There Is No Free Lunch

There Is No Free Lunch
Real Estate Business Development

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Special thanks to;

Ozdemir Tufan, Garanti Koza Real Estate Development Manager Baran Kurutepe, KC Group Vice-President Jale Demirchi, Garanti Koza Real Estate Development Specialist Ismail Ozcan, The Building Information Centre Deputy General Manager And many thanks to Sanart Reklamclk for the great design of this e-book.
Please feel free to share this e-book with whomever you think would benefit from reading it Thank you
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Let it be, let it be Let it be, let it be Whisper words of wisdom Let it be...
Beatles is the best selling band in the history of the popular music and after 40 years of recording their last album, their music is still in demand. They received countless prestigious awards all over the world. In the U.S, the group sold more albums than any other artist. In the UK, they had 15 number one albums and stayed at the top spot for 174 weeks, longer than any of their colleagues. According to many critics and music fans, they are the best of all. Interestingly, Beatles association with their fans did not stay only at the musical level
on brah e goes da lif , ob-las on b-la-di O life goe on brah ow the fe goes a la h L da li , ob-lan... b-la-di O goes o the life ow La la h
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In 1971, the invention of the CAT Scanner (X-Ray Computed Tomography) revolutionized the medical imaging industry. Surprisingly, the company that came up with the product was not any of the giant medical firms; it was EMI, the recording company of The Beatles. Starting
Do you want to spend the rest of your life selling sugared water or do you want a chance to change the world?
Steve Jobs, inviting John Scully (then the president of PepsiCo) to join Apple Inc. 1983
from 1971, CAT Scanners were widely adopted by the medical industry to supplement X-Rays and Ultrasonography. This extraordinary product helped its inventor, Godfrey Hounsfield, win the 1979 Nobel Prize. However, EMI was unable to turn this great opportunity into a business success. After the introduction of the product, EMI lost market share rapidly and about five years later the company was forced to leave the market with an overall loss. How can a financially stable company (fueled by the Beatles earnings) with one of the most important inventions of the 20th century perform so terribly?... Simply, EMI didn't have the right strategy, the proper organization, and the appropriate capabilities to sustain and strengthen its presence in the industry. Shortly after the product launch, powerful competitors, such as GE, Siemens, etc., moved in and captured the lions share of the CAT Scanner market. These companies were better equipped for such a product and EMI did not have the necessary skills to cope with them. As a result, EMI had no choice but to leave the market five years after the introduction of the product. CAT Scanner is a great R&D and at the same time a business development success. However, the product alone does not guarantee an impressive success story or hefty profits. Therefore, business development should be thought in broader terms and must be structured to utilize the strengths of the company. Besides, the business development efforts that are not in harmony with other parts of the organization do not produce the desired outcome, as witnessed in the EMI & CAT Scanner experience.
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Real Estate is no different than any other business and thus should follow the same basic
It does not take sharp eyes to see the sun and the moon, nor does it take sharp ears to hear the thunderclap. Wisdom is not obvious. You must see the subtle and notice the hidden to be victorious
Sun Tzu (Chinese Military Strategist) From the Book The Art of War, Sixth Century B.C.
principles of business development. Real estate business development should not be diminished only to finding a proper site and must cover a wider spectrum, including the organizational and strategic aspects, detailed market and financial evaluation, design management, etc. Turkish real estate industry market is one of the most promising markets in the world. There are so many competent developers in the industry and the attractiveness of the market is also luring in many new players. Since every industry participant is searching for new development opportunities, the companies with the right mindset and plan for business development will surely enjoy an advantage over their competitors. In the following pages, you will find 20 real estate business development assumptions (and/or practices) that need to be changed completely or be improved to achieve excellent results in the Turkish real estate market. Everything starts with business development. It does not matter how great your marketing or your project design is; first of all, you have to get the right job. Therefore, it is vital to think outside the box and adjust to the requirements of the new era.
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Contents
Strategy & Structure
1 2 3 4 5 6 7
There are no Proper Sites Anymore We are a Construction Company Only the Company Owner Does theBusiness Development Lets Take a Look at This Site Too, We May Get Lucky We are Chasing Many Opportunities, Still It Doesn't Work Out Other Developers are Constantly Imitating Us!!! Business Development is All About Networking and Traveling
Evaluation
8 9 10
Lets Go and Examine the Site All We Need is the Price per SQM in that Area Construction Area is the Product of the LandArea and the Allowed Building Area CoefficientAlso, Add Some Area for the Garage
After The Decision

18 19
Have the Architect Design the Project Getting Financing is Easy for Our Development
20 Don't Rush! We Have Time for Sales
11 What is the Profit? 12 The Revenue Looks Great! 13 14 15 16 17

For Construction Costs, Use an Average Figure Take an Additional 20% for theOther Costs Don't Include the VAT and the Income Tax in the Calculations Keep the Feasibility Simple We Need a Fast Decision Wow This Development is Very Profitable
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Contents
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There are no Proper Sites Anymore
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Most of the developers are complaining about the scarcity of sites. They may be right on several aspects; however it is still possible to find good sites. Considering the numerous projects starting in Istanbul and other major cities, it is safe to say that there are plenty of sites still available for real estate development. Never forget that Turkey needs around 600.000 residential units every year for the next ten years (According to GYODER The Association of Real Estate Investment Companies). Since this is a clear need and has to be fulfilled, there will always be available sites. They may not be at the heart of the cities or on the attractive neighborhoods, but they are there. Also the demand is not only for the residential units. The country needs more offices, more retail space, and more hotels. The developers need a new perspective with their business development efforts (and also with the way they conduct their businesses). It may be the time to look at the site search and selection from a different angle. If the previous methods are not working, there is no need to insist on them. The developers have many options about the path they can follow and should choose the one that fits them the most. The opportunities are out there and the firms that can play this game better than the others will benefit most from this environment.
There is always a better strategy than the one you have; you just haven't thought of it yet.
Sir Brian Pitman 1931-2010, Former CEO of Lloyds TSB Bank
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We are a Construction Company

on this will push both of them in a much more dangerous situation.
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The above saying means: two people who are equally shrewd cannot work on the same task; they will strive to deceive each other and to put the other one out of the game. Their insistence
Two acrobats can not dance on the same rope.

Anonymous
Most of the Turkish real estate developers are coming from the contracting background; and largely they wear both the contractor and the developer hats. However, contracting and real estate development are two different business lines, requiring different mindsets, strategies, and organizational expertise. The habits and capabilities carried over from the contracting background are not necessarily the desired skills for a successful development career. Obviously, this situation is causing serious problems for the developer-contractors. It is crucial for the Turkish developers that are in the same situation to separate their businesses. Otherwise, they will bear the risk of damaging both of their business lines. They will not build the proper capabilities, make wrong trade-offs, and have significant troubles with the business development efforts. Therefore, they will be better of by either choosing one of the two or organically separating the two business lines so that each can flourish individually.
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Only the Company Owner Does the Business Development
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In many situations, the company owner(s) (the boss) is the natural leader of all the activities of the firm. Their previous experience, large network, and skills set are highly valuable and must be utilized to the utmost degree. Thus, their involvement to the business development
Talent wins games, but teamwork and intelligence wins championships.

Michael Jordan, 14-time All-Star and 6-time NBA Champion with the Chicago Bulls
activities is surely an important and a crucial factor. However, business development requires many skills and abilities that are hard to be possessed by a single individual. Therefore, business development should not be turned into a one-man show, as generally seen in the Turkish real estate market. This kind of an approach will reduce the effectiveness of the efforts, narrow down the potential projects pool, and also prevent the through examination of the opportunity. Development firms should have a systematic approach to business development. The strategy and the organizational characteristics should be in line with and reinforce the business development activities. In addition to the business development department, other parts of the firm must be structured to support and, if necessary, to join these activities. As a result, a more comprehensive approach can be conducted and the chances for success can be enhanced.
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Lets Take a Look at This Site Too, We May Get Lucky
Contents
Many of the developers are examining site after site with the hope of finding the next winner. They visit sites that are very different in nature -ranging from small to large, urban to rural, cheap to expensive, etc.- and very different in functionality -residential, offices, retail, hotels, etc. Unfortunately, all these different situations require different skills set and the developers,
Know thyself.
Plato, 428 BC-347 BC, Classical Greek Philosopher
no matter how clever they are, cannot be successful in all these settings. Insistence on following this approach will cause the firms stretching themselves too thin and prevent them from focusing on the opportunities that are a better fit for them. Therefore, it is important for the developers to establish their goals and objectives. They should go beyond the vision and mission statements that are on their web pages and commit themselves to carrying out the necessities in fulfilling these goals and objectives. Only then, they will be able to know what kind of projects they want to build and what kind of sites they should be searching for.
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We are Chasing Many Opportunities, Still It Doesn't Work Out
Contents
As developers, we are visiting many sites. Unfortunately, we cannot land on a proper site. The reasons are many A landowner can be demanding; or are we targeting the wrong owner? The property can be problematic; or do our methods fail to identify these problems earlier? The competition may be fierce; or are we incapable of producing the arguments that will give us the advantage? We may be late for the negotiations; or are we late in identifying the opportunity? The excuses are countless. However, all these instances usually stem from the lack of a business development strategy. Without a clearly defined strategy, the developer will be lost in this complicated environment. Unfortunately, establishing your goals and objectives does not necessarily guarantee success. You do need a path that will wisely direct your efforts during the business development cycles. Therefore, it is imperative to incorporate strategy into the process. Equally important is establishing the proper organizational structure. The business units must be in place to carry out the defined strategy and adequate attention needs to be paid to the individuals and the teams that will carry out the assignments. Detailed strategic plan will reveal the organizational characteristics that are necessary for a well functioning organization. The strategy and the structure are complementary to each other and therefore should go hand in hand.
All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved.
Sun Tzu (Chinese Military Strategist) From the Book The Art of War, Sixth Century B.C.
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Other Developers are Constantly Imitating Us!!!
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McDonalds spent $3 million during its first 10 years (between 1953 and 1963) on experimenting with the french fries. McDonalds was a start-up company during those years and needed the cash desperately. Why did they do that?... To come up with a product that will definitely
Men take only their needs into consideration, never their abilities.
Napoleon Bonaparte, 1769-1821, The Emperor of France
differentiate the burger chain from the rest of the competition. At the end, they came up with one of the most successful products of the food industry. And McDonalds is not alone IKEA does not seem to have a problem with its competitors. It looks like Southwest Airlines is also not having a serious copycat. What do these companies have in common?... They spent time, effort, and serious resources to build the capabilities that set them apart from the competition; and they made it extremely difficult for their followers to duplicate their success. Are the Turkish real estate developers building the capabilities that will give them the competitive edge? Or are they more like the same?... Unfortunately, the development firms are concentrating on short-term gains and not investing in constructing the abilities necessary to differentiate themselves. As a result, they are finding it difficult to defend their market against the agile competitors. To achieve a distinctive place in the industry, the developers, while performing their regular and basic tasks, should also emphasize acquiring the essential skills and the knowledge that will strengthen their market position.
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Business Development is All About Networking and Traveling
Contents
Networking and traveling are two critical aspects of business development. However, for many developers, business development is all about networking with as many people as
Perception is strong and sight weak. In strategy it is important to see distant things as if they were close and to take a distanced view of close things.
Miyamoto Musashi, 1584-1645, Legendary Japanese Samurai and Strategist
possible and visiting as many sites as possible. Nevertheless, structuring the business development efforts on the context of just these two features is not the right approach. Among other things, we do also have to instill strategic thinking into the business development process. Strategic thinking helps us to predict the future. Like any other industry, real estate is affected by many forces and thereby understanding and acting upon these forces are critical for the success and survival of the development firms. Therefore, we should be able to see how the market will evolve in the future and also how our current practices will be shifted to adapt to the changing industry dynamics. Developers must constantly refresh their assumptions and practices about their strategies and business development approaches. Thus, following the trends influencing the consumer markets and the global forces affecting the real estate markets both at the local and global levels are also the critical tasks of business development. Namely, the global warming, the rise of the emerging markets, the increasing use of technology at the global level; and the demographic factors, economic conditions, the need for renewing our cities at the national level are some of the most important areas to be covered. In short, the developers must understand where the real estate market is going and position their companies accordingly.
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Contents
Evaluation
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Evaluation
16
Lets Go and Examine the Site
Contents
When developers visit a site, they generally check out the topography, the roads around, nearby surroundings, etc. at the very basic level. They usually get the zoning conditions and other necessary information from the landlord or the real estate agent. However, this process
I hated every minute of training, but I said, "Don't quit. Suffer now and live the rest of your life as a champion."
Muhammad Ali, Former Boxer and Three-Time World Heavyweight Champion
will probably not give you the full picture of the site and may furnish you with biased information. The market analysis and the feasibility studies, executed based on this incomplete or inaccurate information, may overlook the problematic areas and paint a rosy picture. Proceeding according to these promising but misleading results will unnecessarily raise commitment for the site and most probably bring out an ill-advised decision. Sooner or later, all critical information and the problems will become clear and possibly turn the once positive expectations to negative. However, rejecting the project at this point may be difficult for both psychological and financial reasons. Therefore, it is important to have a through analysis of the site. Creating and using a Site Analysis Template will be an instrumental tool. Basically, all legal, official, and zoning information from the Land Registry and Cadastre Offices and municipalities should be obtained and the problems and restrictions on the site (if there are any) should be discovered. Moreover, any other important aspects that may cause problems in the future (including the soil conditions and land surveying) need to be investigated. Detailed evaluation of the land is a cumbersome undertaking, but at the same time essential for the smooth progress of the development.
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Evaluation
17
All We Need is the Price per SQM in that Area
Contents
To find out the potential revenue for a project, the developers simply multiply the prevailing sales prices for the respective location with the expected sales area. The revenue (and the resulting profit) calculated based on this simple analysis forms the basis for their go or nogo decisions. However, since every prospective development has different characteristics,
Knowledge is power.
Sir Francis Bacon, 1561 -1626, English Philosopher, Statesman and Lawyer
the developers will need more information than just the sales price. Thus, a through market analysis is necessary to understand the requirements for a successful project. A good market analysis serves two main purposes. First, it helps us to determine whether the prospective development is a good fit for us. The information regarding the local market conditions allows us to figure out the likely project features, pricing structure, advertising strategy, and sales organization. Thereby, makes it easy to judge whether the necessary conditions for a winning project can be delivered by our own development firm. Second, it will help to produce more accurate analyses and to make a better decision about the opportunity. The acquired information will be instrumental in making more informed revenue, cash flow, and cost assumptions. Therefore, the outcome of both the qualitative and the quantitative analyses will become more reliable and allow us to base our decisions on a much clear picture of the potential development.
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Evaluation
18
10
Construction Area is the Product of the Land Area and the Allowed Building Area Coefficient Contents Also, Add Some Area for the Garage
For a through evaluation of a prospective development, it is important to have an accurate calculation of the construction, sales, and other useful areas. In order to identify and compute these areas, having a basic idea about the potential building is essential. Therefore, it is
The best way to predict the future is to create it.

Peter F. Drucker, 1909-2005, Father of Modern Management
necessary to determine the physical characteristics of the project and the likely functions at this stage of the evaluation process. Once we have the legal and physical conditions of the site and the market analysis, we can determine the feasible development, which will serve as a basis for the area calculations. When calculating the areas, we should go beyond the allowed building area and also consider the additional areas that can rightfully be included in the project (according to the municipality zoning codes). Additionally, the calculations must be structured in a way to generate the satisfactory level of detail. Excel (or a similar spreadsheet program) is very useful for comprehensive area calculations. An in depth and thoughtful modeling of the areas in a spreadsheet format will provide accurate results faster and allow us to reach and analyze all relevant areas in greater detail. Moreover, with a few additions to the spreadsheet, it is also possible to find other areas and quantities that are necessary to calculate the costs for important construction activities.
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Evaluation
19
11
What is the Profit?
Contents
The developers are usually interested in the final number at the end of the feasibility analysis, the profit amount. If the profit level is acceptable for the development firm, then it most probably decides to continue with the project. However, this is not the right way to evaluate the real estate developments, since the profit alone does not tell you the complete story. What we also need to see is the cash flow of the development. It is not the lack of profits that puts the development projects in trouble, but the lack of (or
The fact is that one of the earliest lessons I learned in business was that balance sheets and income statements are fiction, cash flow is reality.
Chris Chocola, Former Member of the U.S. House of Representatives (R Indiana)
poor) cash flow forecasting or management. Therefore, it is crucial to incorporate a cash flow analysis to the feasibility studies. This will allow us to understand the expected cash position of the project. Moreover, it will be helpful in predicting the amount and the timing of the investment required to successfully complete the project. The cash flow analysis is advised to be built both on a monthly and annual basis. A proper cash flow analysis will require additional information, such as the speed of sales, payment schedule for sales, payment schedule for construction and other costs, etc. Through incorporating these and other useful information, we will obtain a detailed cash flow forecast, which will be helpful to understand the financial requirements of the prospective development. As a result, we will be in a better position to make a well-thought-out decision.
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Evaluation
20
12
The Revenue Looks Great!
Contents
The revenue estimated for a development may be very satisfactory. However, for business development purposes, they are just numbers on the paper. The revenue assumptions will become a reality only if the customers are ready to pay those amounts. Therefore, it is vital to understand the target customers and analyze the revenue stream under various scenarios. Although the necessity of a detailed marketing analysis was mentioned on the previous pages, it will not be unwise to stress one more time the importance of understanding the customers. Unless we have a good handle on them, we do run the risk of a failed project. Thus, we need to search for the customer needs, habits, behaviors, and demographics. Their cost consciousness and ability to make payments should also be incorporated into the revenue analysis. Whatever we develop, it must be valuable for the customers. Hence, we should be thinking about the customers before we even decide on undertaking the development. In addition, revenues must be analyzed under different scenarios. These scenarios should be produced based on market conditions and on possible customer behavior. It is therefore very useful to structure the revenue calculations to allow for such scenario analysis. Since different scenarios will generate different cash flow forecasts, we will be able to identify possible outcomes early on and prepare ourselves accordingly.
If you work just for money, you'll never make it, but if you love what you're doing and you always put the customer first, success will be yours.
Ray Kroc, 1902-1984, Founder of the McDonalds Corporation
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Evaluation
21
Costs, 13 For ConstructionFigure Use an Average

The hardest struggle of all is to be something different from what the average man is.
Charles M. Schwab, 1862-1939, Former President of the Bethlehem Steel Company
Contents
It is a common practice in the real estate development world to use an average figure for the construction costs. This number is based on previous experience and most of the time can be fairly accurate. However, an average figure does not reflect the unique characteristics of each development project and the use of it prevents us from reaching a more realistic overall cost. An average figure does not look for the differences between building types, their functions, or their qualities. Averages make things easier; but do we really need to make things that simple when millions of dollars is at stake?... If the answer is No, then we need to avoid working with averages and start detailing costs to reflect the building characteristics and its construction methods and systems. The attention that we pay to the area calculations (as previously explained) will make our task easy at this stage. With well-thought-out areas, it will be easy to calculate the necessary construction areas (and quantities) with close proximity. Also suggested is to prepare a schedule of unit construction costs, which can serve as a basis for other projects as well. With construction areas, quantities, and unit costs in hand, we can calculate the construction costs with greater accuracy. Besides, such a thought process will enable us to think in detail about the structural and material requirements of the potential building and prepare us for the upcoming design development stage (if we decide to go ahead with the project).
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Evaluation
22
14
Take an Additional 20% for the Other Costs
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Besides the construction costs, there will be other expenses to be incurred. These are marketing costs, development costs (including all design & engineering, permits & official fees, land development, etc.), initial investments (all expenses incurred before the start of
Rounding to the nearest cent is sufficiently accurate for practical purposes.

Alexander John Ellis, 1814-1890, English Mathematician and Philologist
the construction and sales activities), and general expenses (managerial, administrative, office expenses, etc.). Usually these cost items are covered in the feasibility studies under a single line, the other costs, and are calculated as a certain percentage of construction costs. In order to get a better handle on the development, categorizing these costs and detailing each category is important. We need a method, similar to the one used when calculating the construction costs, to come up with more realistic figures that reflect the necessities of the location, managerial aspects, and the official requirements. During the process, we start thinking about the soft aspects of the development. This will be useful to better evaluate the project and determine any critical and/or important areas other than that of the construction. Although this looks like a difficult and time-consuming task, it can be done rather easily with pre-prepared templates, which can also be used for other projects as well.
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Evaluation
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15 Don't Include the VAT and the Income Tax in the Calculations
Like mothers, taxes are often misunderstood, but seldom forgotten.
Lord George Bramwell, 1808-1892, 19th Century English Judge
Contents
Most of the time, neither the VAT nor the income tax is incorporated into the feasibility analysis. We usually do not examine the effects of taxes to the project financials. However, taxes are the realities of the business world and should never be left out of the calculations. Only by incorporating them into the feasibility analysis, we can find the accurate return on investment and get a more realistic cash flow position. Whether we are undertaking a residential or a commercial project, the VAT needs to be financed throughout the construction. To fully understand the financial needs of the project (and the cash flow position), the VAT amount should be taken into consideration. On the other hand, the income tax does not necessarily need to be paid until the end of the project. However, it still needs to be calculated to determine the realistic profit amount and justify it with the amount of investment required. We need to incorporate the effects of these taxes into the cash flow calculations. It may be easier to work with tax-free (VAT-free) sales figures and costs and use the outcome to calculate the income tax. To these totals, we can add and subtract the VAT amounts to figure out the real cash flow position of the prospective development.
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Evaluation
24
Feasibility Simple 16 Keep the a Fast Decision We Need

Where large sums of money are concerned, it is advisable to trust nobody.
Agatha Christie, 1890-1976, British Crime Writer
Contents
A development decision should not be taken lightly. We are risking tens of millions of dollars (if not more) and therefore we shouldn't be satisfied with and base our decisions on simple analyses. What we need is a tool that will be sophisticated enough to lead us to the right direction and that will make evaluation process faster, easier, and more accurate. A development firm (or any other institution that is involved with real estate development projects) can evaluate many potential projects in detail and in a timely manner, only if it is well prepared to do so. The level of sophistication necessary for this kind of a task can be achieved through building a financial model of the potential development. The financial model should incorporate all the items that have been mentioned until this point. The area calculations, revenue scenarios, costs, cash flows, etc. should all be a part of this extensive system. Building such a model will help us not only to evaluate the development in greater detail, but also allow us to examine possible scenarios and to understand the effects of the potential changes and improvements to the development.
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Evaluation
25
17 Wow This Development is Very Profitable

Ive never gone to bed with an ugly woman, but Ive sure woke up with a few.
Warren Buffett (explaining bad investments), Chairman & CEO of Berkshire Hathaway
Contents
Sometimes the feasibility study shows enormous profits, much higher than the market norms. But in this highly competitive real estate market, there is very little chance of achieving exceptional profit levels. If you find yourself in a situation like this, be cautious; because it is highly likely that the opportunity is too good to be true. There are so many capable development firms looking for opportunities. Therefore, it is not easy to find a prospective development project with extraordinary profit margin. If you are presented with such an opportunity, make sure to double-check the assumptions. There may be something wrong with the areas, revenues, costs, etc. Do not forget that the development opportunity is out in the open market and there would be other interested parties. Such competitors, bidding for the same site (or the opportunity), will surely take the profit levels down. If this is not happening, always ask Why? and never forget that There is no Free Lunch! Most of the time, such rosy pictures can be presented by the owner of the site or by its representative. This behavior is understandable to have a better negotiating position; nonetheless the developer must question all the numbers and assumptions and never take the calculations for granted. If the numbers are still better than the expected levels, than there may be some hidden problems about the site, the financial situation of the owner, etc. Always question the high profit levels and figure out whether it is the result of optimistic assumptions (and/or calculations) or of some unknown problems.
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After The Decision
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After The Decision
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18 Have the Architect Design the Project

Control your own destiny or someone else will.
Jack Welch, Former Chairman & CEO of General Electric
Contents
Once the developer decides to go ahead with the development and signs the contract, it usually assigns an architect to design the project. Most of the time, the architect is left alone during the design stage. The developer provides very little input and lets the architect do his/her creative work. However, the developer knows the customers better than anyone else and the ultimate responsibility of the development rests with the developer. Equipped with valuable information about the customers and the market, the developers can easily lead the architects during the design stage. This information will be gathered during the evaluation of the development. And if necessary, additional research can be performed to have more insights about the potential customers. Although the developers should refrain themselves from becoming the actual designers, they need to clearly define the basic characteristics and the requirements of the development and the product they are interested in. In addition, the area calculations prepared during the evaluation process can also serve as check points for the actual areas. The pre-calculated areas can be compared with the architects design and discrepancies (if there are any) can be identified. If these differences are caused by ineffective design and use of the spaces, we can immediately point out the problematic areas and have them fixed.
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After The Decision
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19
Getting Financing is Easy for Our Development
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Commercial developments need to be financed, since they will start collecting the revenues after the start of their operations. Although residential developments have a different characteristic and enjoy the advantage of pre-sales, they also need financing to lower the development risk. However, even a critical factor such as financing is mostly misunderstood. The developers mistakenly think that because their project is outstanding and very profitable, they can easily secure the necessary financing.
Don Vito Corleone (Marlon Brando), The Godfather, Part I - 1972
I am going to make him an offer he cant refuse.
There are two common mistakes that the developers make in this regard. First, they usually do not know how much the need is. Without proper cash flow forecasts (especially for residential developments), the developers usually ask for amounts that are based on gut feeling, previous experience, or mediocre analyses. However, this is not an effective way to convince the highly sophisticated investment community or the financial institutions. Detailed financial calculations, coupled with a strategic and market analysis, should be presented to the financial organizations. Only then, the developers can have fruitful exchanges and increase their chances of receiving the financing. Second, they do not establish appropriate relationships with the financial institutions. The developers start building these relationships when they need financing, in other words when it is too late. The relationships with the investment and the financial community should be established before the financing is needed. This way both parties can understand each other better and contemplate over the potential cooperation. These relationships will then shorten financial institutions evaluation process and allow the developers to target the organizations that will more readily be interested in the opportunity.
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After The Decision
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20 Don't Rush! for Sales We Have Time

If you don't sell, it's not the product that's wrong, it's you.
Estee Lauder, 1906-2004, Co-Founder of the Estee Lauder Companies
Contents
Often times, the developers have hard time achieving satisfactory sales. To increase the sales figures, they try very different methods and make additions or changes to their marketing tactics. However, these efforts do not usually work. The fundamental mistakes made at the early stages of the development process can cause irreversible damages to the project. Failure to utilize the market information for business (and product) development purposes is the main cause of unsuccessful developments and products. Although marketing & sales is at the core of real estate development, these activities mostly start after the design stage and are confined to preparing catalogues, advertising, and managing the sales force. Since real estate developments are awfully expensive to redo, extreme caution must be exercised from the very beginning and the developers should strive to come up with the right product and the right marketing mix. Therefore, business development should always go side by side with the sales & marketing thought processes. It should be the market information and the consumer characteristics guiding all the aspects of the business development; not the architect, the previous experience, or the advertising agency. Most of the sales success depends on the performances of the business development activities. Thus, it is crucial for the developer to approach business development with the sales & marketing features in mind.
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After The Decision
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Contents
The real estate development market is getting more competitive every day. Many strong players are searching for real estate opportunities and many more are entering the market. Thus, finding available sites or profitable projects is getting more difficult. This necessitates
Unless you try to do something beyond what you have already mastered, you will never grow.
Ralph Waldo Emerson, 1803-1882, American Essayist, Lecturer, and Poet
a new approach to business development. A clear vision and goals, a well-defined strategy, and a well-functioning organization are the prerequisites of successful business development. Moreover, strategic thinking has to be instilled into the process. The project evaluation methods also need to become more sophisticated. Cleverly designed qualitative and quantitative templates and tables will be instrumental in streamlining the process. On the other hand, many industry participants are content with the business as usual. They do not feel the need to change their practices and think that a more elaborate process is unnecessary and a waste of time. However, numerous developers are complaining about the lack of profitable opportunities and many are stuck with developments that do not generate satisfactory profit levels. In the near future, the competition is only going to get more intense and things will become more complicated. Therefore, the developers must reevaluate their current practices and take every measure necessary to improve the effectiveness of their business development efforts, and in return raise the profitability of their businesses.
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Previo
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by Gu
rler U
nlu
NK YRMEEN ADET GA EY
Y ESK K tc zm ra 25 Ya
ZAR UL PA
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About the Author

Gurler Unlu is the Real Estate Coordinator for Garanti Koza Construction and currently leads the business development operations of the company. Between 1999 and 2004, he was engaged in the management of large scale projects for The Walsh Group (Chicago, USA). He also assumed various leadership roles in the Turkish hospitality industry (2004-2008) and was the Secretary General for GETOB (South Aegean Hoteliers Association) for the years 2006 and 2007. Gurler Unlu holds a BS degree in Civil Engineering from Istanbul Technical University (Istanbul, Turkey - 1997), a masters degree in Project Management (MPM) from the Northwestern University (Evanston, IL - 1999), and an MBA (with honors) from the University of Chicago Booth School of Business (Chicago, IL 2004). Gurler Unlu can be reached via email at gurlerunlu@gmail.com. To find more information about author, please visit Gurler Unlu on Linkedin (http://www.linkedin.com/profile/view?id=26188880&trk=tab_pro)
You can also reach and download this e-book from Gurler Unlus Linkedin Profile.
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