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From readying for disaster to strategically closing stores and self-developing, the sessions of the Ground-Up Construction/Remodeling workshop track at SPECS/201 1 shared a common theme: cautious growth with an eye toward building or maintaining profit.
Self-Developing Trends: In the session "Managing risks in the Trend Toward Self-Developing," the presenters emphasized that self-development is about controlling retail real estate. With speakers from Walmart, Target and Best Buy, the session of retail heavy-hitters focused on risk mitigation when the project is under your personal wing.
"Much of Walmart's growth in more recent years has been through self-development," said Carl Crowe, senior director, international design and construction for Wal-Mart.
According to Crowe, there are two self-development scenarios: You control the project from the beginning, or you take it over from someone else.
"Which one has more risk? I tend to think it's the one you take over, but that's not always the case. The first scenario can carry a lot of risk as well," Crowe said.
Managing development risk starts with the history of the site, and using that history to determine how much control you want to exercise and risk you can take. The presenters suggested using history as a data tool to aid in project and risk analysis.
Next, Crowe suggested, try to determine what your risks are.
"Once you identify the risks, evaluate the impact from a cost and scheduling standpoint and how you can mitigate the risk as best you can," he said.
According to Crowe, Wal-Mart's own history impacts how it self-develops. The company's rural beginnings segued into regional expansion, and even as recently as the mid-1980s. Wal-Mart was totally reliant on others for development.
"Then the savings and loan crisis hit, and Wal-Mart made the decision to control its own real estate," Crowe explained. "Today, the retailer seeks to control as much of its own real estate as possible."
Some of the risks that go hand-in-hand with self development include environmental issues, zoning and permitting, entitlement, related party claims, financial and funding risks, and performance by others.
Development agreements can go a long way toward mitigating many of the above risks. The key elements of a development agreement include:
* Define events clearly.
* Define what default is.
* Provide a...