How to decide if Development is for me?

Hey all for those in development or who have been in the development side of things before.. how did you ultimately decide that was where you wanted to be or didn’t want to be and how can one decide if that is the right path for them?

 
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I graduated with a finance degree and saw my father working and having a piece of a CRE PE firm. I thought this was what I wanted to get into. I thought that development was the sexy side of the business and that you'd be able to see a deal from start to finish, literally from the ground up. At first, I was very satisfied working in the industry as I was doing some cool development stuff and attending important architectural meetings and city meetings. I quickly realized that this side of the business was less of what I wanted to do with a finance background. (I was also working for a smaller family office/developer, in a secondary market).

You need to see exactly what you will be doing with the firm. My job turned much into project management and it just wasn't something that suited my talents. Therefore, I have decided to move on to an acquisitions/investment role. Let me know if you want some more insight.

 
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Really the only way to find out if you like it is to do it, or on some level, witness it.

You can also practice by babysitting a group of toddlers if at least five times a day you hire someone to light the daycare center ablaze and you only have a telephone to extinguish the flames.

Commercial Real Estate Developer
 

Glad you posted this. This is something I have been wondering as well. For whatever reason I have this built up idea in my head that development is the holy grail of real estate. Similar to how people in investment banking view private equity.

 

What can make development the holy grail is the opportunity it provides to impress equity providers. If you are a DM that consistently delivers projects on time without blowing the budget they will love you. Impress them enough, and when you decide to go independent you should have no issue getting them to write checks for you.

I’m on the acquisitions side, but I deal with sponsors that will agree to do a deal simply because certain developers are running the project.

 
press107:
Glad you posted this. This is something I have been wondering as well. For whatever reason I have this built up idea in my head that development is the holy grail of real estate. Similar to how people in investment banking view private equity.

Better to think of it as a endgame, not the endgame. To use your example, you can go from IB to PE, or HF, or VC, etc. There's nothing inherently better about being in Private Equity vs. a Hedge Fund vs. a Venture Capital firm - they just do different things.

Similarly, there's nothing inherently better about being a developer vs. REPE vs. a REIT vs. a family office, etc. Anything on the ownership side is the holy grail. The differences are just personalty, focus, business model, etc. not "prestige" or anything.

Commercial Real Estate Developer
 

Would you care to speak to those personality differences (here or your own post perhaps)? I was under the impression that development was suited for more of the entrepreneurial type and didn't really care about background as long you have a track record. I've also always viewed development as the best niche in CRE to eventually start your own firm.

This may be wrong but I have always thought that REPE,REIT are more institutionalized and care more about background, and pedigree.

 

Used to be in commercial brokerage, was making great money but already bored going to work at 24. Every deal felt like minor variations of the same 10 steps.

Saw that many of our local developer clients--small shops with few staff--seemed to have 4-5 jobs working as the asset manager, development manager, managing an architect/design, contract/lawyer interface all in one.

I personally knew development was my jam working through my first mixed-use ground up deal. It was just so clear that the entire team from the analyst to the MD were navigating novel issues for the first time...trying to understand a new entitlement process, an approach to a new environmental issue, problems managing a new custom window system and procurement challenges, figuring out how to price office/retail space in a new submarket...where else is a 50 year old MD learning on the job every project? Not many places.

 

I'm at a hybrid type shop and can say without a doubt that the development deals I work on are way more fun that the more traditional acquisitions deals. As the poster above alluded to, every cash flowing deal feels like the same: underwrite it, LOI, bring in financing, DD, close, hand off to asset management. The only fun part is figuring out the business plan and negotiating the capital structure (and we only do value-add type deals - can't imagine how repetitive core investments must get).

In development you do all that plus the additional layer of entitlement/design/construction/marketing. It just feels like there's way more depth to every deal. The downside is that the deals take way longer and you pivot from one to the next less frequently. I think a happy medium would be being at an LP type shop that pursues development opportunities and stays rather involved in the execution - it would be nice to get out of the day to day weeds, but I would miss being able to drive the design process.

 

I’m going to put it as simple as this.

I don’t take any sides, but at the end of the day, the building you developed will be there for decades - as tangible as it can get. Models come and go, but to be able to say that you developed that particular building is something special.

IMO, I love modeling, which is what I do now, but hopefully one day, I can utilize what I learned to actually construct something. Seems fullfiling putting all the pieces together.

 

What does a Development Analyst do if projects are currently in development? Do they assist the Dev Managers on maintaining models?

Do they assist in sourcing other land opportunities and modeling our feasibility studies? I guess I’m just wondering if it’s better to start out as an analyst or in an APM type role. I guess it depends on the firm?

 

depends on the shop. in my past experience as an analyst at a smaller shop it was everything from updating the financial model, managing pay reqs, updating project presentation decks for leasing efforts, attending design meetings, auditing/working through construction/schedule estimates, negotiating consultant contracts, helping work through legal docs (AIA agreements, PSAs, etc.), putting together presentations for zoning/public hearings..

 

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