RealEstateDevelopment.Rider.2004

RealEstateDevelopment.Rider.2004 - Real Estate Development...

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Real Estate Development Professor Brian Rider Spring 2004 Rider’s contact info brider@lumbersmensinv.com brider@sbcglobal.net brider@guarantygroup.com I. INTRODUCTION A. Review of Course and Class Resources 1. Demographics a. Driving Force of Real Estate Development b. In order to house people and give them places to buy groceries, we have to build a lot of buildings 2. Reasons for owning real estate a. Profit Motive – builders build for profit, 2 kinds of builders i. Investment builders – plan on owning for life of property ii. Merchant builders – build, get running and sell it b. Diversification of property and assets c. Inflation protection – real estate is hard asset; returns (rents) are likely to increase with inflation, unlike bonds d. Tax benefits i. Interest Deduction ii. Depreciation Deduction e. Users needs – i.e. Dell when they need a warehouse 3. Who does real estate development? a. Users – small part b. Entrepreneurs – do most; are local or national in scope c. Institutions – i.e. REITs – publicly owned d. Governments – generally infrastructure type-things i. Roads ii. Schools iii. Etc. 4. Development is team sport a. Tenant-users b. Construction Lenders – generally local banks c. Permanent lenders i. Insurance companies ii. Pensions iii. 401(k)’s iv. University endowments d. Title companies e. Lawyer – generally the quarterback of this deal 5. Areas of law covered in this class a. Real Estate b. Contracts c. UCC d. Securities e. Taxes Page 1
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f. Environmental Law g. Constitutional Law i. Zoning, platting, permitting, entitlements ii. Eminent Domain iii. Leasing – whether people can come on private property to express First Amendment rights h. ADA i. Telecommunications Acts j. Water/Flooding 6. Walking Through Development Transaction a. There has to be a reason for the development i. Need for leased spaces ii. Speculation for future need iii. Usually requires market assessment b. Must think about where property may be available in which building permit will be granted c. Make a deal with who owns the dirt and acquire the site i. May require tearing down structures already there ii. Letter of intent as means to agreement iii. Contract to purchase a. Feasibility/Due diligence period iv. Arrangement of financing a. Almost all development done with borrowed money d. Architecture e. Pre-leasing f. Permits and Planning g. Closing – point at which bank loans money to purchaser and purchaser buys the land i. Construction loan is “opened” h. Construction contract – get contractor i. Some developers have their own construction capability ii. General contractors sub out to contractors i. Tenant fit-out – as construction nears completion, tenants contractor’s move in to finish out 7. Politics of Development B. Meet a Developer and a Project 1. Ref. pp. 31-49 of Materials II. SITE ACQUISITION – THE LAND PURCHASE CONTRACT A. Making the Deal and the Lawyer’s Role in it 1. How does the lawyer contribute to deal making? a.
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RealEstateDevelopment.Rider.2004 - Real Estate Development...

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