inform strategy planning and suggest competitive positioning, market niches, and inform feasible timing/ phasing. Supply analysis should address relevant information regarding current and future supply conditions, performance of existing projects, relevant projects, price/rent trends, historical sales/absorption rates, the nature of buyers/ renters/ tenants, future development pipeline, current market segmentation, dominant consumer preferences, location, quality, product trade-offs in the marketplace and, identification of niche market opportunities. The supply analysis will also determine the Primary Market Area - the area from which 80% of the demand at the subject site is likely to emanate, and the Competitive Market Area - the area in which the subject site will most actively compete for market share. There is no way to determine these factors without conducting first-person supply-side analyses. Note that for each land use - retail, residential, hospitality, office, and industrial - the PMA and CMA determination will be different and calculated differently.

Consultants are identified:

Consultants are identified from personal referrals, professional association directories, trade magazines that feature directories and advertisements, literature mailed to agencies, and on websites, such as WWW.iedconline.org. Most valuable is the professional contacts that one makes with other professionals in various activities. Many times it helps to ask other colleagues who they used and their level of satisfaction with a certain consultant.

Pre-qualified Candidate List:

Consultants are sometimes selected from a list of pre-qualified candidates. Many agencies maintain a list of consultants that are pre-qualified to perform certain functions. The agency chooses several to submit a statement on how they would approach the problem, interviews them, and selects the best qualified candidate. The request for qualifications (RFQ) is similar to selecting from a pre-qualified list, except that there is an official announcement and often a more rigorous selection procedure. The announcement, say in trade publications, would help the agency add to its existing pool of candidates. It is useful to have a stable of pre-qualified consultants who can move quickly. Again, time is money. EDOs should seek to review qualifications annually.

Public sector contract Approvals

Contracts and approvals with the public sector can range from simple to highly complex. For a single-family home, a single building permit may suffice. In large commercial projects, a number of permits and approvals may need to be signed before construction begins. These approvals vary by community, location of the property within the community, zoning overlays, and the extent of redevelopment relative to regulations. For example, a property that must be rezoned and subdivided will require more approvals than one that does not. Additional approvals take longer and increase uncertainty because there are more opportunities for the public sector and citizens to review and request development changes during the approval process.

Demand Analysis:

Demand Analysis determine how deep is the overall pool of customer (residents, tenants, etc.) for the subject project in the marketplace. It also addresses whether the market demand is growing or shrinking as well as if the needs of the market changing over time. Demand modeling addresses the issue of overall level of potential market support. It provides a quantitative, forward-looking context to the competitive market analysis and identifies underserved markets where pent-up demand may exist. It quantifies the total pool of potential consumers for a particular real estate asset (shopping center customers, office tenants, apartment renters, homebuyers, etc.) and determines the likely amount, type, and pace of market capture that a particular real estate project is likely to experience. Demand modeling varies by the type of land use. Residential demand modeling may take into account existing and potential future households and their housing preferences. Office demand modeling may be subject to accurate employment growth forecasts. Retail demand modeling often depends on not only household spending, but the extent to which retailers themselves are changing and growing and whether they could justify a new store location. In general, demand models attribute a majority of demand potential to the Primary Market Area and a subset of demand potential to a Secondary Market Area. Delineating these market areas is a function of primary research and market knowledge, and is the result of integrated analysis of all of the above factors. Demand analysis often includes "capture rates", which are often the art that drives significant portions of the analysis. However, capture rates are often subject to discussion and the result of some level of professional judgment.

Development Recommendations:

Development Recommendations assesses how do the above factors play against each other and inform recommendations as to product program, timing/phasing, implementation strategy, prices/rents, and product types. The development recommendations may be strategic in nature and outline a business plan, or may be static in nature and outline conditions that must be met before a project becomes viable. Recommendations may be geared towards the developer or the EDO, and often inform an understanding of the level of involvement required by the public sector or the expected outcome of a particular real estate development venture.

When the market for a particular project seems weak:

Economic development organizations may conduct feasibility studies and make them available to the developer or perspective developers. If conducted by the public sector, feasibility studies can help determine the most efficient use of public funds and help shape a project's direction before the private sector gets involved. This also save developers up-front costs. However, developers often conduct their own studies to assist them in the financing process as well as to shape development programs and trajectories.

EDOs Role in facilitating developments:

EDOs play a major role in facilitating development by addressing regulatory issues that potential developers must meet. By streamlining these processes and offering directed incentives, the development of a site can be achieved more quickly and with fewer obstacles.

Major economic factors to consider in an Economic and Demographic Analysis include:

Employment growth, location of employment hubs, major employers, major industries, Industries that are growing/ declining and economic development initiatives. Major demographic factors to consider include: household and population growth, income distribution, household age by income, household size and types, ownership and renter propensity, annual retail expenditures.

Exactions:

Exactions may take the form of mandatory dedications of land for roads, schools, or parks as a condition of plan approval, fees in lieu of mandatory dedication, water or sewer connection fees, and development impact fees. Impact fees are levied on building permits In help fund capital improvements that are not financed by subdivision exactions. An impact fee is a kind of exaction intended In compensate the municipality for off·site improvements made necessary by a development project like improvements In major roads, water, sewer and sometimes schools. Since impact fees are not levied for subdivision approval, they can be levied against redevelopment projects that do not require subdivision.

The structured Processes:

Facilitation: Facilitation is a "voluntary, informal, and flexible process of communication guided by a neutral professional. In addition to mediating conflicts, facilitators can identify stakeholders and issues, clarify roles and responsibilities guide parties to a common understanding, and build a partnership among groups and diverse interests. Facilitation aims to reduce conflict, ensure all stakeholders are heard, and formalize a community involvement process, and keep the project on track. Mediation: The next level of intensity in alternative dispute resolution is mediation. ''Mediation uses a neutral third party, typically with no decision-making authority to aid in negotiations that are stalled or particularly problematic. It is a voluntary process in which mediators can assume a variety of roles from facilitative, that is, assisting parties to develop their own solutions, to evaluative, meaning providing recommended settlement terms. In particular, mediation could be useful when parties are at an impasse or a resolution is needed in a short amount of time. Mediation is also appropriate when facilitation has proven to be unproductive or if the parties will need to work together after the dispute resolution process. Arbitration: When facilitation and mediation will not work, arbitration may be the best alternative. Arbitration can be binding or non-binding and involves a neutral third party who renders a decision at the end of the process. Binding arbitration is less formal than litigation, but decisions can be enforceable by law. Non-binding arbitration follows the same process as binding arbitration, but the arbitrator's decision is advisory. In both types of arbitration, the parties develop rules and procedures for the process and each side is obligated to follow them

(gap financing) New Markets Tax Credits in the scheme of gap financing:

For example, New Markets Tax Credits represent a major opportunity for development progress because there is a 39% tax credit over seven years against equity investments made in designated Community Development Entities (CDEs). By effectively reducing the cash outlay of investors over the life of the tax credits, they are more willing to either invest more or to invest in a project that would otherwise be considered too financially risky. All of the qualified equity investments must in tum be used by the CDE to provide loans or investments to businesses, commercial real estate projects, and other entities in low-income communities. For more information, see Chapter 12 on federal redevelopment tools.

The solicitation is the best opportunity to maximize the agency's influence in its relationship with the developer.

For example, the agency should require that all respondents complete a standard form so that proposals can be easily compared with others. The agency may require that the respondents commit to or comment on specific sensitive issues that will have to be resolved in negotiations. For example, if the subsidy depends on the public maintaining land ownership, state it in the RFP and request that developers comment. Prospective developers' willingness to adhere to the submission requirements and format will depend on the attractiveness of the development opportunity. For a very appealing opportunity, the agency should expect strict adherence. For less appealing opportunities, the agency may be lucky to get multiple responses. It should be noted that a development team may spend upwards of $100,000 to prepare a development proposal for a larger-scale urban project. Therefore, the public agency must be very sensitive to the cost and time commitment required to respond to an RFP.

Sole-source:

For the sole-source scenario, a consultant is selected without a formal competitive process. Sole sourcing mayor may not be legal, depending on local and state statutes. Some statutes specify a dollar amount over which the consulting assignment must be competitively bid. If federal funds are used, there must be a documented selection process. The advantage of sole sourcing is that the consultant can be retained quickly. For legal and political reasons, any agency retaining sole-source consultants should carefully document their reasons for doing so.

Process- (Format) Formal citizen committees and advisory groups:

Formal citizen committees and advisory groups are authorized and organized by local governments. These committees should represent a diversity of constituencies including the private sector and citizens. The primary responsibilities of these groups are to advise elected and appointed local officials on development issues and to provide practical recommendations. They do this by identifying the interests of stakeholders and residents; making the different points of view known to local decision-makers; and ensuring local concerns are considered in the planning and implementation processes.

What is the Contractor Negotiations & Public Approvals?

Getting all of the necessary pieces in place requires elaborate and often prolonged negotiations. Good intentions do not build real estate. Until there are legally binding commitments which specify who does what when, who owns what, and who pays whom, the project cannot go forward. Real estate development is always a lawyer intensive game.

Phase II: Market, Financial, and Political Feasibility:

If the initial project evaluation is favorable and site control is complete, the developer begins the more costly feasibility analysis process.

Introduction to gap financing:

It is not uncommon to have a gap that tends to fall between the equity contributed by the real estate development company or business and the amount of debt financing raised by the company. Financing gaps tend to occur in new developments if the current value of the project is worth less than the final value. What's even more pressing, there has been a trend in recent years towards leased development and speculative development projects requiring a larger portion of gap funding. When this occur, extra financing is needed to cover the cost of completing the project. At times, economic developers step in to explore less conventional methods to fill the gap.

Conflict Resolution:

Land use decisions can be emotionally charged for a community. Regardless of the level of a community's involvement, the redevelopment process has the potential to get stalled by disagreements and ongoing debates. If this happens, EDOs or some other interested party may wish to facilitate a process that assists stakeholders reach consensus. Often referred to as conflict resolution or alternative dispute resolution, these structured processes can provide viable alternatives to long, expensive court battles. The three main types of conflict resolution techniques are facilitation, mediation, and arbitration.

Neighborhood characteristics:

Neighborhood characteristics, such as the relative safety and the level of blight in an area, contribute to the potential success of a property. Distressed neighborhoods may be eligible for public funding targeted at eliminating blight. Therefore, a developer should consider public incentives for development that may be available due to a neighborhood's socioeconomic characteristics.

Consultants can provide a number of services and are often retained to complete feasibility analyses.

Not only do they bring a further measure of objectivity, but they can lend additional expertise that gives the analysis further credibility. The type of consultant chosen should reflect the problem that needs to be addressed. For example, if the EDO requires detailed architectural consultation or wants to know if a project is market feasible, it is wise to select architects and market feasibility consultants, respectively, who have strong private sector experience and are currently serving developers and investors. If on the other hand an EDO desires more of a policy approach to problem solving, then a consultant that specializes in economic development policy may be the right choice.

When working with a Consultant and Developer an EDO will enroll a selection panel:

Often in conducting a search for a consultant or a developer, an EDO will enroll a selection panel representing various stakeholders to review candidate qualifications, analyze project proposals, and recommend a preferred consultant. These selection panels come in all sizes and configurations. Members of the board of the EDO may perform this function, community leaders may sit on selection panels, or sometimes there is a panel with a host of diverse perspectives represented. In some cases the city council or town board becomes the selection panel. The critical issue in forming the selection panel is avoiding a lopsided panel in favor of the project and representative of only a narrow and limiting perspective. Homework needs to be done in providing in-depth education about the project, clear guidelines about the process, and decision making procedures. Selection panels need staff - that is, some person who can serve as staff to the panel: coordinating, arranging, communicating, etc. This requires a great deal of work .

Disposition & Development Agreement

Once an MOU is developed and approved by the board, a more detailed binding agreement, known as the disposition and development agreement, is drafted. This agreement refines previous agreements, and defines and establishes a schedule for subsequent contracts required for development. It should require a developer deposit that is forfeited if they are unable to obtain financing. A real estate attorney should assist in preparing this document.

Site Control (Phase I)

Once the developer is convinced that the project warrants serious due diligence, he or she takes steps to gain site control. Typically, a developer will secure an option contract on the property or have a purchased sale agreement with an adequate inspection period. The property owner agrees, for a fee, to reserve the property for the developer for a fixed amount of time while the developer conducts an in-depth feasibility analysis. This agreement is based on a stipulated sales price. If the feasibility studies indicate a viable project, the developer purchases the property.

One-Stop Assistance Center & Facilitated Approval Process:

One-Stop Business Assistance Center Often housed in an economic development department, a "one-stop shop" centralizes requirements and regulations so all of the information is in one place. This "one-stop-shop" may include staff or be set up as a resource center. Facilitated Approval Process Instead of bringing all of the information into one place, an economic development department may provide staff assistance to facilitate a developer through the process. This staff assistance will often serve as an advocate to ensure that the necessary approvals in various departments are

Performance-oriented Assistance Structured a Deals:

Performance-oriented Assistance with Initial Explicit Denomination and without Formal Denomination are performance subsidies meaning that a developer is able to receive public funds only to the extent that he or she generates them. The most common form of performance-oriented assistance is tax increment financing (TIF). A common mechanism used to structure performance-oriented assistance with initial explicit denomination transaction is to use a note to denominate the amount to be paid by the public agency to the developer. Payment of the note is contingent on, and limited to, some portion of the amount of revenue generated by the project. Performance-oriented Assistance without Formal Denomination transaction structure is similar to performance-oriented assistance with initial explicit denomination, with the exception that there are no formal denominations as part of the contract between the developer and the public sector. There is a growing movement toward performance-based partnerships between the public sector and the developer.

Site (Phase I)

Physical conditions, access, visibility, utilities, and parking are among a developer's first considerations when embarking on property development. In general, the more accessible a site is, the greater its market potential.

(gap financing) Constraints on gap financing options:

Public gap financing options are often specific to the type of development offered. Historic Tax Credits, for instance, are only available to developments involving historically significant sites. Public financing is often used in situations involving low income or minority communities, distressed economies, designated redevelopment areas, brownfields, and in projects where the goal is to diversify or strengthen the job base.

(gap financing) Pros and cons of real estate development Projects:

Real estate development projects can induce strong opinions in various segments of the community. Projects involving gap financing, increased vehicular traffic or noise, added lights or pollution, and similar changes, while adding to economic vitality, will nevertheless prompt public scrutiny, debate, and sometimes rancor. The economic developer's role as a mediator and facilitator in gap financing situations increases in fiscally tight economic conditions. Community involve lent in a project can influence how willing the community will be to financially support projects and can ultimately affect the success of the project. Community funding sources will require information on the use of funds and the benefit to the local community. Communities will try to ensure that their funds go towards increasing jobs and quality of life in the community, and that fund usage fits into the respective community's economic development strategic goals.

Location (Phase I)

Regional characteristics are an important consideration in the formal market analysis. Regional transportation systems and spending patterns can be discerned through field observations, discussions with local business owners, and a cursory analysis of the area before a formal feasibility study.

Zoning Permits:

Special uses: Uses allowed by zoning subject to special use permit: churches, theaters, etc. If limited in number, these uses are appropriate for a given zoning classification. Special exceptions: Uses that require special review, e.g. an electric-utility transformer in a residential neighborhood. Typically these are reviewed by a zoning board. Variances: Modifications In development standards (part of zoning ordinance that deals with measurable requirements for development - height limits, setbacks, seating capacity, etc.). Typically these are used In address unique situations related In lot size, shape or topography. Modification to a legal nonconforming use: A nonconforming use is a lot or improvement that was present prior to adoption of the zoning ordinance but doesn't conform In that ordinance. Modifications may be allowed if the modification doesn't impose any greater negative impact than it already does.m

(Financing from the Developer's Prospective) Financing Process-Introduction:

The availability of financing is one of the most critical factors in real estate development affecting what gets built, where, when, and by whom. Typically, the financing options available to developers are limited only by the economics of the project, which incorporates the attractiveness of the financing package to investors. The financial structure that the developer chooses can have a significant impact on the profitability of a project. Developers will try to secure financing that will maximize his or her expected rate of return on the project. In addition to injecting equity in a project, a developers must raise funds via loan obligations that will be repaid during the course of the project or at completion. The methods for structuring a publicly supported deal dictates the level of risk commonly more than the tools used. Quite often in publicly supported projects, gap financing is required when the financial resources necessary to complete a real estate development project do not fully cover the cost of undertaking the project. However, gap financing using public resources should take place only for deserving projects that have clear public value.

The key benefit of an EDO-sponsored feasibility analysis:

The key benefit of an EDO-sponsored feasibility analysis is in analyzing an opportunity that the development community might not analyze on their own, most likely because the asset may be in public hands, is in distressed private hands, or is in a location that is untested or considered risky.

Process:

The following aspects of the community involvement process will vary according to the strategy developed. 1. Publicity and Public Participation 2. Involvement of Key Leaders 3. Format

Funding source for gap financing

The funding required to fill the gap can be sourced in a number of different ways. For example, private investors or philanthropists or public organizations can contribute equity, tax credit schemes can be utilized, and government grants can provide funding. Different funding methods tend to have different restrictions on the usage of the acquired funds. Economic developers need to know if there will be conflicting requirements for funding bodies or if the requirements will restrict the project uses. A large number of funding sources may also make structuring a deal more time consuming and difficult to coordinate. Therefor, care must be taken to avoid conflicting requirements in loans. These requirements may hinder the progression of a real estate development project. The economic developer also needs to be able to coordinate the various funding sources because the various levels of government may want to occupy the same preference position on the gap mortgage or loan.

(Process) Involvement of Key Leaders:

The identification of participants should not be underestimated. Involving the right people in the process is instrumental in the success of a project..

The key to successful public-private partnerships :

The key to successful public-private partnerships is having a project that is mutually beneficial. In other words, for every incentive the public sector or redevelopment agency provides, the development must provide some benefit to the public sector or to the redevelopment agency. In some cases, practitioners have tied the level of assistance provided to the developer to the amount of benefits they provide to the community. Performance or recovery-based approaches to redevelopment assistance will not work with all redevelopment projects. There may be cases where front-end without guarantee assistance is the only meaningful assistance. An example is affordable housing projects, which are not income generating projects. In most cases, however, a guarantee or obligation of repayment from the developer to the agency can be structured into the partnership agreement.

Request for Proposal (RFP):

The most rigorous selection process is the RFP. It is recommended that the issuing agency distribute the RFP to as many groups or entities as possible. The consultant must submit a full proposal to be considered. The RFP typically is advertised, mailed to a list of possible consultants, and posted on the website. The RFP clearly explains the project specifications, discussed previously, that the agency prepares before retaining a consultant. In addition, there should be a description of the project and services required. The description of required services is very important because consultants will base their response to the proposal on that description. It should be clearly written and consistent with other parts of the RFP. In describing the proposed tasks, the RFP should provide enough detail, including the number of required meetings with agency officials, for the consultant to make realistic cost estimates. The RFP not only conveys information but also acts as a marketing tool. A good RFP should be well organized and written so that it encourages the consultant to invest time and money into a thoughtful response. The RFP should include instructions for submission. Such instructions should include the time, date, and location of submission, as well as submission requirements such as a cost proposal, and an outline of what should be provided in the consultant proposal. Agencies may wish to include budget information or set a budget. Alternatively, they may ask the consultant to propose a budget and make the consultant's cost one of the selection criteria. By excluding the budget, the agency encourages the consultant to price their response competitively. However, it is difficult to compare responses with wide variations in budget. Therefore, agencies may wish to provide a budget range or have a target budget in mind.

Public sector role in real estate development:

The public sector is always a partner, as all built structures are subject to building and zoning codes, and therefore public-sector involvement is needed. The government entity or economic development organization can also play a role in helping the developer obtain relevant government approvals and construction clearances. In addition, the public sector can serve as a link to citizens and neighborhoods impacted by development. Neighborhood acceptance has become a critical component of the public process.

The subject site analysis should consider the different needs of different land uses.

The subject site analysis should consider the different needs of different land uses. For example, single family housing may be more appealing to certain demographics if it is relatively secluded and certainly not proximate to major freeways or interstate highways due to noise and pollution concerns. However, big box retailers often prefer locations that are immediately adjacent to highway interchanges and want to be able to raise their signs above their properties high enough for drivers on the highway to see. Finally, the subject site analysis should seek to quantify the evaluation of relevant characteristics if at all possible, either by using readily-available data (such as traffic counts, distances to job centers, etc.) or qualitative rankings that are the product of professional judgment. This will allow the study to arrive at a quantitative SWOT analysis of the subject site and its development/redevelopment potential for different land uses.

Discrete methodologies:

There are discrete methodologies used to analyze the market for different land uses such as housing, retail, commercial office, industrial, hotel, entertainment/arts, and parks/recreation space. Each one of these methodologies can ultimately solve for quantity in acres or in square feet of (space consumed), market share (as a percentage of a broader area), and rents/prices (m dollars per square foot).

Structuring deals (gap financing):

There are many different funding sources available to the economic developer. The economic developer should be able to bring together a number of different gap financing strategies tailored to the specific real estate project that needs public assistance. No two projects will have the same funding structure and a number of techniques will be available to fill a funding gap. The project itself may be equity or debt financed-typically both-and from a number of sources, which will alter how the project finances itself in the long term. Care must be taken to ensure that the right funding options are selected for the project because the final structure of the financing may affect the final profitability and use of the development.

Overview of Financing:

There are very few developers who can complete a project using their own money. Most look to private sector lenders and equity investors for a major share of the project financing. Many developers are now fee-based which means they have little investment in the project and work to earn a fee at the conclusion of the project. Importantly, many developers will have some expertise in gap financing and will be able to help both the public and private sector partners understand where gap financing is required. The recent global financial crisis has put a dismal spin on access to financing. For example, the downward pressure on the credit ratings of certain municipalities and state governments has raised the cost of capital for development purposes. Moreover, the number of foreclosed properties on the market has increased the supply of available units whether it is residential, commercial or industrial. That being said, there are still viable deals to be made, but the economic development organization must efficiently garner its resources to "do a lot more with less."

Exactions and Impact Fees:

To fund capital improvements, impact fees and exactions are levied at the time of subdivision or other approval steps. These fees may be set by law or partially or fully negotiated. Developers also may be required to contribute land for public purposes such as schools, parks, or public facilities. Sometimes developers even make the capital improvements themselves. State courts often require that the exactions and impact fees pass a "nexus test", a test that determines whether the fee is reasonable and fair to cover the cost for public services or public improvements needed by the project.

Justification for gap financing:

Using public resources in this type of financing scheme should only take place for deserving projects that have a clear public value. Helping to finance a historic downtown building to stimulate other downtown reinvestment, or financing the clean-up of a contaminated site probably are in the public interest. Often the costs of preservation or environmental clean-up exceed "greenfield" development costs, so a little help from the community is valuable and cost-effective. Gap financing analysis, therefore, requires close scrutiny of market studies, pro-formas, cost estimates, revenue projections, and related factors to assure that the project (1) truly needs public dollar support and (2) furthers other private development that should not need, or need much less, gap financing now that a "market" has been re-established with public support.

Economic Demographic Analysis:

Via an economic and demographic analysis, a practitioner or developer can project the regional forecast for jobs and household growth and examine how much of that growth may impact the market conditions for a particular project. Accurately interpreting the volumes of economic and demographic data is important to understanding project viability.

Zoning:

Zoning is the regulation of use, shape, and bulk restrictions on development. Zoning approval can range from a few simple reviews In a complicated and time-consuming process. If current zoning permits the proposed development, then the development plans need In be reviewed to see that they meet development standards. Development standards are the part of the zoning code that deals with measurable constraints such as density, building heights, setbacks, and parking spaces. Density is often measured by floor area ratio (FAR). FAR is the ratio of gross floor area in a building In the Intal site size. For example, a 100,000 square foot vacant site is subject In a maximum 5 FAR. Therefore, the developer can build a maximum 500,000 sq. ft. building. Local regulations may allow some components, such as underground parking, to be omitted from FAR calculations.

Evaluation & Selection The responses to the RFP should be evaluated against criteria weighted by importance. Criteria typically include the following:

• Appropriateness of project concept; • Benefits to the community in terms of economic development objectives; • Financial risk and return to the development agency; • Knowledge and experience with similar projects; • Financial strength to consummate the proposed deal; • Design appeal (If applicable); • Thoroughness, creativity, and clarity of response.

Recommendations that come out of Market Feasibility include:

• "Highest and Best" land use(s) - What land uses provide the greatest level of economic value today and tomorrow? • Orientation and target consumer - Who is the customer for this project, and what are their needs? • Market Positioning - How should this project be positioned in the marketplace to differentiate it from the competition? • Pricing - What are the achievable rents and/ or prices that this project can achieve, and do these prices justify the cost of construction? • Construction Type - What type of construction n (wood frame, steel concrete, etc.) do the prices justify, based on financial modeling and do these construction types deliver the type of project as envisioned? • Features and amenities - What features and amenities must this project deliver in order to be successful/? How do these features and amenities impact the overall construction cost or management cost of the project? • Absorption/Sales - How quickly will this project sell in the marketplace, and will this time period be in·line with the type of financing that it has secured? • Profitability - Does the developer or EDO recognizing a profit in the venture, and if not, what incentive must be offered in order to generate profit?

Process- (Format) Community Involvement Strategy:

• As part of a community involvement strategy, the EDO should consider whether or not to include a media relations campaign. If the project is highly visible and community consensus is crucial, the media should be included in the process. Information provided to the media should be consistent and timely. • Finally, the timing of involvement should be included in the community involvement strategy. In some instances, early involvement by the community is an important element for success. Again, this helps to build consensus and the community's capacity for involvement. However, the timing of involvement will depend on the community's characteristics and the goals for the process.

Meetings

• Choose a convenient location for all participants, preferably transit and handicapped accessible. Ideally the meeting is within or adjacent to the "study area." A downtown meeting at city hall or the chamber of commerce for a neighborhood economic development strategy will suggest that policy makers and planners are not all that serious. Make sure that the room reserved for the meeting is an appropriate size (not too big or too small) and set up appropriately. Community meetings are often held at YMCAs, schools, community centers, and other rooms available for nonprofit/community use. If necessary, meeting organizers should find out if a sign language or other foreign language interpreter is needed. • Promote the meeting as targeted as possible. Direct invitations to the most affected businesses and residents should be mailed. Announcement should appear in general circulation newsletters. The EDO website and other public web sites should announce a general invitation. Even posters in the windows of merchants can assure maximum participation. • Provide written material and graphics (if appropriate) to participants before the meeting. Participants need time to reflect on information and should not be expected to comment on material they have not reviewed. At the meeting, the written material and an agenda should be provided. In lieu of pre-meeting information, key maps and charts should be posted conveniently so that registrants can browse and talk among themselves informally before the meeting starts. Scheduling a two-hour meeting and allowing the first 30 minutes for browsing can be informative and comforting to the crowd. • Take notes and ensure that notes taken during small group activities are collected at the end of the meeting. Additionally, there should be a sign-in sheet requesting the name, address, telephone number, and e-mail address of all participants. If the focus of the meeting is a "study area" (downtown, neighborhood, etc.), registrants should be asked to circle their homes or businesses on a large map or aerial photo in order to illustrate the distribution of representation at the meeting. • Provide food and refreshments. This is especially true if the meeting is in the early evening or early morning. This allows participants to focus on tasks - rather than their hunger - and conveys a message that their presence is valued. Announce ahead of time that refreshments/continental breakfast/light lunch will be available. Food draws greater attendance. • Attend the meeting. The person(s) responsible for the project or plan should be there to listen to participants, receive feedback on proposals, and comment on the feasibility of suggestions. However, they should act as convener and host rather than an authority. For instance, they should not feel as though they must answer every question posed at the meeting. If the participants are to be drawn into the process, they must feel as though their opinions and suggestions are taken seriously and will be used in the process. Likewise, public officials representing the area should attend if at all possible. They, too, should not act like authorities, but they will learn an immense amount about the relevant issues in a manner which is not readily translatable through reports or consultant presentations. • Support staff should attend the meeting As noted above, staff should not feel as though they must provide answers to every issue discussed. However, staff can provide answers to technical questions to enable informed discussions.

The RFP should include a list of submission requirements (an RFP outline is included below):

• Corporate qualifications, information on similar projects; • Project team organization, individual resumes; • Developer understanding and approach; • Proposed development program and commitments; • Public-sector responsibilities; • Private-sector responsibilities; • Conceptual site plan and drawings; • Capital costs and financial deal (provide a standard form); • Financial credentials.

The market analysis process varies by land use (office, industrial, retail, etc.). However, in general it should follow some basic guidelines:

• Define the market area (or primary and secondary market areas). • Evaluate the supply of current and future competitive properties and tenants. • Evaluate area market demand from customers for retail and housing uses and for tenants for all land uses. • Assess the expected demand and projected absorption rate for the market area. • Compare the project with similar projects on a cost or rental-per-square foot basis, taking into account various site factors, such as access, visibility, physical or perceptual boundaries, vacancies, amenities, design considerations, etc. • Estimate the overall market capture, absorption, and sales prices or lease rates of the proposed project. • Identify amenities and characteristics of the subject property that give it a competitive edge in the market (These can be refined later).

Project Concept & Objective

• First, the issuing agency must formulate the project concept. This effort includes project goals and objectives, market analysis, conceptual design, financial analysis and funding options. The concept must also describe the expected relationship of the city and EDO with the developer and with the manager of the site, if different than the developer. In deciding the lead local EDO, consideration should be given to keeping certain developer information confidential. • The EDO board and its staff should establish policies about prospective developer contact with the EDO. Developers and related parties should have to contact the EDO staff prior to contacting its board members. This prevents undermining the authority of the staff. Many EDOs stipulate that answers to individual questions are provided to all prospective developers. Procedures should be specified in the RFP. • The lead agency may also want to include a local developer in the development and/or review of the RFP or hold a developer workshop to preview the RFP concept and solicit feedback. Many times, communities put together proposals that may look good on paper but in fact neither support the market nor prove to be economically feasible.

If the decision is made to hire a consultant, the development agency should c1early identify the problem and determine what the consultant's end product should be. Before approaching a consultant, the agency should define the following:

• Goals and objectives of the consulting product; • Process for finding and selecting consultants • Problems, challenges, and issues that need consulting support; • Technical, administrative and political constraints; • Role of the agency in the consulting effort; • Budget and schedule for consulting services; • Work tasks to be accomplished;

STRATEGY AND FACTORS TO CONSIDER (Continue) :

• In active communities with a solid organizational infrastructure, it is important to involve the community from the beginning and include representation from all of the stakeholder groups in an inclusive and ongoing process. For other communities, it may be sufficient to work with a few key strategic organizations for a limited time (Area History & Culture). • The nature of the development and the extent of regulatory changes affect the amount of necessary community involvement. The reuse of a small building in a commercial strip may require little community input. In contrast, new construction of a large commercial space near a residential neighborhood may require a long, intense process (Project size). • Again, after identifying stakeholders, look for capable community leaders who can make a time commitment. They should become leaders and representatives for the plan (Leadership). • The process for plan adoption is also a factor. Occasionally, there is soft approval where the city council or a board approves a plan without legal implications. However, potential contentious changes such as the formation of a tax-increment financing (TIF) districts, blight declarations, re-zoning and variances have a greater impact on the community and may require more public involvement in the process (Complexity).

(Process) In regards to Publicity and Public Participation:

• In regards to publicity and public participation, the process could be open to the general public or limited to an invited group of representatives from key organizations. The participants should reflect the culture of the community as well as the task. • For instance, in a community that requires broad participation before decisions are made, the process should be open to the general public and widely advertised using posters, e-mail, web sites, newspapers, civic organizations, churches, and newsletters. • In a community that relies on organizations or public officials to represent their interests, less publicity might be appropriate. In this type of community, officials and representatives from key organizations should be identified and invited to participate. Involvement of key leaders is significant.

Meetings Build Consensus- Use consensus-building skills:

• Listen to one another; • Define an agenda; ask for comments on a draft agenda; • Encourage the participation of everyone; • Respect all opinions; • Identify and work towards common goals; • Vote only as a last resort.

The RFP should require the following from the consultant:

• Listing of the tasks the consultant is assuming; • Work plan; • Specific responsibilities of consultant's staff; • Detailed timeline and list of deliverables; • Corporate capabilities statement and resume of all personnel working on the project; • List of similar recent projects, information of persons who can testify to the consultant's expertise; • Executive summaries or complete reports from projects that the consultant has recently completed.

Solicitation Document The solicitation document, with incentives (If relevant), should be approved prior to issuing the RFP. An RFP should include most or all of the following:

• Project concept and background: Type of development, how it "fits" with the rest of the area; • Market study or briefer market summary; • Suggested deal structure including public funding if appropriate; • Operational relationship; • Preliminary financial analysis (optional); • Schedule for project and developer selection; • Evaluation criteria and selection process; • Rules for contacting agency and political leadership; • Submission requirements; • Confidentiality statement. The responding developers should be given enough latitude to respond creatively. That is, the RFP should not be so rigid that it stifles conceptual novelty. It should demonstrate a way for the developer to participate and realize a return on investment and encourage the developer to respond with an even better way to participate and realize public and private objectives.

Marketing the Solicitation Document The solicitation document is sent to a list of developers to respond. This list can be compiled by drawing on various sources.

• Regional real estate journals; • Local commercial leasing guides; • Discussions with fellow professionals; • National organization annual directories (e.g., IEDC, Urban Land Institute, National Association of Industrial and Office Properties, International Council of Shopping Centers, state and local builders associations); • Responses to advertising in local and perhaps national newspapers; • Internet / e-marketing services.

There are a number of options for EDOs to successfully involve the community. Here is a short list of outlets that will help generate community support and involvement:

• Task forces, ''blue ribbon" panels, citizen advisory committees; • Institutions with community tradition acceptance; • Churches, CDCS, neighborhood associations; • Chambers of commerce and other business groups; • Cable access television; • Community newsletters and magazines; • Community meetings; • Charities;

Two components comprise an initial assessment of development potential:

• The first is the site itself: its physical characteristics, access, and basic infrastructure. The other component is the location. This refers to the site's relative spatial position within the local context, including the convenience to customers, goods and services, transportation thoroughfares, and mass transit. • Site and location are particularly important in real estate because they are unique assets. A building is fixed in its location, and therefore its value is subject to its surroundings. For example, a building well-suited for retail conversion may be located in an area with poor transportation access.

Process- In regards to the Format:

• The format should be predicated on the strategy selected for the community involvement process. It might include large structured public dialogues, small-targeted meetings, or formal citizen advisory committees. The participants should reflect the culture of the community as well as the task. • A large public meeting can be made more manageable by breaking into small work groups during the meeting. One way to organize this type of meeting is to divide it into three parts: o Plenary session with a welcome, general overview of project, and a description of the task(s) for the meeting; o Break-out sessions where participants work on a specific task in small groups, often with a facilitator; o Plenary session where the break-out groups report their results to the full group. It may be useful to use impartial facilitators for the break-out and final plenary sessions. Facilitators can help manage the process, leaving those involved to concentrate on the issues at hand. • Small, targeted meetings would be appropriate for communities with strong representative organizations. Representatives from all key organizations in the community should be personally invited to attend. Ideally, attendees should have the authority to speak for their organizations. An impartial facilitator might be used at this type of meeting; however, it may be more effective for a well-respected community leader to act as facilitator. Again, this depends on the community and the goals for the process.

Phase I: PREDEVELOPMENT (Site, Location, and Site Control):

• The outline of the real property development process bears a strong resemblance to that of a business plan; in essence, it is a business plan for an endeavor, which has the potential to be very profitable or very costly. • Most developers go through the planning process twice for a project. The first pass is a broad-brush attempt to find major problems with the project; if found, the project is likely to be scrapped. • During predevelopment, the developer or business considers possible sites. Alternately, they have a site and they are considering possible building sizes and uses. In discussions with prospective tenants, owners, lenders, partners, consultants, and government staff, the developer does a "quick and dirty" analysis of the project to conceptualize potential fatal flaws. If a project looks favorable, the developer will (if they have not already done so) secure site control.

Political Feasibility (Phase II) INTRODUCTION/OVERVIEW:

• The purpose of political feasibility is to determine if the public sector will approve a viable project in a reasonable amount of time which is the benchmark of potential support or opposition. For each development project or plan, EDOs should plan for community involvement because it is an important part of the development process for various reasons. • While a proposed project may meet market and financial tests, it is not truly feasible unless it has political and community support. Consequently, a community involvement process should include the stakeholders, public regulators, and key elected and appointed officials. • Prior to embarking on a community involvement Process, an economic development organization should develop a community involvement strategy that takes into consideration the goals of the process and a valuation of the community. • Ultimately, the process will vary according to the community involvement strategy developed. In developing a strategy, there are several key factors to consider germane to the process and community. Most community involvement processes include meetings. • The type of meeting will deviate according to the strategy while some aspects remain constant. The project or plan will help define the goals, form, participants, and process of the involvement.

For this phase, they address three feasibility concerns:

• There must be a sufficient market demand; that is, market feasibility. • It must provide a sufficient return on investment; that is, financial feasibility. • It must be approved by the public sector; that is, political feasibility.

Selection criteria include the consultant's:

• Understanding of the project; • Approach to the project; • Experience with similar assignments; • Staff qualifications for the project; • Clarity of proposal; • References and contacts from prior project engagements.

An analysis of the neighborhood should include the following questions:

• What is the perception versus actual crime levels in the area? Have they gone up or down in the recent past? • Has the neighborhood implemented crime-prevention tactics, such as better lighting, a neighborhood watch, and increased police patrolling? • Does it look like there might be an emerging residential community? • What is the average income level and general spending habits of the residents? Is there a healthy consumer base and labor supply? • What is the character of adjacent properties? Are there many vacant buildings in the area? Have they been purchased recently? Are buildings being renovated or have rehabilitation potential? • How are the aesthetics? Is the area clean? • What other businesses are in the neighborhood? • How are existing neighborhood businesses performing? • What types of units are available for rent and at what cost? Is there an unmet demand for a particular type of rental space?

The following are questions to consider when looking at the site:

• What is the topography and shape? How well will the site accommodate development or reuse? • How does the site "read" from the road? Is it easily visible from important high-traffic corridors? How does it look from the primary approach route? • Do nearby roads allow for easy access to the site? • How accessible is the site for private vehicles? Pedestrians? Mass transit? Truck and rail service? • What is the lot size? Is it adequate to support parking? If not, is affordable parking available? • Are utilities and public services (police, fire, etc.) affordable and adequate?

While a thorough market analysis is use-specific, there are some general questions that guide a brief analysis of regional characteristics:

• What kinds of businesses seem to be doing well in the neighborhood? Do they have plans for expansion? • What income brackets characterize local neighborhoods? • What is the regional transportation infrastructure system like? Does it provide ready access to the site and thereby increase access to a larger market? • What are the commercial traffic patterns among principal and supporting activities? • Is there access to mass transit? What is the level of usage by day, week, and hour? • What are private vehicular traffic patterns like? Where are the major thoroughfares? Are there any planned improvements or new routes? • Is there heavy-truck or rail service? What kind of uses could this site serve? • What is the size and location of the nearest airport? • How is transportation access to relevant support services, suppliers and labor? How long does it take to travel to the site from their locations?

Ultimately the market study should provides a basis for determining the highest and best use of the development site. In the end, a market analysis on the subject site should address the following questions:

• What products are appropriate for this market? • What will tomorrow's customer demand? • What is the appropriate timing and phasing for this project? • What is the appropriate quantity and mix of uses for this project given the market? • Are there financial considerations that the market alone will not bear? • How can this project be best-positioned in the competitive marketplace?

Selecting a Developer:

• When an EDO wants to develop a piece of property for the private market, it usually contracts for those services with a private-sector developer. This process of solicitation and selecting a developer is often initiated through a request for qualifications (RFQ) or request for proposals (RFP). • An EDO may first issue an RFQ, followed by a RFP. RFQs are used to do an initial evaluation to create a smaller pool of potential developers to respond to an RFP. • Submission requirements are usually limited to a letter stating developer's expression of interests, corporate qualifications, examples of past projects, references, and resumes. • After developer make it past the first cut, the short-list developers are more likely to provide a serious response to the more costly, time-consuming RFP. • The RFP requires the developer to submit a detailed response on how they will finance, develop and operate the project, and the roles and responsibilities of the public and private sector parties. • In some cases, an EDO may sole-source (no bidding) development. • Often, RFPs are issued for publicly owned property. However, in some cases, an RFP is created for privately owned property. The EDO may request development proposals without having ownership of all of the necessary parcels. In these situations, if accepted, issues related to property acquisition should be addressed prior to issuing the RFP. Sometimes an RFP is issued for unspecified properties. Here, the agency specifies the subsidy and desired development, opening competition to multiple sites within a target area. • Developer RFPs are a means of introducing competition in a development project. Ideally, competition ensures that the developer who is eventually chosen has the skills and expertise necessary to bring a project to fruition. Competition also allows a municipality to maintain some control over the project while leveraging public investment. • An agency should never issue an RFP without first gaining community consensus on the project's broad concept and objectives. The creation of the RFP solicitation document often helps clarify issues and build consensus. • An agency should also be aware of state-competitive bidding laws. Laws may require that certain aspects of the RFP process, such as land conveyance, be competitively bid. The RFP may be structured to satisfy the bid requirements. Alternatively, the agency could set legitimate conditions upon which the selected developer wins the competitive bid. • An RFP is a marketing tool and should be prepared as such. It introduces the site concept and opens the opportunity to the development community. It should clearly describe the development opportunity, define development parameters, and describe the development agency's objectives.

In addition, it is important to go beyond merely reporting data and to instead understand the big picture and connections between the data points. Questions to consider include:

• Where are we located in the economic cycle? • How does the local economic cycle compare with the national economic cycle? • Is current growth supported by solid fundamentals? • How are demographics shifting nationally and locally? • Where is growth occurring? • Where is the geographical path of growth in this region? Economics and demographics will ultimately make or break a project's future. Therefore, a forward-looking approach is critical to an accurate analysis of economic and demographic factors. Being able to project forward trends in economics and demographics is far more important to the real estate project than simply examining historical data. For instance, changing consumer preferences for communities that are walkable or transit-oriented may mean that tomorrow's demand may be different from yesterday's demand.