Wealth Opportunities in Commercial Real Estate: Management, Financing, and Marketing of Investment Properties

The 10 Phases of a Construction or Rehab Project

A ground-up development or a major rehab project can be broken down into 10 distinct phases:

1. Equity assemblage
2. Feasibility study
3. Acquisition of the land and/or the project
4. Acquisition and development financing
5. Design and construction drawings
6. Governmental approvals
7. Construction of improvements
8. Marketing and leasing
9. Permanent loan
10. Management and operation of the project

A straight acquisition of a leased fee estate usually does not include four of these phases: the feasibility study, design and construction drawings, governmental approvals, and, of course, the construction phase. These four areas are discussed in this chapter, along with other construction-related matters. The other areas are covered in more depth in other chapters.

The 10 phases just listed are often interdependent and do not necessarily follow in a consistent, linear order. It makes sense to obtain your equity monies at the outset, but there is nothing wrong with seeding the project with your own funds and later, if you decide to move forward, assembling all of the needed capital. Similarly, in order to complete the feasibility study, it is crucial to understand the applicable construction costs, which are dependent on the design and the final construction drawings. A permanent loan is typically secured only once the project is fully built and substantially leased with tenants in place; however, it might be desirable or necessary to obtain a take-out commitment ...