Economy and Government and Real Estate & Retail

VOICES FROM THE INDUSTRY: So, you really want to be a real estate developer ...

August 13, 2007

Real estate developers have a secret: We're not evil. OK ... we're not all evil

This runs contrary to the perception that some people seem determined to promote. They opine that "good development" is an oxymoron.

Development is a humbling business. It turns out that a lot of people know a lot more about the right way to do development than we do, and they're not shy about letting us and everyone else know this, in public meetings, private conversations, newspaper articles, letters to the editor, whatever.

So, to offer a little enlightenment for all of you "I could do that better" would-be developers out there, I'm printing here the rules those of us already in the game have to consider every day.

Rule 1: Assess the needs

A successful development addresses needs in the marketplace. What products and services are under-represented and where? These needs constantly shift as social changes and changes in infrastructure create new community needs.

If developers pay attention, they see opportunities that could meet those perceived needs. As a result, they spend a lot of time looking at maps and asking the question, "What isn't there?" They don't try to put development in a place it is unwanted or unneeded, because it would likely fail.

Rule 2: Work with government

A good development is not just the product of a developer's desires and marketplace needs, but also of municipal directives. Begin working with the municipality early in the process, not just to learn about zoning laws and planning visions, but to hear what elected or appointed officials actually want for their community. Very few development proposals get very far without some sort of official encouragement.

Rule 3: Talk to the neighbors

You can't expect a development plan to succeed if you don't know the people, organizations, municipalities and other stakeholders that will be affected by your development. So, learn about them.

This doesn't mean just doing data-based research. This means talking to people. Asking them what they like about the area, what makes it special, and what they'd like to change or what they'd like not to change. It means answering questions, honestly and candidly.

Rule 4: Communicate benefits

A lot of people have knee-jerk negative reactions to development. For example, we all have a little NIMBY (Not In My Back Yard) in us. Fear of the unknown is a powerful thing.

But people with these reactions are overlooking one critical fact: The homes they live in, their workplaces, their favorite shopping centers, the restaurants they like, even that nature center they take kids to, were all "developed" by someone.

To counter this, talk about the benefits you'll deliver through your development. Describe the amenities and infrastructure upgrades you'll deliver to improve the quality of life in the area. Explain how you'll add to economic activity, the tax base and jobs. And realize that you will not please everyone.

Back up your claims with facts. For example, on a residential project, let people know that, according to a National Association of Home Builders study, in 2007 the Indianapolis-area home-construction industry is expected to generate almost $500 million in economic activity and $40 million in local taxes while creating 9,515 jobs.

The people who live in the homes developed this year will, on an annual basis, generate about $118 million in economic activity and $30 million in taxes while supporting the jobs of another 2,500 people.

Rule 5: Anticipate objections,

and consider the source

There is usually a direct relationship between how bad a development is perceived to be and how close it is to one's residence (again: NIMBY). When you meet resistance, try to understand the source. Is there a key benefit you could offer to help people appreciate the good in your plan?

As noted above, most people automatically resist development. They may make sweeping statements like, "Development is bad," But what they mean is "Development I don't like is bad," because defining bad development is a subjective process. They are usually quick to qualify their opposition, "We're not really opposed to development; we just need the right kind of development."

However, the right kind of development is rarely available for comparison, or exists in resort communities like Seaside, Fla., or Hilton Head, S.C. In other words, not in a place with the same geographic, demographic or other factors directly comparable to central Indiana.

If the opponents have a good point, respond by addressing it directly, either by making changes to your plan or explaining why such changes are not possible, and what alternatives you can offer to respond to their concerns.

In other words, listen, even if you don't like what you hear.

Rule 6: Follow through

None of the above steps will do any good if you say one thing and do another. Be clear about your plan. Be honest about how you'll address concerns. And then do what you say you're going to do.

Rule 7: Make projects profitable.

Do you really want to do good? Run a healthy, thriving enterprise that makes enough money to pay people well, provide benefits, pay taxes and support local philanthropies. Because one of the best ways you can help a community is by employing its people, supporting the economy and adding to the tax base.

Well-intentioned developers who fail to make an economically viable model for their business practices don't live to fight another day.

If you remain undeterred by reading this, and want to get in the real estate development game, remember that anyone can play so long as you follow the rules.
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