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?
