Friday, April 25, 2014

Developer, Owner, Architect and Contractor's working process

In the development project, the developer’s duty is to create development from beginning to end. The developer must have clear vision to approach what he wants to do, with strong leadership, he should be a good listener. In the project, he works with people with diverse background such as customers, bankers, investors, city officials, architect, contractor and other people. To lead the whole team to success, developer identifies the opportunities in advance and must manage from people to building. In the predevelopment, his job is mainly three categories of design, financing and marketing. Managing creative process and people are the keys to another success.In working with architect, owner or developer establishes design goal with designer’s concept and helps the designer to approach design well within the boundaries of developing program and allowable budget.In the process, he encourages designer’s pursuit and identifies with his idea. If he has architectural knowledge, coordinating work can be easier and smooth. Second, developer makes financial assumption plan based on the current or future business market with potential risks. Failure could lead to bankruptcy. Therefore making asset strategy for success and relationship between financial networks is important. Credit line from the bank also provides site acquisition and construction financing. Finally in the marketing, architect’s drawing with attractive 3D computer/hand rendering and proposal notes present what client wants to do.After marketing, from contract to the construction and leasing management process, within limited budget, timing issue and people’s risk are also what he should coordinate and manage in the exact location and time with no delay. In the real estate market cycling, demanding and supply point are different. In the equilibrium point, the developer’s confident and his diverse experience is certainly needed for the project.Traditionally, the architect needs to consider these components to every design decision such as cost function, aesthetics, time and sustainability. Life-cycle costing affects the decision of the selected form during final design process, but sustainability may increase functionality without harm and to be designed within cycle of living things.An owner’s principal obligation is to pay the contractor and provide property information related to project like legal description of site or easements. He is required to provide the contractor with drawings and specifications during construction period. There is no relationship between the owner and subcontractors. The AIA General Conditions requires a general contractor to bind all subcontractor and owner. Contractor provides bonds guaranteed the obligations arising out of contract will be paid for reducing an owner’s risk of financial loss on contractor’s defaults. Surety companies guarantee the contractor will fulfill contractual duty to the owner.From contract to the construction and leasing management process, within limited budget, timing issue and people’s risk are also what he should coordinate and manage in the exact location and time with no delay. In the real estate market cycling, demanding and supply point are different. In the equilibrium point, the developer’s confident and his diverse experience is certainly needed for the project.

Real estate class at UT Arlington III

We went at Texas Orthopedic Specialists at Bedford, Texas for site visiting on construction industries. As 5 million project, Ridgement Company is doing design built for owner. They build two story building with steel beam and column structure with eight month construction periods. The imported stone wall material is looking impressive for the visitors. As called Turn Key, design construction contract is that owner contracts a single firm for both design and construction. The construction company hires local architect and has responsibility of financing, design and construction of the project and hand over to the owner as ready for occupancy. The benefit is saving both time and cost for the owner, but single company should have all responsibility of the project. At the second floor, we have the chance to see the material and structure in more detail. For hospitality usage purpose, this building has more advance ventilation system and safe structural method like steel beam and column. When finishing the construction process during final communication, contractor makes the request for information to make clear of omission and error of drawings. The daily report helps keep the date, on-site activities and important information. Finally, the request for payment that contains schedule of values, lien wavers, clear indication of retainage and any approved charge to contract.
Other site visiting, We went to sprouts farmers market job site at Hebron in North Dallas. With tilt up wall prefabricated system, they save time and materials at field. As reinforced concrete wall, they precast on the ground floor slab of the building and lift with a crane to its position. Since the connections of tilted up walls buildings are critical, embeds in panel and slab-on-ground are connected together through weld plates. Then we went to single family houses at Highland Park. With concrete and steel materials, the house was made with flexible custom design with the pool at second floor. In the living area, transparent glass makes outdoor yard as part of indoor space. However, many segmented spaces make people feel restricted and confused to find directions.

Real estate class at UT Arlington II

When Ridgement company project introduction like Southlake and Turtle Creek project, we discussed bid invitation, estimate bidding and change order. The company uses electronic database bidding system for inviting the contractors. General contractors and subcontractors easily download the plans to calculate estimation online. Since some years ago, they have used timber line software which let them manage all change orders and accounting numbers for more efficient working. We discussed several documents for the bid , construction and contract documents. Contract form, condition of contract, specifications, drawings, addenda and contract modifications are for the contract documents with bidding requirement are for the construction documents and without contract modifications are bid documents. Construction documents are prepared by the architects and must understand the propose of these document. Specifications are complements of the drawings. They are written documents regarding quality, method and techniques of installation and desired performance. The CSI Master format is developed and published for the construction specifications. It is consisted with 16 divisions and each section is divided by General, Material and Execution. The contractor’s required insurance coverage are included contractual liability insurance, worker’s compensation insurance, liability insurance, personal injury insurance and automobile & property damage insurance. The contractors are usually required to obtain products and operations coverage after work completed. All amounts are specified in the supplementary conditions and must be purchased before starting construction work. Liens give the worker, contractor or material supplier the right to force the sale of an owner’s property in order to satisfy for payment. Without clear title, an owner may be prevented from transferring the property through sale. At the presentation time, I researched the process of shop drawings. Generally, shop drawing is prepared by contractors, subcontractors, material supplier or fabrication companies with graphically indicating the fabrication and installation of particular product. (AIA General Condition A201). Shop drawings are typically required for pre-fabricated components. Contractors need to verify actual materials and measure dimensions at field. The architect reviews contractor's shop drawing to match construction documents.

Real estate class at UT Arlington I

At the real estate class at UT Arlington, we discuss the construction management topics for the commercial investment real estate. I realize all of construction management is combined with social relationship and physical building within the trust, time and budget. The construction industry, one of the major economic markets in the country, is related to owner, architect and contractor by creating physical buildings. Many people are involved in construction and when construction is finished, the buildings are used as real estate business investments. Architecture and Construction should be energy efficient, design creative exploration and cost efficient to meet real estate business benefits. Upon the architectural design experience in Dallas with studies at graduate school, I think the future architecture is more closely approaching it’s intention to make energy environmental and efficient buildings. At the strategies, there are many approaches to make creative exploration. It is difficult to see good sustainable buildings around us, and it sounds the initial construction cost is more than expected. Also it needs many years of experience and education in lifetime for architects to open their eyes on the sustainability.

Monday, February 21, 2011

The sales comparison and cost approach valuation

The sales comparison approach is comparing a subject property with the comparable properties which have recently sold with similar transactions and similar characteristic to subject property. The sales comparison approach is based on the assumption in the competitive market substitutes for similar prices. This approach is based on the supply and demand factors to tend to move the price more equilibrium with close substitute selling for similar prices. After Identifying elements of comparison & value adjustment, the recently sold comparable sales are selected and reflect to make the general pricing preference in the market. Then indicated value of the subject property be obtained from reconciled the adjusted sale prices of the comparable properties by using weighting scheme. The result of this adjustment procedure is a final adjusted sale prices for each comparable property. Then appraiser evaluates and reconciles the final adjusted sale prices of the comparable properties into a single indicated value for the subject property.
The cost approach method is the based on the depreciated reproduction or replacement cost adding the market value of the site. The value of property is measured the current cost of construction for improvement subtracting all elements of accrued depreciation from the building’s cost. The reproduction cost is the exact detail materials to construct the building today In contrast, replacement cost is equal utility to construction the money required. The old structure, reproduction cost is often difficult to estimate because of no existing materials. As a result, replacement cost is often used since it is easier to obtain. cost approach is used for the specialty properties like church, educational facilities and specially used government properties. To determine existing property, the appraiser identifies and measures sales value of site similar zoning, utilities and similar use as the subject property. the next step is to estimate reproduction or replacement cost of improvement. Third adjustments are made for all accrued depreciation including physical depreciation, functional and obsolescence.

Income approach valuation

There are two methods in the income approach valuation. One is Direct Capitalization method, and the other is the Discount Cash Flow. With direct capitalization models, value estimates are based on a ratio or multiple of expected first year NOI. In the income approach, appraisers for first year estimated the periodic income of the property then convert the income forecast into value estimate. This method divides a single year’s net operating income by an appropriate overall capitalization rate, also known as the “going-in” cap rate, which is extracted from comparable sales in the current market. The indicated value of the subject property is determined by: Value = NOI1/R0, where R0 is the overall cap rate or “going-in” cap rate, NOI1 is the first year net operating income. The bond of investment method , Mortgage –equity rate analysis recognized that the NOI produced by a property represents the initial return on the total acquisition price of the property. Mortgage-equity rate analysis assume the investor’s minimum required cap rate is weighted average of the required cap rate on debt financing and the required cap rate on equity financing; Ro=MRm+(1-m)Re, Re=BTCF/Ve. The summation technique is add of the inflation, real return based on Treasury bill, risk premium and recapture premium. In the finally, General constant growth formula is that capitalization rate equals the subtraction of inflation growth rate form IRR on the equity. To get appropriate cap rate, these cap rate can be adjusted by reconciliation method.
The discounted cash flow method is the projection of the property’s annual net operating income over standard holding periods and discounts them back to present value of before tax cash flow by using the required yield or discount rate. Then with income from the sale of property at the end of the projected holding period, the total value is estimated. The incomes are discounted to present value utilizing the investor’s required rate of return to get the indicated value of subject property.

The real estate market value and investment value

The market value is defined as the most probable selling price assuming “normal” sale conditions as the value the typical participant would place on a property. It can be viewed concept of market value rests upon the interesting forces of supply and demand. Specific property right should sell the presence of willing buyers and sellers freely bidding in completion with one another on the fair condition by buyer and seller are motivated, well advised and acting what they consider their interest, a reasonable time is allowed for exposure in the open market, Payment is made of a cash or financing comparable and the market value should be clearly revealed in the appraisal report.
In the appraiser preparing, inspect the subject site and improvement of interior and exterior and gather the analyzed data and applied the sales comparison approach for indicating the market value for the subject property. For the best determine the market value and investment value of the subject property, The three method-sales comparison approach, cost approach and income approach will be proceed.
The goal of investment is to get decent operating income as well as property value appreciation. Considering low initial equity need, individual investor or partners are acceptable. Market value of a property is property selling price under competitive market under normal condition and with value for a typical investor. Investment value is the best worth property for investor and the maximum amount he is willing to pay based on the market and preference. However, seller’s investment value is the minimum he or she would be willing to accept. They each have differences because different investors have different requirements of return, tax and different financing situation.With the positive net present value of the after-tax cash flows and the desirable internal rate of return, the investment opportunity factors are subject property is in good condition, stabilized cash flows as low risk investment, and it is located in an area with high development demand.

Saturday, February 5, 2011

Liability of directors

The shareholders elect the directors to seek their best interest. The directors represent the shareholders as agents and make various corporate decisions on behalf of them. As fiduciaries, directors and officers owe legal duty to the corporation and shareholder for trust and confidence. The directors cannot exercise their power and act in ways that benefit their own interests but has to seek the interests of the shareholders and the corporation. The fiduciary duty includes the duty of care and duty of loyalty.
In the general rule, directors should have well understanding of the business of the corporation. Directors are expected to act in good faith and act in the best interest of the corporation. Directors should become familiar with the fundamentals of the business that the corporation is engaged. Directors’ management is general monitoring of corporation affairs and policies but does not required of detail inspections. However, directors are under a continuing obligation to keep informed about the activities of the corporation such as reviewing financial statements. Directors and officers who do not exercise the required duty of care can be liable for the harms suffered by corporation as a result of their negligence.
The duty of loyalty requires directors and officers to subordinate their personal interests to benefits of corporation. Directors may not use corporate funds or confidential corporate information for personal usage. Directors should not oppose a transaction that is in the corporation’s interest because it may not for director’s interest or position. To protect a lack of due care default, the directors and officers is covered by liability insurance. Typically D&O policy has two separate insurance agreements for the corporate reimbursement which insures corporation and personal coverage for directors and officers against losses for wrongful conduct for corporation loss.

Tuesday, February 1, 2011

Effective communication of the Starbucks II

The Starbucks has been a financially successful company since going public in 1992 with its reputation for rapidly expanding all over the global market. However, aggressive expansion of stores produced negative results that were inconsistent with the Starbucks vision and the communication also suffered as a result. For efficient production and reduce wait time, the Starbucks implemented many different machines, and these made the experience less personal interaction between the baristas and the customers.The Starbucks needs to make sure to get people’s attention of the message they are sending, conveying the massage with that in mind, creating the step to minimizing the errors between the leadership and the employee and sending the consistent message. Because misperception of the company’s vision can cause the loss of employee loyalty and untrustworthy of the brand from the customers. The Starbucks has successfully created the coffee drinking as the unique experience for the customers. The family-friendly services from the employees will provide the customers with valuable experience in the Starbucks culture.

Effective communication of the Starbucks I

With Howard Schultz’s vision, the Starbucks was created for people who would enjoy coffee drinking as a romance experience. Starbucks wanted to be the “Third place” between home and work where people can gather, relax and interact freely. The Starbucks offered various coffee drinks that could be created by customers in many different ways and result in unique beverages for each customer. The Starbucks wanted its customers to not only enjoy the final product but also the process of ordering their drinks.
To make the Third place, the leadership thought that the store employees’ ability to engage the customers was the heart of the Starbucks experience by two-way communication. Without flowing in only one direction from the leadership to the employees, the employees listen to the customers’ voice and apply their opinions in the operation. The employees deliver the customers’ feedback to the leadership and make the stores as local cultural events place. The interiors of Starbucks are artistic, and there were many opportunities for local artists and singers in the store bulletin board.
The employees are essential to provide the customers with valuable experience in Starbucks culture. To make this possible, the Starbucks focused on the employee benefits. Howard Schultz’s vision shaped how Starbucks treated its employees. The Starbucks treated the baristas as the “partners” in the business and offered health insurance to all partners, even the part-time employees.
The benefits to the employees enhance the upward communication. Employees get the motivation through the benefits, give the feedback to upward and provide better service to the customers. The Starbucks’ effort to involve the employees in the success of the business paid off. The Frappuccino idea came from the store managers in California. They tested the idea of cold blended beverage with different ingredients and tried with the customers. With customers’ approval, the company reversed its initial refusal and came around. Since then, Frappuccino became an instant hit and drove the store sales and represents the Starbucks as a successful drink item. Seasonal products such as a strawberry and cream Frappuccino and gingerbread latte also came from the stores with employee initiative.
For the Starbucks’ efficient downward communication, open-book management and coaching can be useful approaches. Sharing the company’s vision, financial information and benefits with every employee and coaching and educating the employees to pursue the company’s goals can make effective communication in organization and enhance employee identification with the Starbucks objective.

Playstation 3 Marketing Analysis

Sony’s strategic approach to new product development historically has been product innovation through technology. Sony’s brand name is associated with one of a kind electronics, and this was accomplished through rigorous protection of its rights on technology. The pros of this approach is being a pioneer in the market, no competitors at the initial stage and potentially creating an entirely new market. Sony enjoyed strong market share or market dominance when products launch were successful such as Walkman and Trinitron. The cons of this approach is to lose market to competitors with inferior technology by unwilling to share its technology and unwilling to adopt other technology.
PS3 has all the features for consumers to enjoy for long term. The firms that succeed in competitive markets have a clear understanding that they must first determine what consumers want. However the weakness of the PS3 is higher price than competitions. It costs $200 more than the Xbox 360. Even with the higher price, Sony lost about $300 on each console due to expensive manufacturing costs. On the other hand, PS3 lacks original games. PS3 launched with 15 titles, but most of these were already available in Xbox 360. In addition, Xbox and Nintendo Wii had higher game ranking titles than PS3.
The reasons of new product failure are poor matching between features and customer desire, over estimation of market size and incorrect positioning with price high or low. Inadequate distribution is another factor. Sony’s initial launch was delayed for a season with technological problems, and Sony could not deliver the number of consoles needed to retails to meet the market demand. Sony focused too much on producing consoles that can last for long-term. Due to delayed launch, Sony spent additional money to convince the customers to wait to buy a console after holiday season instead of buying from competitors.
In the PS3 operating system, diverse software programs are possible through internet. They add internet news in the world, cyber networking and home entertainment programs with simple download. Compared to the Sony’s marketing of PS3, Nintendo’s marketing of Wii was more simple. The development costs of Wii were about a third of PS3. Wii was inexpensive yet it had higher ranking game titles than PS3. PS3 focused more on providing its users with better graphic hardware, but Wii focused more on practical software. For example, Nintendo added to its product line by introducing Wii Fit, exercise and weight-loss system for busy mom to its Wii line of gaming consoles.
The success factor of product is matching product for market needs. Company should listen from customers what they want, and produce best products with strong leadership. The launch of a product cannot be successful when potential buyers do not have access at the right time. PS2 was successful because it offered reasonable price with newly developed games taking advantage of the console’s more advanced graphics and delivering enhanced content through a built-in DVD drive. PS3 is upgraded version of PS2 with Blu-ray. In order to increase sales of the PS3, it needs to offer more quality games with original content through software development. If it provides more diverse internet programs, it can be used as a multi-functioning electronic for home entertainment.

Wednesday, July 21, 2010

Real Estate Syndicaiotion

A syndicate is a group of person or legal entities who come together to carry out a particular activities. In the typical syndication, a limited partnership is formed with a group of investors providing the equity capital. The syndication is made with general partner’s experience and investor’s money. When the transaction is over, general partner gets the money, and investors get the experience. The real estate syndication combines investment and management for the real estate property. It means that the real estate syndication is a group organized to develop a parcel of land, purchase an entire portfolio of properties, make mortgage loan, and perform other real estate activities. The purpose of the syndication may be for the development of office complex or apartments or acquiring land for development. The real estate syndication allows a developer to acquire nonconventional funds for a development through group of individual investors. There are several stages of process. First, divided into original phase, operations phase and completion phase. The syndicator works as a general partner, and he is responsible for partnership affairs of acquiring, operating and completing stages. In the original phase, a syndicator is responsible for planning syndication, marketing investment units to investor or corporation and complying with disclosure and rule that deal with securities. During the operation phase, a syndicator is managing the syndicate itself and property, reporting to the partners, accounting activities and preparing tax information and administration of partnership funds. Finally, in the completion phase, a syndicator is preparing property for sale, marketing it a managing residual assets and distributing them to investors. With pooled ownership structures, the investors can receive income, appreciation and tax benefits produced by direct investment. In addition, through their multiple purchasing of syndication, the investors expect to receive the benefit of diversification, economic scale of acquisition, disposition of properties, and the ability to obtain debt financing and the expertise of the management team assembled by the ownership. The real estate syndication gives the smaller investors a new access to real estate, just as the money market fund for short term investment and the mutual funds offered to access shares.

Wednesday, June 16, 2010

Making Decision

When the investor and developer have a face to make decision in the successful real estate development project, conceptual design, financial feasibility and implementation issues can be considered. Other risk factors of development are political and financial issues for current and future market condition. In the supply and demand relationship, financial assumption plan has potential risks in the current or future business market. Developer need to check the projected financial picture make sufficient profit under current maker demand. And with due diligence in current market value, developer evaluates how much tenants to spend on the rent. Well proposed energy efficient design attracts demands of the market income. clear design concept and financial allowance should be suggested with market analysis.

The risk analysis of the station redevelopment

In the real estate development project, both developer and investor face risk when they make decision. In the risk consideration of the development, market, location, political and financial issues should be considered in the proposed project. These factors affect developer to make sure in the development process for reducing potential risk after project is finished.
Market analysis - Will the supply and demand relationship be successful in that location? Many people pass through station. They are busy to meet the train schedule and their main purpose is transferring. Therefore, snack or fast-food that are easy to take from passengers and supporting them at the same time can bring profits.
Location and site analysis - Will the proposed energy efficient design improvement attract the site demand for the market income available? If city allows the private developments like mixed-used projects for residential and commercial buildings near the stations, station would be more attractive icon in that community, and it will work more efficiently as its main role for transportation and historical conservation.
Political and social environmental analysis - Business decision is integrated into the political and social effect. Station opens from early hours to late night. It has potential to be homeless shelter or potential crime site. Therefore, overly available rest area in the station would not work well with its function.
Financial analysis - Does the projected financial picture make sufficient profit? And with due diligence in current market value, does developer evaluates how much tenants to spend on the rent and how long they should make contract?
During pre-development, developer, investors and city officials reevaluate the design layout again under feasibility analysis. They may ask questions themselves such as what are pros and cons in the project for the best decision- each retail’s usage, location and size in the station, restaurant’s space and usage and office location. In the redevelopment project, existing limited space in the station would be obstacle for adding other program. Therefore for additional new program, if there are available space near the station, side development approach can be another strategy for success.

The turnaround strategy

As the city goes through the up and down of the economy, abandoned areas produce crimes and wasted spaces in the surrounding community. Sometimes Brownfield area redevelopment is more beneficial than new development because it provides economical savings by reusing existing infrastructure. When a development opportunity comes along for abandoned area, it will create sense of place and revive the community. The development is more compact and more independent on parking, and the infrastructure cost is less when the property value increases. In the urban city, Planning around transit station is commonly known as the transit oriented development. public street and walkway create public space integrated with the transit station and commercial spaces. The nature theme-oriented street for pedestrian provides citizens for resting area. People can park at public parking garage.
When there is an opportunity for redevelopment, the turnaround strategy focusing on environmental concerns will accomplish synergies for community, people and economy. The site use design concept within financial allowance is essential for this project to be successful.

Tuesday, April 27, 2010

Financial benefits from pro-forma and design

In the real estate market cycle, demand and supply points are different. In the risk consideration of the development, market, location and financial issues should be considered in the proposed project. The developer makes financial assumption plan based on the current or future business market with potential risks. Market analysis and detail study of market condition is one of the important things because it realizes as aspect of a proposed project with needs for targeted market. And financial feasibility study is done for acceptable potential market and the analysis of a satisfactory return on investment for project. Making asset strategy for success and creating relationship between financial networks is important. Without market analysis or detailed study of market conditions, the projected pro forma does not accurately estimates the potential income and future sales. Essential design saves the cost of construction and result in financial benefits.

Emerging capital sources for refinancing and acquisitions.

The Fourth Roundtable was held in Dallas on December 03, and the discussion was about new emerging capital sources for refinancing and acquisitions. Invited panels are Private Equity and Financial Institutions and developers. They discussed the opportunity of refinancing from Foreign and Pension fund and the Refinancing and Acquisition opportunities expected in the coming year 2010.The question is where we are at the cycle. The bad news is there is no work now even though these funds always have money. Total mass began when consumers were unwilling to spend, and the credit card companies cut consumers’ spending limits. That resulted in many empty retail spaces. It is difficult to predict the sale side of market. Once transactions occur, we will know. The CMBS market is flat. The leverage is 75%. In 2006 to 2007, CMBS was at 80-100 basis points above, now it lost 40-50% of value like U.S. Treasury Bond. Today, the phrase is used that commercial real estate is dead yield, and that term was never used since 2001.. The government is trying to bring the equity back to market. The year 2010 will be the recovery year. There is plenty of money out there. We just need the incentives for sellers to sell. Congressmen in Washington have to understand the distinction between residential and retail mortgage to better come up with the incentives.

New Architectural Design Approach

The project in the west Dallas at the UT Arlington Architecture+Business School 2009.

Upon the experience, I started to work with Architecture, Real Estate and Business for a green design development.

Emerging Architecture Trends - Green Design

Future architecture is more closely approaching it’s intention to make energy environmental and efficient buildings. Upon the strategies, there are many approaches to make creative exploration. it is difficult to see good sustainable buildings around us and it sounds initial construction cost is more than expected. Also it needs many years of experience and multi educations in the life time for architects to open their eyes on the sustainability. However, Future architecture should be energy efficient, design creative exploration and cost efficient to meet real estate business benefits. Architects should add the knowledges like art, science and business for future their success.