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Predevelopment. Suzanne Keech Corporate Managing Director, Studley, Inc. June 2010. Facilities Process Overview. Why Is Predevelopment So Important?. Real estate—second highest expense for schools Financial viability — dependent on “smart” decisions

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Predevelopment

Suzanne Keech

Corporate Managing Director, Studley, Inc.

June 2010

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Why Is Predevelopment So Important?
  • Real estate—second highest expense for schools
  • Financial viability—dependent on “smart” decisions
  • Quality of space—linked to student performance
  • Error/misstep—significantly impacts space quality and cost

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Predevelopment Topics
  • The process
  • The team
  • Site selection
    • Qualitative and quantitative evaluation
  • Ownership vs. lease
  • Feasibility analysis
    • Sources and uses document
    • Pro forma
  • Due diligence
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The Predevelopment Process
  • Step 1: Build the team.
  • Step 2: Review and refine the educational facilities plan.
  • Step 3: Identify all feasible real estate alternatives.
  • Step 4: Evaluate each alternative.
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The Predevelopment Process
  • Step 5: Rank alternatives.
  • Step 6: Recommend site to Board of Directors.
  • Step 7: Negotiate terms and finalize documentation.
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Selection Criteria for Team Members
  • Qualifications/experience on similar projects
  • Professionals dedicated to project
  • Fee structure
  • References
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Advice for Building a Successful Team
  • Hire based on qualifications/experience, team, references, and fee.
  • Outline scope of services, method of payment, and time frame for completion in each contract.
  • Exercise right of termination if performance is unsatisfactory.
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Site Selection: Qualitative

Evaluation Criteria

  • Property’s conformance to education specifications
  • Location
  • Condition of property and physical features of site
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Site Selection: Qualitative

Evaluation Criteria

  • Lease terms
    • Length of term
    • Sublease and assignment
    • Renewal rights
  • Legal and timing issues
  • Other risk factors
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Site Selection: Quantitative

Evaluation Criteria

  • Lease or own
    • Economic terms—purchase price or lease rate
  • Budget
    • Operating—cost of utilities, repairs and maintenance, taxes (if applicable)
    • Capital—cost to improve the space, renovate the existing structure, or build a new one
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Feasibility Analysis
  • Process of combining the economic terms of each alternative with the economic resources of the school
  • Key documents
    • Sources and uses
    • Pro forma
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Due Diligence
  • Conduct environmental survey.
  • Conduct title search and review.
  • Ensure conformance with zoning.
  • Identify the “unknowns” and ensure that both the risk and associated monetary obligations are accounted for in the program.

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Predevelopment: Key Take-Aways
  • Ensure team synergy.
  • “Am I responsible for that?”
    • Outline scope of work in every contract.
  • Feasibility analysis demonstrates school’s long-term economic viability.
  • Who created that budget anyway?
    • Refining and updating the budget at every stage is critical.
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Suzanne Keech

Corporate Managing Director, Studley, Inc.

P: 202-624-8504 >F: 202-624-8555

E-Mail: [email protected]

National Charter School Resource Center

1100 17th Street NW, Suite 500Washington, DC 20036-4632

Phone: 877-277-2744

Fax: 202-223-8939

E-Mail: [email protected]

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