How do you define “Development?”

I know some folks who call themselves developers. They have great architectural skills, good construction knowledge, and no transactions experience, operational experience, or financing experience. The will not take entitlement risk.

Their target project is typically a heavy value add MF; essentially renovating/repositioning around 50% of the physical asset.

Is this development?

 

I'm my opinion that is not development. They're doing value add MF. A developer is someone who takes on the entitlement risk and is doing some sort of zoning change or official plan amendment.

 

There are basically two types of development: speculative (for ownership / sale purposes) or build-to-suit (for a specific tenant)

Then there are a couple of methods: ground-up development (greenfield - developing an empty plot of land for new use), re-development (brownfield - developing existing properties for re-use) and re-positioning (renovation - upgrading or tweaking existing properties for similar uses).  

 
CapRateSlapper

Tell me you work for a lender without telling me you work for a lender...

I'm a developer.  Lenders don't know the first fucking thing about risk, because they don't take any.

Until the money is coming out of your pocket, it's not risk.

 
Funniest

There's a couple of easy tests to see if you're a developer. 

  1. Do you tell experts in their field what to do even though they know more about what they're doing than you do?
  2. Do you show up to a job site in business attire thoroughly unsuited for the job site?
  3. Are you financially responsible for everyone else's mistakes? 
  4. Do you make up at least half of the financial metrics in the creation of 8- and 9-digit business ventures? 
  5. Do you "slap a cap rate" on a decision to gauge its financial implications? 
  6. Do you have to explain to friends and family that you can't really sell or give them advice on selling their single family home? 
  7. Do you swing between feeling eternally undercompensated to wondering how you make so much money doing what you do? 

If the answer to these questions is yes, you may be a developer. If the answer to some of them is no, but you can pencil whip them to a yes to further your purpose, you are definitely a developer. 

Commercial Real Estate Developer
 
CRE

There's a couple of easy tests to see if you're a developer. 

  1. Do you show up to a job site in business attire thoroughly unsuited for the job site?
  2. Are you financially responsible for everyone else's mistakes?  
  3. Do you swing between feeling eternally undercompensated to wondering how you make so much money doing what you do? 

@CRE, these are my personal favs... great answer!  

 
Most Helpful

This sounds like another vein of the popular.... "Is it REPE" debates... but at least this one is intellectually interesting. 

I remember listening to an urban developer (does legit downtown office/apartment mid to high rises type) speak to a university event I attended a long time ago... he gave an answer to a "how do I become a developer" type question like this (heavily paraphrased and twisted, as this was like 10 years ago...).... His answer "if you really want to be a developer, buy an old house, rehab it, and congrats you're a developer!" (side note, I'm pretty sure this how his career started like a decade or two prior). 

So, if you are converting and changing the nature/characteristic of real property... congrats... it's development (sure you can call it renovations/rehabbing/whatever). Why stress beyond this? Personally, I'd say buying raw land, getting entitled, and then selling/sub-dividing (i.e. doing zero physical work, not even knocking down a single tree..) is 100% development. Buying a 100% entitled, fully planned with stamped/approved 100% CDs (fuck it... let's say say 100% pre-leased).. site/parcel and then proceeding to do all the construction work is... 100% development. I really don't see the big distinction (certainly not with entitlements being the determining factor).

This is not some magical definition, so, do as you please! 

 
redever

This sounds like another vein of the popular.... "Is it REPE" debates... but at least this one is intellectually interesting. 

I remember listening to an urban developer (does legit downtown office/apartment mid to high rises type) speak to a university event I attended a long time ago... he gave an answer to a "how do I become a developer" type question like this (heavily paraphrased and twisted, as this was like 10 years ago...).... His answer "if you really want to be a developer, buy an old house, rehab it, and congrats you're a developer!" (side note, I'm pretty sure this how his career started like a decade or two prior). 

So, if you are converting and changing the nature/characteristic of real property... congrats... it's development (sure you can call it renovations/rehabbing/whatever). Why stress beyond this? Personally, I'd say buying raw land, getting entitled, and then selling/sub-dividing (i.e. doing zero physical work, not even knocking down a single tree..) is 100% development. Buying a 100% entitled, fully planned with stamped/approved 100% CDs (fuck it... let's say say 100% pre-leased).. site/parcel and then proceeding to do all the construction work is... 100% development. I really don't see the big distinction (certainly not with entitlements being the determining factor).

This is not some magical definition, so, do as you please! 

I mean, just doing the construction means your a general contractor.   I'd argue there has to be some distinction, or else why have any at all?  Ever looked at a set of architectural plans and asked someone to flip the kitchen and the bathroom?  You're an architect!

 

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