Not all developers are created equal – why character matters
We have written recently about how landowning clubs can use their property to diversify income and create a sustainable future for the club. If a club does choose to go down a redevelopment path, then at some point they are likely to need to partner with a developer to tap into their knowledge and capital.
It would be easy to think that the only variable in selecting the right development partner is the financial terms on offer. However, this would be ignoring a critical aspect of the process: you would not be simply selling your land, but rather entering into a multi-year partnership. This means that instead of selling to the highest bidder, you are seeking the best partner.
So what are the key considerations when selecting the optimal development partner? At Augusta Advisors we have a proprietary framework to identify good quality potential partners to be included in the development competition process. Some of the factors considered include a developer’s:
reputation;
previous club partnership experience;
local context and knowledge;
past projects of a similar nature/size;
balance sheet; and
character
How do we define character? Fundamentally, we look for developers that don’t have a record of predatory treatment of clubs and demonstrate a win-win approach to negotiations and outcomes. We ensure that the club is as informed as a competent developer as they enter this process, and so our side always knows when a developer is trying to pull the wool over our eyes rather than negotiate in a robust but fair manner. This matters a lot, because a redevelopment project can take many years and during this time it is almost certain that both parties will at some point rely on the goodwill and character of the counterparty to get through unexpected challenges.
The other key dimension to consider aside from financial terms and developer characteristics, are the broader commercial, legal and risk terms of the agreement. Risk should always be apportioned to those with the ability to manage the outcome, so the ideal development partner should willingly shoulder planning risk, funding risk, construction risk and sales risk.
To learn more about our process of defining, identifying and negotiating with the ideal developer to optimise the commercial, legal and risk outcomes for your club, please contact us on 02 9966 8898 or email us at admin@augustaadvisors.com.au.
