Introduction

Property development is a fascinating process. From land acquisition, through design and planning, to construction, each stage of the development cycle has its own challenges. It requires a myriad of human interactions, from the most mundane discussions to overcoming the most peculiar challenges. Upon completion, what was an initial sketch, or idea, has been transformed into a tangible object and space that interacts with all our senses. Some structures are mesmerising. Some allow us to elevate our connection to this world, as the Getty Center once did for me.

In my professional life I have worked in many different roles. First as an architect, later I studied Quantity Surveying to improve my skills on more complex issues such as construction costs and construction law. I worked for contractors, before working as a project manager on the client side. My first project was a private villa extension. 20 years later I found myself working with the government on a multi-billion dollar sale of a public asset, I was introduced to the team as a development manager. I have seen the industry from many angles.

I have also undertaken my own property developments. Looking back, I've had my share of losses and wins. I have faced many unpredictable challenges and constraints while trying to get the job done, but overall the property industry hasn't broken me. In fact, I like property development so much that I used to run a meetup in Sydney, Australia, just to talk about it. It was called the Sydney Property Developers meetup. Maybe not the most creative description for a group of people, but it worked to attract all sorts of property developers.

Personally, I got into property development because I wanted to design and build my dream home. When I think of the number of days we spent indoors, it soon became clear to me that the place where I lived had to be the one that was tailored to my needs. I am fascinated by the concept of living and how property development adds layers to it.

However, as I learnt at the Meetup, people get into property development for all sorts of reasons. The usual suspects are in property development for the investment returns. These are usually people who work for corporations, or are “loaded”. But having lived in cities where property prices keep going through the roof, I have also met many property developers who make a killing by "flipping units", as they say, and like to emphasise their argument by driving away with their sports cars.

Another type of group were those disillusioned with their regular jobs and looking for another source of income. They eagerly read the property headlines, especially anything that affected the average price of a house, while trying to figure out how to enter the property ladder.

The most desperate were those who had started a house extension and were unsure how to complete it within budget. These were the ones most in need of advice. Unfortunately, as this book will show, once construction has started, remediation can be an expensive exercise.

Many of these property developers were attracted to the group because they wanted to network, talk about business opportunities and so forth. The majority had a genuine interest in learning as much as they could. Some had already got their hands dirty and needed advice, others were about to make their first property investment and were trying to minimise as many risks as possible.

I gave plenty of professional advice at these meetings and the more I gave, the more I learned. I think my biggest lesson was to realise that access to capital is not a barrier to start a property project. A friend once told me, 'you need a shitload of cash, mate' to get into property development, which was true to an extent. However, as I learnt at the meetup, property development is happening in all sizes of investment; and in that sense, property development can be for everyone. This is something I hope to make very clear in these pages, but especially in the final chapter of this book.

As with any industry, it helps to know what you are doing. Experience helps to navigate the ups and downs. It is not uncommon to meet people who start with a budget in mind and end up spending two or three times as much, sometimes way beyond their financial means. Sometimes people complain about the opposite scenario, stating the amount of headaches they had dealing with poor workmanship, which is often a mixture of sore feelings to the extent that they often say 'never again', although I have always felt that going for a second round is what makes property development profitable.

Property development can be a headache. The Berlin Airport can certainly attest to that. It was a real drama to get it off the ground, some people landed in jail, contractors went under, major budget overruns, but now that the work is done, despite the criticism for being outdated, I much prefer to fly from there rather than Tegel. The old airport where I experienced some of the most asphyxiating hours of my life trying to catch a flight.

I have always been curious to know about what went wrong with the Berlin airport. I've read here and there what people have said about it, but I've never met anyone who worked on that project. I would love to talk to the delivery team about their main headaches, which from what we could read must have been strong and many. I would love to read about their main challenges, so that I could learn from their mistakes,

I admit that I have had my share of headaches, but I have eventually learnt to deal with them and enjoy the ride. In the process, I have acquired my professional know-how and a bunch of stories that I am happy to share with anyone who has the patience to listen. Which is essentially what this book is about: my lessons from more than two decades in the property business. In the chapters that follow, I intend to share my view of the basic principles of property development. I will do this by recounting my most challenging and surprising moments, in the hope that this will make this industry less mysterious to some and more profitable to others.

Who is this book intended for?

As the subtitle clearly states, albeit metaphorically and with a pinch of sarcasm, this book is intended to help anyone who wants to make a profit from property development. As the subtitle suggests, the returns on property development can be substantial if done properly. I don't know all the best recipes for making a good return, but I do know some useful ones.

At its core this book is designed to help aspiring property developers to navigate the different phases of a property development project, from inception to completion, regardless whether the project is a kitchen renovation, a dream house, or a 30 stories skyscraper. I hope to highlight the main challenges and the not-to-dos in this industry so that anyone embarking on this journey has a better chance of success.

That's not to say that seasoned professionals won't find something of interest in these pages. Just when I think I have seen it all, life has a peculiar way of showing me that I have only scratched the tip of the iceberg. I do hope the following pages will amuse even the most experienced developer.

In the long run, I also hope that some of the readers of this book will get in touch and share some of their experiences. As the saying goes, learning is a two-way process.

The development cycle

Most of the projects I have been involved in have taken several years, sometimes decades, to complete. I have also been involved in projects that were done and dusted in less than a year, but the majority have been a long digestion of countless meetings, design and construction issues and so on. One particular project was so long that it had already been around for several years when I joined; and still had close to 10 years to go when I left years later to concentrate on other projects. In many cases I had the opportunity to see a project through from start to finish. Each one took several years to complete.

Property development involves a lot of number crunching at the beginning. The business case is often put together with a variation of educated and wild guesses. A creative phase that promises to turn initial ideas into concrete solutions. Planning requires some fine tuning to keep the community, if any, happy with the look of the design proposal. Finally, there is construction, where the main design ideas and strategies are put to the test. With so many bills to pay, construction will either make or break the business case. The journey is not always bright and shiny. It is a mix of low and high moments, shiny and stormy days.

Getting the business case right is a daunting exercise. Structural steel, for example, could cost 3,000 a tonne this year and 15,000 a few months later. We just don't know. I have seen the cost of steel rise almost exponentially for three distinct reasons. Some of my projects were built at the right time, others not so much. Some educated people, armed with a bunch of charts, claim to be able to predict the property cycle. As they usually say, 'if you want to be successful, you have to understand this', and they often show a curve or a circle that goes down, then up and down again. ‘This is the property cycle, you see? And this is where we are', and they often highlight an area on the graph, before the cycle goes up or down. ‘This about to happen,’ they say and some smart arguments are made as only the greatest magicians can do; predicting the future I mean.

Although the chapters in this book are organised according to the development cycle, I have moved the chapter about the business case to the very end. The preparation of the business case is often at the beginning of any project, since investors do the maths first and green-light projects afterwards. But I felt it was better to run through the major challenges of each development phase before tackling the business case. I am hoping that when we reach the end, the data we need to discuss will look better than a bunch of random numbers on a spreadsheet.

The business case is often linked to a business opportunity. This may be a piece of land, such as a greenfield, an existing building that is ripe for redevelopment, or a simple apartment, which, as we will see, also offers opportunities to add value. The challenges of finding the right opportunity and discussing the different options available to secure it are covered in Chapter 1.

Once the business case has been approved and the property acquired, someone needs to start appointing consultants, engineers, architects and so on, subject to the size of the project. The design proposal will eventually be discussed with the local municipality. Political projects can be difficult to navigate, but at the end of the day, as long as a proposal meets the local regulations, there should be no reason to stop it. I have covered this design phase of a project in chapter 2. Liaising with authorities and agencies is covered in chapter 3.

After planning and documentation, it is time to put the project out for tender. Construction is the point at which many things come together. Some developers approach the market almost after the business case and ask the contractor to do the design as this is 'the quickest way to get the job done'. Others don't want to be at the mercy of contractors and document everything down to the last screw. Regardless of how the process is undertaken, tendering works is a risk transfer exercise. I have been on both sides of the negotiating table and witnessed how business cases start to crack at this stage. I have covered the procurement phase in Chapter 4.

Once a contractor is signed, construction can start. This is usually when the big bills start rolling in, sometimes with additional costs. Getting buildings off the ground is not always easy and many unexpected events can happen on site that will eventually affect the final price of the project. I have covered most of the construction challenges in Chapter 5.

Eventually the development cycle is completed and we reach the end of the project. Most of the time, after struggling with all sorts of human emotions, we deliver what we set out to build. It becomes a living object that people can see and interact with for a very long time. I have worked on a myriad of colourful projects. From simple residential buildings to major infrastructure jobs. Seeing the end of a development project is often a mix of relief and joy.

However, not all projects reach the final line as not all challenges can be overcome. All sorts of issues can appear in each phase of a project, regardless of size or complexity. I have seen projects struggle to get off the ground or go in the wrong direction.

When projects go wrong, it's often because of variables we can't control. Just think of Covid and the impact it had on the construction industry. But projects that go wrong because of human error are less forgiving. Especially when these cost millions of extra dollars. Again, Berlin Airport is a good example of something going very, very wrong financially. It is important to be vigilant, but projects can still take a wrong turn no matter how hard we try to nudge them in the right direction. I was once asked to rescue a project that had stalled. I have described my experiences in Chapter 6.

It takes several property projects to build up expertise. If you are about to embark on a development project, thinking about it, or merely curious about the property industry I hope you will come to appreciate the following pages. So, without further ado, let’s get started.