Miles Chapter 19

page 465-485

DECISIONS ABOUT DESIGN AND

CONTRACTORS

Developper usually have preliminary drawing of the project

Final construction drawing will be design by architech, engineers,

and other profesionals

A contract is needed to eshtablish a formal relationship and make

sure that the designer (architech, engineers, and other
profesionals) have a responsibility on the final construction
drawing. Ex.AIA (American Institute of Architech) Standart Contract

The Final Construction Drawing usually be used to ask a loan and

addopted on the construction contract

Binding vs Negotiation :
Fixed Price vs Cost Plus
There are two types of contract between developer and construction
contractor :
1. Fixed Price the price in establish in the begining of contract and
can not be changed during construction, to keep the budged
alocation on the track.
2. Cost Plus the establish price may be changed if something
happened (such as: complextion of work, increase of material price,
fast-track construction, etc) to make sure the quality of
construction.

Fast Track Construction

The idea of Fast Track Construction to have as many steps

underway at the same time as feasible.

It can be done in Cost Plus Contract.
Benefit for Developer:
1. Less interest payment
2. Some tenants may pay more as the construction finished

faster.
3. For Competitive Reasons
4. Etc.

Bonding
Bonding is a guarantee of completion and/or payment.
1. Payment bond ensure that surety will pay valid
claims for work performed and/or material supplied.
2. Completion bond provides that the project/contract
will be completed, notwithstanding the default or
bankruptcy of the contractor / developer.

DECISSION ABOUT MAJOR TENANTS

Since stage one (inception of an idea) the developer has had
an idea of primary tenant and/or tenant mix. This idea is
refined in stage two and further documented in stage three. In
stage four, the developer must make final decission.
Some developer prefer to make early agreement (contract)
with the tenants.
At this stage developer must also decide the marketing
strategy, wheather leasing is to be handled by in-house staff
or outside broker

DECISSION ABOUT EQUITY

When developer cannot finance the entire project
through senior debt , they must find additional
source of capital. Four basic alternative are possible:
1. Equity from their own firm
2. Outside equity investor
3. Obtain a second loan
4. Combination of three

THE GOVERMENT AS PARTNER

It would be advantageous if the developer were able to contract
with the municipality where the project located (but not all
states permit municipalities to enter into these type of
contract)

STAGE FIVE: COMMITMENT-SIGHNING

CONTRACTS AND INITIATING CONTRUCTION
In stage five of the process, the contracts negociated in stage four are executed.
It is often necessary to have different contracts executed simultaneously.
Contract may be signed are:
1.Financial agreement (loan, join venture, etc)
2.Construction contract
3.Contract with supervision consultant
4.Contract with leasing agent, etc
As the construction contract is signed, the construction process in initiated. The
developer must prepare mechanism to ensure that the project is going well,
such as : administrative side, cash control mechanism, and develompment
(construction) control mechanism.

Thank You