Conceptual Phase
When we are introduced to a project, whether through an RFP or an inquiry from an existing relationship, we assemble a team charged with building a conceptual economic model for the project. They determine the price point for market rents; estimate the proper building size by balancing perceived demand and efficient utilization of the land; estimate likely construction costs as well as other soft costs associated with the project; model the proposed land transaction (ground lease or purchase); and finally, put all of this into a proforma that will provide a preliminary indication of whether or not the cost basis of the building can be supported at the target rental rate. This stage of analysis is largely a number crunching and data gathering exercise with less emphasis on design.
Defined Phase
Once a project has passed the Conceptual hurdle, we assemble the external team (architects, engineers, legal, etc.) and work to replace the Conceptual Phase assumptions with specifics. During this phase, we develop schematic plans for the project and obtain initial construction budgets; conduct an internal review of the project design from our operational teams to be sure the property will operate at Ensemble standards; start initial marketing to prospective tenants to gain their reaction and perception to the project in terms of cost, timing and functionality; refine the identified soft cost and land transaction assumptions; and meet with government officials to identify and quantify any entitlement issues. At the end of this stage, our goal is to have taken our conceptual number-driven proforma and define it enough to present to the general market. In the next phase, we proceed with more detailed design work and verify the feasibility of the project through actual bidding.
Verified Phase
Once a project has been well defined, we verify every component of it. This includes setting the initial rental rates and broadening our marketing efforts to prospective tenants to determine pre-lease levels; refining the design to request proposals from general contractors and select the contractor for the job; finalizing any hospital agreements and ownership structures; and engaging any entitlement process required for the project. By the end of the Verified Phase, we have a project that we are certain can be delivered in the timeframe required and at a cost that the market will readily accept. This sets the stage for construction.
Final Phase
Now that we have a project that is not only well defined, but with economics that have been verified to the furthest extent possible, we can proceed to the final execution phase leading to construction. This includes completing all construction documents as well as any entitlements required to secure a permit. We also establish final lease rates so that we can complete our pre-lease efforts and obtain executed leases; execute all hospital agreements if required; execute ownership documents; establish the final construction cost; execute the contract with the general contractor; and close construction financing. This work brings us to breaking ground on the project, and while there remains much to do before the project is delivered, once we break ground we have laid the ground work for the project’s success. During construction, our operational team will become involved to provide a smooth transition and to verify that the project, as being constructed, meets with the standards identified and outlined in the Defined Stage of the Development Process.
