What Goes Into a Development

smallest drop of entrepreneurial blood running through his or her veins could

live in — or even just pass through — Southwest Florida without contemplating

becoming one of the developers who are building the region. Literally, every

street corner and all the land between the street corners have been developed

within the last two decades, or will be developed within the next two.

According to government reports, last year more than $1.2

billion was spent on new construction in Collier County alone, a nearly 30

percent increase over the previous year. In Lee County, the industry claims as

much as 30 percent of the economic base, employing 25,000 people, or nearly one

of every five working people. Real estate development is the region’s largest

industry.

But is it this region’s largest opportunity? The industry

has given way from the mom-and-pop developers of the eighties, the people who

drew their concepts at the kitchen table, on a yellow legal pad, and had a

banker friend, and knew a block guy, and put a spouse in a sales trailer. In

the new millennium of this region’s development, corporate partnerships and

publicly traded companies are tilling more and more of the soil. Work boots and

plain talk have yielded to suits and legal speak.

This sort of competition raises the bar, and tempers the

opportunity. According to industry representatives, eight of the twelve largest

national builders are now in this market. Certainly, there are only going to be

so many lessors for quality anchor store locations, and buyers for office

condos. But for now, finding customers isn’t the critical challenge. What the

national builders and the locals compete for is not so much customers. Finding

land is; getting all the permits is; hiring labor is.

Can a small developer compete, or find a cooperative role,

with the likes of WCI, DiVosta and Regency? Can he be a fellow traveler with

those who affect planning decisions? Can the small developer economically and

diplomatically coordinate water flow issues with other builders, while

negotiating favorable scheduling with subcontractors who are promised more and

longer work from the national builders, all the while protecting the gopher

tortoise?

Small developers have not been pushed out of the market.

Some have found literal niches — holes in the midst and along the edges of the

big builders’ thousand-acre projects — where some office condos might go, or

some restaurant space might be sellable.

But these small developers, the ones who are successful,

look and work more like the big developers than the kitchen table folk who have

developed much of the region to date. They have to.

Setting One’s Sites

Finding somewhere to build is the first challenge developers

face. Developable land is growing scarce because the land that has not already

been developed is more and more often either already under plan by a national

developer, or is protected through environmental overlays. While it may be

tempting for developers to simply look for any property that is still

available, Ross McIntosh of Ross W. McIntosh, LC, a development land broker and

analyst, suggests looking for land that can be developed to suit the market. He

calls this “fundamental.”

“We have to start on the demand side, not the land side,” he

says. McIntosh says that many people see a piece of property they feel is ideal

for a particular use — say a retail shopping center — but neglect to see if the

market in that location, at that particular time, will readily support that

use. He points out, “The land has no value beyond the residual value of what’s

left over after you sell something and deduct your costs.”

This market research burden falls more upon developers of

today than those of the recent past, and sometimes this results in a shift of

risk to the developer. McIntosh concedes that risk has always been present in

the site selection part of the process. “There has never been a sure thing,” he

says. Today, however, he sees more risk for the would-be developer.

“What has tended to increase risk is over-heated demand,” he

says, and describes it as a sellers’ market. “I suggest there are pressures on

the buyer to act, and act fast. [I hear] ‘pay what you have to get it, there

are other buyers.’” McIntosh says the buyer “loses the luxury of prudence.” He

says that shopping center developers, historically among some of the most

risk-averse, in days gone by, wouldn’t buy a property until a Publix-like

tenant was committed. In fact, he says, “They couldn’t get financing until a

lease was signed and construction drawings were completed.”

Now, things have changed. He reports that developers such as

Regency and other nationals close on 20-acre sites today, although there is

insufficient demand for a Publix and won’t be for three-years. “Because if they

didn’t,” he says, “somebody else would.” And a developer without a site is a

developer out of business.

Joseph D’Jamoos is a local developer who competes in this

arena. He has thirteen projects in Southwest Florida including the Vanderbilt

Galleria and Galleria Plaza in Collier County at the intersection of Airport

and Vanderbilt Beach Roads. Although these projects are in one of Collier

County’s hottest development areas, south of Pelican Marsh and across the

street from a new Ritz-Carlton hotel, D’Jamoos explains that he didn’t plan it

that way. “I normally don’t go looking for areas,” he says. “I go looking for

sites, then I determine if there is any value.”

D’Jamoos concedes that he does not have a formula for

picking winners. “I go by my feelings and my experience,” he says. “I have more

than 36-years development experience. I’ve developed a certain feel.”

In The Niche Of Time

In the case of Vanderbilt Galleria/Galleria Plaza, D’Jamoos

is literally a niche developer. His particular niche is a 25.6-acre chunk of

WCI’s 2,213-acre PUD bounded by Livingston Road and Route 41 to the east and

west, and Immokalee and Vanderbilt Beach Roads to the north and south. Landy

Engineering’s Mike Landy, P.E., explains that the uses for this parcel, like

other niche parcels, were narrowly defined. “WCI is very organized, and their

property usually has a very specific use in mind,” he says. “[This parcel] came

with conditions attached.” Those conditions, approved in the WCI’s PUD filings

and, hierarchically, in the region’s comprehensive growth plan, allow 200,000

square feet of buildings to include 175,000 square feet of office space and

25,000 in retail space.

This site had other, less apparent, conditions attached to

it, too. Interface with government agencies such as Southwest Florida Water

Management District, and county planning and permitting departments, is

constant throughout all development processes. This site offered an unusual challenge

to cooperate between otherwise competitive developers.

“There were water management requirements on that particular

piece, and an overall permit with South Florida Water Management District,”

Landy says. “We had to modify the overall conceptual permit.” Landy explains

that whenever a government agency reviews modified but previously accepted

plans, risk is inherent. “They look at every aspect,” he says. Things that have

passed previously may not pass in the review. “It’s not beyond the realm of possibility

that there is a change of policy at the [reviewing agency], where they don’t do

things like they did when we first submitted.”

In this case, Water Management had required 4-1/2 acres of

lake, and D’Jamoos owned neither all the property on which the lake was to be

situated, nor was responsible for all the run-off it would hold. Landy reports

that the review was successful, and D’Jamoos was able to negotiate an

appropriate sharing of the burden with the other landowners.

D’Jamoos knew this challenge going in. During the 60-

to120-day due diligence period, he says, all the overlays are reviewed. Not the

least important is zoning. Zoning changes and variances are flash points in the

political process. It is a time when neighbors with perhaps competing

interests, and otherwise unrelated groups with environmental issues are given

the opportunity to derail the project.

“If it’s not zoned,” D’Jamoos says, “we meet with the county

to find out more about the property and then make the decision [whether to buy]

based upon what we find out. He says that property zoned for other uses can

take a year to be rezoned, barring major political hassles.

“Sometimes we buy before the zoning is completed,” D’Jamoos

says, explaining that the zoning period can be used to accomplish other tasks

like the above-described engineering. “If we have a good feeling from the

county that it will be rezoned,” he says, “we’ll go ahead and take the risk. It

might be lucrative.”

Several processes can happen in parallel, while the developer

waits for zoning. One is design. Michael Sheeley, AIA, of Sheeley Architect,

Inc., explains the design process. “The developer decides to commit to the

site,” he says. “Then we start a preliminary design phase, and initial code

reviews [to arrive at a] preliminary design that’s acceptable to the owner.”

In code reviews, the project can get sticky. Engineer Landy

recalls that approval for this project took four months. “If you talk to the

client, that’s terrible, but I think it’s real good.”

But the risk and delay do not end with the issuance of the

permits. Since D’Jamoos builds to suit the end-user, and the clients’ needs may

change in process, it is often necessary to go back to the county to request

approval on amendments to the original submissions. Landy reports that, on this

project, the developer has been back to the county with amendments twice. “I’m