Recently, A Gathering of Experts spoke with James Stuckey to find out more about the real estate development process and how there are many different types of developers. James Stuckey says that each has their own reasons for entering the field.
A Gathering of Experts: Good evening and thank you for joining us today.
James Stuckey: Thank you for having me.
A Gathering of Experts: So does real estate development involve more than just a builder and financier?
James Stuckey: Yes, there are many different players involved although the builder may be the only one visible to the public at times.
A Gathering of Experts: We understand there are also many different developers with different motives.
James Stuckey: That’s very true. I can think of probably half a dozen different types of development firms.
A Gathering of Experts: Can you tell us about them?
James Stuckey: First there are groups called Equity Developers. Silverstein Properties is a good example. These are both private and publicly traded companies that place their own equity or money at risk.
A Gathering of Experts: Do these groups always contribute the same percentage to a project?
James Stuckey: No, the amount of money and the type of equity as well as the guarantees that are given vary dramatically.
A Gathering of Experts: What about Real Estate Investment Trusts?
James Stuckey: These are often simply called REITS and they are companies that sell shares of stock to raise capital and must distribute 90% of their pretax profits to shareholders.
A Gathering of Experts: Are there any guidelines on how much of their total assets they must invest in real estate?
James Stuckey: Yes. Seventy-five percent.
A Gathering of Experts: Are there any developers that don’t offer up their assets as collateral?
James Stuckey: Fee Developers; frequently, developers or development organizations complete projects for a fee.
A Gathering of Experts: And they don’t invest their own equity or give financial guarantees?
James Stuckey: No, they also do not participate in the profits and losses or tax benefits enjoyed by Equity and REIT Developers.
A Gathering of Experts: What about government agencies? Do they fund their own development?
James Stuckey: Well, there are differences between government agencies and institutional developers.. A government agency might build a school or industrial park, and an institutional developer a retail project.
A Gathering of Experts: And they are all nonprofit?
James Stuckey: No, there are some for-profit companies, like Home Depot, that are considered Institutional Developers because they build for themselves.
A Gathering of Experts: What about small builders?
James Stuckey: There are some smaller builders and speculators who typically build one and two family homes and low-density office and retail buildings.
A Gathering of Experts: Aren’t landowners considered developers?
James Stuckey: No, not all land owners want their property improved. But often, landowners will contribute their land as equity to developers for a partnership interest. Some just hold property for the investment value.
A Gathering of Experts: Is everyone involved in the development process usually an expert in real estate trends?
James Stuckey: Equity players are those who may or may not have development experience, but supply equity to others as an investment for projected return.
A Gathering of Experts: It sounds like that at any given time there can be many people involved in a single development contract.
James Stuckey: That’s true… In addition to the people who plan what should be built, there are also architects, structural engineers, and dozens of other people with specific areas of expertise involved.
A Gathering of Experts: Well, we appreciate your time with us this evening. We look forward to speaking with you again.
James Stuckey: Certainly and thank you for having me.
A Gathering of Experts: Before we go, can you tell our readers a bit about your own property development firm?
James Stuckey: I am the President and CEO of Verdant Properties, LLC®. We are a development firm focusing on in environmentally responsible building and development.