At the November 2019 Property Feed event sponsored by Devcon Property Group, Dan Everett of EVERETT Property Development Management hosted a panel discussion to uncover insights on Delivering a Successful Residential Development in South East Queensland with the following speakers.

Michael Kain – Managing Director at Devcon Property Group

Richard Woodhead – Managing Director at GPS Development Finance

In this article we bring together insights on:

  • Procurement Methods
  • Key Ingredients to a Successful Residential Development from a Builders, Developers and a Financier’s perspective
  • How can Developers and Consultants engage with builders in the early phases of a project?
  • Tips to starting in the Property Development Industry

Every development has a different and unique procurement model. But developers essentially follow a 4-step process.

Development Process

  1. Buy
  2. Add Value
  3. Deliver
  4. Sell

Procurement Method

There are many ways to go about this Development Process, but typically what we are seeing in the current property development market are the following Procurement Method’s between the Principal (the Developer) and the Contractor:

  • Traditional AS4000 (construct only contracts) – where the principal provides the Contractor with all required construction documentation provided by the Principal’s specialist consultants.
  • Design and Construct (D&C) – where the principal provides only a brief, called the Principals Project Requirements (PPR) with or without a preliminary design.
  • 2 Part D&C – same as D&C but part 1 is for detailed design and part 2 is for construction. Common with government contracts.
  • Design Development and Construct – where the Principal provides a PPR and preliminary design must be provided.
  • Design, Novate, Construct – same as design development and construct, but includes novation of consultant agreements.

As Superintendent’s. we are generally always asked by our clients “What is the best method to use?” In doing so, we always want to be able to bring in the Builder in the Planning phase, but when is the right time?

Dan Everett of EVERETT Property Development Management hosted a panel discussion to uncover insights on Delivering a Successful Residential Development in South East Queensland.

QUESTION 1 – Michael Kain – Devcon Property Group

Can you tell us what does Devcon Property Group do in relation to Residential Property Development?

Devcon Property Group has four main business units, we are builders and we are developers.

We have a sales and marketing division and also a property management division. Construction is primarily the largest part of our business. Delivering projects for developers who are our clients but also delivering projects for ourselves. We are based on the Sunshine Coast but we operate throughout South East Queensland, and for us the Brisbane Region is a growing area for us.

QUESTION 2 Michael Kain – Devcon Property Group

Say for example a development is presented to you with DA Approval. What are some key due diligence measures Devcon Building Co. are undertaking on developments pre-construction?

As builders we love Development Applications / Development Approvals (DA) even though they have limited detail. The DA to us is the idea, the devils in the detail, most of the details are within the Operational Works documentation, and Building Approval documentation. Our duediligence is co-ordinating conversations and meetings with the project team, these being the Stake holders, Consultants, Development Manager and the Marketing team. As builders, we are always under pressure to deliver a product for a price less than what it can be built for in reality but the devil is always in the detail, we take the DA and when you try and fine tune what needs to be achieved for a project. The consultants involved with the DA are generally the ones that help us gather that extra detail we need from the DA documentation.

QUESTION 3 – Richard Woodhead – GPS Development Finance

Can you us what GPS Development Finance do in relation to Residential Property Development?

GPS Development Finance fund Residential Developments (i.e. Construction) within South East Queensland. We used to fund developments in Northern NSW but issues with Certifiers at the moment have made it a little more difficult to lend funding being high risk. We are a word of mouth business with our own direct investor base and own direct builder / developer base that we work with.

QUESTION 4 – Richard Woodhead – GPS Development Finance

What are key ingredients to a Successful Residential Development from a financier’s perspective?

For us, it is all about having a successful residential development.

Key features that we look at prior to accepting are:

  • Who is the Developer?
  • Who is the project team?

We always ask ourselves, Do we want to work with this project team? What are they going to do when the inevitable problem arises? Will they work with us? Will they be a good fit for the team?

Who is the builder? If it is a good team, we will overcome majority of the issues.

Other than the team, you need to look at what is the product? Is it going to be built as per what the Developer says it will be built for? Is it going to sell? How long will it take to sell all products?

We just need to know all the basic fundamentals of the project. We only want to get involved with good projects which are successful projects.

ABOUT DEVCON PROPERTY GROUP

Devcon Property Group have four main business units, Devcon Building Group, Devcon Homes, Devcon Property Services and Devcon Property Management.

Devcon Building Group is primarily the largest part of the business delivering projects for developers.

Devcon are based on the Sunshine Coast but operate all throughout South East Queensland.

To learn more about how Devcon Property Group can help with your next development, get in touch with Damian McIntosh. Details for Devcon can be found at the end of the article.

QUESTION 5 – Michael Kain – Devcon Property Group

Say for example we have a residential development and the client is unsure of the procurement method they wish to use. The client and consulting team want to seek advice regarding buildability and high-level construction costing.

This is a question EVERETT generally get a lot of from the consultant team “I wantbuildability costing advice”.

How can developers and consultants engage with builders in the early phases of projects?

From our point of view, in the reverse, if we were given a set of documents that hasn’t had a buildability review or a cost analysis done to it, it will inevitably cost more than expected. 90% of our clients are involved extremely early (i.e. from site acquisition) where we are doing highlevel feasibility costings of sketched boxes on a page and our client was asking how much will this cost? What this does is gets our focus on the job early so that for every variation from there to a DA set and working set, we are in the process, we are value engineering along the way, co-ordinating with the ethos of the project, what needs to be delivered as well whilst we are trying to achieve the budget. For us we love to be involved as early as possible, even before the Developer is committed to the site because ultimately if we are up there making decisions with the Developer rather than just being the contractor, the outcome is far better. Get in touch with us as early as possible as we don’t mind wasting our time working out a project that isn’t feasible, if we get a kick out of that as well as the ones that do go ahead – we know that we saved / dodged a bullet, the developer dodged a bullet, the financier dodged a bullet and everyone is happy. Because then the Developer will eventually find a project and we will bring that project to life.

EVERETT’s team really resinate with this, we have a few projects that Michael’s team are currently looking at that are subdivisions and inevitably the home build is done for rental portfolio clients. Devcon’s team are just magic with numbers straight away, so we have found great value in bringing on the builder in this early phase.

QUESTION 6 – Richard Woodhead – GPS Development Finance

What are key ingredients to a Successful Residential Development from a financier’s perspective?

I understand that as a financier you will need to vet the proposed construction contract and approve the contract prior to accepting to lend on the project. You have multiple Residential Developments on the go at the moment, some Traditional, some Design and Construct. What procurement methods have you seen successfully working on projects recently?

The fundamental issue that we really look at as to which methodology we should look at is that we can only fund on a cost to complete basis.

We did a project where they used a standard HIA contract and trying to bring a HIA contract which was funded in stages and trying to bring it into our model for cost to complete was a little bit of a nightmare.

With the methods you explained earlier, as long as we can really work with our Quantity Surveyor that we know that we have a cost to complete and we know that it will be built for the amount of money that we have allocated for finance, that’s all that we are really concerned about. What I have seen is, it just really depends on who the borrower is, who is the builder, because different teams work differently together for better or for worse.

QUESTION 8 – Richard Woodhead – GPS Development Finance

Richard – you have been investing in projects for 25 years.

What are two tips of advice you would give to a younger you starting fresh in property development?

Well a younger me was in a completely different industry. For when I started in the Property Industry probably one of the key issues is coming back to the general people that I have spoken about, to which is people. I talk about cross pollination like yourself Dan, it’s these sorts of functions (Property Feed), come out, meet new people that you are involved with day in and day out on projects, get to know them, create a bond because Brisbane is still a small town and this really is a small industry, don’t burn bridges, work with people. It was great for me tonight.

So it really is just building those relationships and it’s just the experience and then you know that when the inevitable problems do arrive, you can ring up somebody you know who knows how to deal with the problem.

QUESTION 9 – Michael Kain – Devcon Property Group

Michael – You have recently completed Stage 1 of a townhouse development called Ascent in Meridan Plains, Sunshine Coast. You are currently delivering Stage 2. Comprising two and three-storey townhouses, I believe Richard is involved in a finance capacity.

STAGE 1 – 27 Townhouses – (13 x One Bedroom & 14 x Two Bedroom)

STAGE 2 – 26 Townhouses – (7 x One Bedroom, 13 x Two Bedroom, 6 x Three Bedroom)

Tell us about this project from a Developers & Builders perspective? What was successful and what was some challenges you had to overcome with the project?

One thing that I can say that hasn’t been a challenge is the finance, it has been amazing.

This project we developed a couple of years ago in response to tightening regulations over the developer product with a price point in the low $300,000. This product is a duplex inside a townhouse that is strata titled which allowed us to deliver a one bedroom studio townhouse as opposed to a studio apartment.

This product was well received in the market, but from a construction and buildability point of view, it was a nightmare. We had to design, engineer a lot of undocumented solutions around fire separation and those sorts of things. For us the biggest challenge for this project was design buildability product that was a solution from a market point of view that created difficulties inside of the ‘construction methodology’.

QUESTION 10 – Richard Woodhead – GPS Development Finance

Richard – Looking at Michael’s Ascent Development.

What excited you and your investors about lending on this project?

My investors don’t get excited, most of them are self-funded retirees, but what excites them is not getting excited.

When the project first came across my desk, I’m afraid I basically said where is Meridian Plains.

We went out and had a look at the product with Michael, had a look at the site, understood it and the demographics within that area. By introduction to that area whilst driving to the site, kids were about to go to school and I just could not believe how many kids there were in that suburb.

Our thoughts were it was a really good site and good product for what it is. We looked at design, there were a few nominal interestee concepts about the design, but after Michael explained them and the market acceptance of it we understood it and were happy to get on board.

ABOUT EVERETT

Property Development Management Consultants

South East Queensland’s trusted development and project management consultancy forfeasibility studies and management of developments.

We offer a complete project management service, delivering property developments of architectural excellence for developers, landowners, education and community groups.

We understand quality design

Unlike other project management firms, we are founded on the principals of traditional architectural management.

Our Director Dan Everett is a registered architect and clients value our up front honest design advice from feasibility study through to successful project completion.

  • Development Management
  • Feasibility Studies
  • Superintendent