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Owner Representation

What is owner representation, how does it typically apply to development management, and how does Rainmaker apply the owner representation approach in a way that it worthy of serious consideration?  Why should you consider it for your project?

Owner Representation (commonly referred to as "OR") is an alternative to the standardized development management services approach to project delivery for commercial real estate projects.  Under the standard development management services approach, the services provider is responsible for managing all aspects of the project's development program from initial concept development all the way thru to completion of construction and operational stabilization of the income-producing property.  The project development manager (commonly referred to as the "Developer") makes all decisions for the owner regarding every aspect of the project's development, financial, marketing, and operating affairs from "soup to nuts".  There are basically two (2) kinds of development management services agreements:

  • Fee for services.  The Developer is paid a fee (the development fee) for the services, takes no risks, and contributes only the developer's expertise to the project and owner's program.  This results in virtually all of the near-term income opportunity the project sponsor may have been counting on being eliminated from consideration.

  • At-risk.  The Developer is paid a fee (the development fee) for the services and retains a residual equity ownership interest for the services rendered.  Frequently, the at-risk approach includes the Developer contributing capital to the project and/or guaranteeing performance (loan guarantees) that result in the Developer receiving an additional (and very significant) additional ownership interest in the project.

The challenge created by the development management services approach is that it leaves very little (comparatively speaking) of the economic opportunity on the table for the owner (the original project sponsor), because the Developer is taking the majority of the risk - and all too frequently - saddled with providing the vast majority of the project's funding resources.  This leads to the inevitable realization that hiring a Developer to manage the project can result in some economically painful consequences for the project sponsor that all too often, result in severe disappointment and no technology transfer that would allow the project sponsor to pursue future projects without significant outside development management expertise (and a repeat of the same scenario all over again).

Owner Representation services solve a majority of these problems by placing the owner/sponsor in firm control of the overall development program.  The project sponsor is now in the position to have the mission critical services loopholes filled, while retaining the vast majority of equity ownership that would otherwise be "soaked up" by the Developer.  The project sponsor is also left with the opportunity to receive the vast majority of the development management fee income generated by the project, thus creating the much desired specter of both near-term and long-term economic remuneration for the project sponsor that is materially significant - especially in multiple project roll-outs.  OR services providers are typically paid on an hourly fee-for-services basis and receive a modest success fee based upon the services provided.  The OR services provider takes no risk and is not typically involved in anything outside the narrow purview of the management of the actual development program (i.e.: capital funding and project operations are not typically part of the OR Services Agreement).

The Rainmaker approach is to focus on the areas where the greatest value is created for the services provided, to wit:

  • The due diligence documentation process; and

  • The capital funding process; and

  • The initial project team development and selection process; and

  • The business deal and contract negotiations process for key project team members and consultants required to put the project on a firm footing.

This approach allows the project sponsor to gain insight and knowledge at each step of the way, stay firmly in control of their destiny, retain the lion's share of the sponsor equity interest, and gain the help when they need it the most - in the formative stages of the project where the capital formation activities make the difference between a drawing board dream that remains that way and a project that can move forward on a fully funded basis.  Rainmaker then exits the transaction after having created significant value for the project sponsor by helping with the mission critical items, training key staff members, and not placing the owner in the position of having to forego significant equity and income opportunities that would otherwise happen in a development management services envelope.

Learn more about how we can help you.  Contact our offices today.

Company Profile

Rainmaker Marketing Corporation is a consulting firm that focuses on providing the due diligence services on a business to business (B2B) basis.  Rainmaker Marketing Corporation can trace its roots back to the late '80's and was formerly incorporated in 1994.

Over the years, Rainmaker Marketing Corporation consultants have completed hundreds of assignments across the United States (43 states) and offshore.  The completion of RMC's work directly lead to over $1.5 billion in successful project outcomes.

Take a few minutes and learn more about RMC.  This website is designed to provide a wealth of planning information pertaining to the capitalization, operations, and organizational program tenets today's savvy entrepreneurial company must embrace for continued growth and success...

Contact Information

Our business hours are from 9:00 a.m. to 5:00 p.m. Monday thru Friday (CST)

Telephone:

281-537-1200

Postal address:

15519 Dawnbrook Drive, Houston, Texas 77068

Electronic mail:

General Information & Consulting Queries: clint@rainmakermarketing.com 

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