David vs. Goliath in Developer Decision Making

& Performance

Keelan Cunningham – Msc Real Estate

Building

DecisionMaking

Research Hypothesis

Distinct Developer Types adopt Different Strategies to formulate Profit

Expectations which in turn Impacts Developer Performance.

Research Drivers

1. Full-time Student, Recovering Property Investor!

2. Some Barely Survived…Others Thrived…Why?

3. Dissatisfaction – Where’s My Developer!?

4. Distinct Developer Types – Homogenous!?

Research Rationale & Genesis

“Leaving aside the impact of market dynamics and property cycles, is there an approach to decision-making, a veritable “secret sauce”, that determines performance outcomes which doesn’t solely rely on some econometric, tightly-sprung financial modelling?”

Research Objectives

1. To evaluate the start/stop development decision-making factors by developer type.

2. To analyse the decision-making behaviour of distinct developer types.

3. To critically examine the main influences and influencers on property developers‘ decision-making.

4. To develop a critical understanding of development performance as measured by developer type.

Parameters – Distinct Developer Types

Small, Independent Developers

Mid-Size Developers

Large, plc Developers

<50 Direct Employees

Privately-owned

Turnover:>£25m

Net Assets: >£25m-£100m

>50-99 Direct Employees

Public or Privately Owned

Turnover >£100m-£749m

Net Assets:

>100 Direct Employees

Publically-owned

Turnover: >£750m

Net Assets: >£1bn

Research Strategy & Method

• Quantitative - Statistical Analysis of Planning Applications.

Reason Why: Proxy for developer intentions

• Qualitative - Semi-Structured Interviews

Reason Why: Deeper, exploratory & higher-response.

Interviews – Participant Selection

Qualitative Data Analysis – Theme MatrixTheme Matrix: Key Themes Identified Impacting Decision-Making

Start/Stop ID1 ID2 ID3 ID4 LD1 LD2 LD3 CAB1 CAB2 CAB3 F1 F2

Interest &

Background- X X X - - - X X X X X

Equity X X X X X X X - X X X X

Available

LandX X X X - - - - X - - X

Overseas

Investors- - - X - X - X - - X -

Cycle

Watching- - - - X X - X - - X X

Behaviour ID1 ID2 ID3 ID4 LD1 LD2 LD3 CAB1 CAB2 CAB3 F1 F2

Returns Incr

Over Dev.- - - - X X X - X X - -

Trader/Exit

Fast- X X X - X X - - X X X

No ROT X X X X X X X X X X X X

Intuitive X X X X - X - X X X - -

Low-Med

RiskX X X X X X X X - - X X

Qualitative Data Analysis – Theme Matrix

 

Themes Identified Impacting Decision-Making (Cont.)

Influence&

Influencers

ID1 ID2 ID3 ID4 LD1 LD2 LD3 CAB1 CAB2 CAB3 F1 F2

Planning/

ConsultantX X X X X X X X X X - -

Professionals X X X X - X - X X X X X

Internal

LoansX - - - X X - - - - - -

Sustainability

= PlanningX X X X X X X X X X X X

Constr Costs X X - X - X X - - - - X

Dev.

Perform.

ID1 ID2 ID3 ID4 LD1 LD2 LD3 CAB1 CAB2 CAB3 F1 F2

Stability - X X X - - - - - - - -

Profit and/or

ROCEX X X X - X X - X X X X

Short

TimelineX X X X - - - - - - X X

Constr Costs X X - X - X X - - - X X

Internal

LoansX - - - X X X - - - - -

Key Finding – Distinct Developer Profit

Developer Profits Quoted  

ID1 ID2 ID3 ID4 LD1 LD2 LD3 CAB1 CAB2 CAB3 F1 F2

25%+ 20%+ 20%+ 20%+ - 25%+ 25% - 20%20 -

25%>10% 15-16%

Independent Developers vs. Large plc Developers

Key Finding – Evolving Profit Expectations

Large plc Developers: Appraisal Stages

2% Increase

Key Finding – Relationships IdentifiedAvailable

Land

Debt Finance

ProfessionalInputEquity

Develop & Exit

Initial Capital

In Conclusion…

Do Larger plc Developers approach decision-making differently than Smaller, Independent Developers?

....or is it merely that they have the equity to participate in the property cycle at the most opportune

time thereby maximising profits?