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March 31, 2009


The Scoop

If you enjoy taking risks, look no further than development. You can get in by working for another developer or you can strike out on your own, starting with some smaller transactions. It involves managing labor, establishing time estimates, managing money and monitoring construction crews. Good developers are results-oriented, creative and know how to get work done on time.

You take a concept and physically construct or alter a property that will last for years. In this field, you work with the local and sometimes federal government to bring your project to life. You also aggressively pursue the funding necessary from both the debt and equity markets to make the project a reality. Because of changes in population, technology and consumer taste, there's always a need for development.

Even the largest have lean organizations and are tight with cash so getting a job is tough. Some developers are only design-build firms, while others are full service -- first building and then managing and leasing the property. Most people in real estate agree that development is the riskiest and most rewarding part of the industry. Many developers are extremely charismatic and appear regularly in the society pages and every major city has its own Donald Trump; someone behind the big projects and deals.

One of the best things about real estate is the lifestyle and development is no exception. "This is definitely a work hard, play hard career," said one real estate developer. Since some much of the industry is focused on personal relationships, you have some gregarious folk who love to have a good time. "I worked in banking before I made the jump to development," another real estate professional confided. "I saw how much fun and money my real estate clients were having and decided to switch careers. Granted there is a learning curve and you initially suffer pay wise, but I don't know any industry that allows you to make the kind of money you can make in real estate, while not putting in a ridiculous amount of hours."

On the Job

The developer is the person or the company that is responsible for the concept of a property and bringing it to reality. One thing that must be stressed is that every firm is different, more so than any other part of real estate. The titles and pay scales vary from firm to firm.

New hires start as analysts who create and rework spreadsheets that examine returns for the developer. Part of the spreadsheet analysis is keeping track of debt payments and the returns to equity partners. In this role you'll be expected to become a Microsoft Excel expert and your principal duty will be to run the financial spreadsheets. Any time there is a change to the project, the analyst reruns the spreadsheets to determine how it impacts the developer's and the investors' returns. Since most developments firms are lean, analysts can expect to perform other duties such as market research: comparable project research, leasing activity in your market and demographic studies.

Associates, sometimes called project managers, work above analysts and are assigned to a specific project. The developer may have 10 buildings that are under construction but the associate is responsible for only one of them. Associates still perform a good deal of financial analysis but have additional duties such as contact with the real estate community and the development partners -- architect, contractor, investors and attorneys. Your main task is to see that the building is constructed on time and the management team will rely on you for updates and recommendations. You write a number of memos and begin to get invited to presentations to management.

Associates report to vice presidents (VPs), which at some companies are called managing directors (MDs). They're responsible for multiple assignments and make the final decisions with respect to the development project or portfolio. VPs delegate a lot of work to associates but are ultimately responsible for a development's success. They're directly involved with leasing or sale negotiations and report to management or the developer. In this role, there's a lot of responsibility and a ton of pressure.

At many development firms you will have the opportunity to eventually become a principal. As such you'll be expected to contribute equity to a development. Principals are asked to help raise money and are also expected to provide concepts for future developments. This is as good as it gets in the industry: you can make in the millions and will be held in high regard.

Developers start marketing their projects before they break ground and will often have their own team of leasing agents to market the property to the real estate community and show the development to prospects. Leasing agents that work for developers essentially have the same responsibilities of regular agents, but are under a lot more pressure when leasing a new development. Junior agents are assigned to a project and work with the leasing team to market the property and conduct property tours. However it is worth pointing out that some leasing agents at development firms eventually become principals.


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