(50) Why do some projects fail while others succeed? - The 6 Pillars of Development Readiness

(50) The 6 Pillars of Development Readiness - Why some projects fail while others succeed?

 In the 50th episode of the Real Estate Development Insights podcast, Payam Noursalehi (president of Dena Project Management) thanks listeners and introduces shorter-format episodes featuring live events, updates, and practical frameworks alongside ongoing expert interviews. He explains the podcast’s core question—why some projects fail while others succeed—and argues that real estate development is fundamentally the business of risk management, where success depends on identifying, pricing, sequencing, and managing risks through effective, disciplined decision-making under uncertainty. Drawing on lessons from guests and references like Sheldon Rosen’s “Know your limit, stay within it” and Jack Welch’s question “What business are we in?”, Payam presents a non-scientific, living “Development Readiness Framework” to help, especially first-time developers, assess readiness amid growing opportunities in Toronto/Canada. The framework has six pillars: local market fundamentals, capital structure/financial feasibility, ownership/legal/tax liability, design and approval strategy, execution and risk management, and operational discipline/mindset, plus a free assessment at developmentreadinessassessment.com.

00:00 Welcome and Milestone

01:12 New Shorter Format

02:57 Why Start the Podcast

04:15 Why Projects Fail

06:44 Development Readiness Framework

07:47 Know Your Limit

08:25 What Business Are We In

10:42 Risk Management Core

13:01 Decision Making Under Uncertainty

15:25 Mindset and Discipline

16:39 Why This Matters Now

19:39 Six Pillars Overview

22:37 Free Assessment and Wrap Up

#RealEstateDevelopment #DevelopmentReadiness  #ProjectFeasibility  #RiskManagement #DeveloperMindset #Housing #HousingSupply #HousingAffordability #TorontoDevelopment #CityBuilding #GTARealEstate #CanadianRealEstate

For more information, please refer to RealEstateDevelopmentInsights.com

Take our Free Assessment at: DevelopmentReadinessAssessment.com

Transcript

0:00

Hello everyone, and welcome to another episode of the Real Estate Development Insights podcast. We'll bring you ideas, experiences, and best practices from the real estate development industry. My name is Payam Nhi. I'm the president of Dental Project Management, a construction and development management firm that helps real estate developers define. Define design and deliver successful projects. Thank you for being here. This is our 50th episode, so as a special thanks to everyone who's been with us through this journey over the past couple years, it has been such an interesting journey. I've learned a lot of, enjoyed a lot of great conversations. With our guests offline and online and with our audience. A lot of them who've been kind enough to reach out to us over the past couple years, share their thoughts, their insights and feedback. Some of them very candid feedback that they've shared with us. So thank you very much. It's been fun. It's been, very interesting ex experience for myself here. And before I forget, if you have not already subscribed to our. Podcast here. please ensure to do so because it really helps us grow the show and reach out more audience as we go through this exercise together. So today's episode is a little bit different. typically you're used to us having a guest in each episode as an industry leader, someone who has a lot of experience and thoughts that they share with us. and they basically let us into their brain. they shared their wisdom with us everything they've learned over the years, and that has been a very interesting medium But. Considering that we reached a milestone of 50 episodes, I wanna start trying something new in the hopes that we can bring you even more value. And, we will introduce something that is a little bit different, some shorter format episodes such as this one where we bring you something actual live events, industry updates and ideas, and potentially frameworks, which we'll do in this episode that we're working on. Which which hopefully you will find helpful through, your daily day-to-day business and activities. One of the comments that we've heard from our listeners over the past 50 episodes has been some of the concepts have been very great. They apply to larger and more mature organizations. But what about our daily? Situations. What about our daily decision making? if you've been following the show long enough, you know that I'm a practical person. I try to keep the conversations very practical. Try to find real life examples of that. So, with that being said, we're gonna try this new format, and we're still gonna have the interviews with the industry experts as a main part of our. Podcast going forward, but we'll have, uh, shorter episodes here and there to try and bring our other concepts to life and talk about other items that are going on, which might not necessarily require an hour long conversation with an expert with decades of experience. One of my main reasons for starting this PO this podcast a couple years ago was to learn more about the industry that I've been working in for most of my life. I've, been. Involved one way or another in construction design and engineering and real estate development investment throughout my whole life. And to truth be told, like probably most of the professionals who are listening to this podcast can relate to when you are a professional, you. Tend to put your head down, go deep into your own silo and not necessarily know or understand what's going on in the other parts of the project. That was one of the main reasons I started this podcast because I have a lot of questions if you haven't noticed so far. And, the environment of working on a project or inside the project team does not necessarily lend itself to. Asking very wide and open questions and getting very clear answers. Some developers that I've worked with have been great in that regards, and they're very willing and open to share their experiences and insights in terms of what's going on. And others are, I guess they have reasons and they're less so inclined to sharing and being transparent about the project. So this was a perfect medium to do that, and I hope that so far you've enjoyed doing this, one of the overarching questions that has always been on my mind. One of the main reasons we started this podcast was try and figure out one overall question. Why do some projects fail? Why others succeed? Or put another way, How can you increase your chances of success? in your current or your next project. So it's a simple question, right? It sounds like a simple question, but the more you spend time in industry and the more you realize that as simple as it may sound, it's super complicated Basically because projects don't really fail because something super dramatic happened, like in the movies and like all of a sudden everything fell apart. Based on my experience and based on all the conversations that we've had, on this podcast. There are multitude of factors that can lead to, failure of a project. And in the background, I've been trying to put together a framework. Based on, again, work experience, real life experience, and also more than 50 professionals that we've had on this podcast, and we've asked them those questions. We've been trying to come up, with a framework, a decision making matrix, whatever you want to call it, to try and help with answering that question. Try and help with. coming up with a good answer to that question about how do you increase your chance of success on your next real estate development project. if I wanna sum up most of the time. Based on what we've heard on this podcast and also outside of it, projects fail because a series of Risks go underappreciated. There are assumptions that go unchecked. People are not really paying too much attention. Poor decision making, bad timing and luck is a factor. I have to admit. Luck and in the bigger macro environment is a really decent factor that you have to allow for, you have to account for in your equation to the best of your ability. And on the other side, what has become more and more apparent to me is that. Projects don't really succeed or necessarily succeed because the developer is such a genius, but typically it's because they really understood the risks. They had the right team. They made the decisions when they were needed, and they had a framework for making those decisions. They had a mental map or roadmap or mental model that, helped them make the decisions. and I think it might be stretched, but let me put it this way, they stayed within a lane that they could actually manage something they felt comfortable dealing with. So far, based on all this that we just described, I've created something that we call the Development Readiness Framework, which is not a scientific model, just so you're we're clear. I am not a researcher. I'm not a scientist trying to solve this problem. I'm just documenting our real world experiences. it's a living framework, so it will evolve based on what we see, based on more conversations that we have. but the goal of it is to find a useful way of thinking about whether a developer, especially specifically first time developer or early stage developer, are they really ready? What are their weak points? What are their blind spots? And later on. I'm gonna touch on why I think this is the right time to have this conversation in the context of City of Toronto and in Canada, mainly because we see a lot of new developers coming to market. we'll explore that a little bit later. And bottom line is. This is my best effort at documenting what we've learned so far and trying to share it with you guys. I hope you find it helpful and I'll share more of it as we go through. I wanna start with this quotation from Sheldon Rosen, who was our first guest on the podcast on episode two, and he rephrased or reused a phrase that we've heard on TV probably too many times about, uh, gambling. And that was phrased was, Know Your Limit, stay Within It. And he applied that concept to the game of real estate development It ha it stuck with me because it has so many different applications when it comes to development, and we've seen this conversation come up time and again, when you, when we interviewed the guests on this podcast. starting from that premise, and I want to. Go to how we came up with a framework. back in the school days when I was studying for my MBA and uh, they were going through some whole bunch of different courses. One of them, one of the lessons, one of these strategic planning courses really stuck with me and it was around Jack Welsh, I dunno if you know Jack Welch, but Jack Welsh was the legendary CEO of General Electric, who basically, when he came into power and took the role of being CEO, there was a dying giant. That he inherited and. Very big company, very like f familiar household name, but it was struggling and it wasn't too many businesses trying to do too many different things all at once, and it was having a hard time. So he did a very remarkable turnaround of GE as we know it, and it's still around, and he had frameworks and patterns of doing that. But there were two questions that he asked to help him to make decisions and make that turnaround happen. One of them is us of. Particular interests to our conversation here, The two questions were what business are we in, number one and number two, can we be number one or number two in the market for our business? The second question I don't wanna dive into today in this conversation, but the first question, what business are we in, I think is of super importance and super relevance to what we're trying to achieve here. And I think clarity on the answer to that question will help us significantly in creating the next steps. so let's think about it for a second. Let me ask you this. What business are you in or what business are we in? If you are a developer or real estate professional, what business are we in? And just take a minute, take all the fluff away, take all the fancy word and phrases and renderings and e and o insurances and everything else away. What are we in? At the end of the day, you might say we're in construction. You might say we're in real estate. You might say we're housing I might say we run a project management company and they're all true to a degree, but if I wanna strip away the fluff and narrow down on What is the essence of what we are doing? I think all of us who work in real estate development. Or to some extent in the business of risk management. That's it. That's what we do. We manage risk day-to-day. different levels of risk, different priorities and different strategies, and that has been one of the core messages that have echoed through multiple episodes and multiple conversations that we've had with the developers on this podcast and the professionals that risk is. The primary are bread and butter, right? Yes. We deal with the design. Yes, we deal with the concrete and steel and drywall and consultants and lenders. Permits, marketing approval, sales, you name it like tons. There's no shortage of things you deal with as a developing professional or as there is a developer. But underneath all of that, what we are basically doing, we're trying to manage, mitigate, eliminate. Risk. We're typically taking capital that is very hard earned, whether it's our own or someone else that we are raising and We're putting it at risk for exchange, for possible future outcome, which hopefully is better than what we started with. That's generally the gist of running a business. But in the case of development, I would argue that we're faced against, significantly wider range of risks that most of them we don't have control over. And, somehow the deck is not a stack. For us, and in most cases against us, at least in the context of Toronto and GTA. It's changing recently. It's getting a little bit better. We'll dive into that. So bottom line is, the better you are at identifying, understanding, pricing, sequencing, and managing risk, the better. Chances of success you have on your project. You miss your risks. You don't understand them properly, you don't plan for them properly, and you very quickly get in trouble. As again, we've talked multiple times on this podcast. You can get too bogged down over design. You can get too bogged down on energy, efficiency, aesthetics, this and that, and the other thing. Marketing, sales, promotions, launch events as it used to happen a few years ago. But at the end of the day, it's all about risk. You have to manage it, and we go from there. Okay, so with that established, I think that's the basic premise of the conversation we're gonna have. The next question will be, okay, we're in the business of risk management. What do we need to do? What do we really need to be good at to be able to manage risk properly? I would argue, and based on all the conversations that we've had on this podcast, the most critical skill a developer needs is effective decision making. If development is fundamentally a risk management practice or exercise, then you really need to be able to deal with multiple risk factors that come up all the time and deal with them as quickly as possible to the best way that you know how at the moment, based on the information and the results will show that. So it's not perfect decision making. It's not decision making with full information. God knows that's not the case. Most of the times it's not decision making under a certain circumstances that you know everything clean cut and you have obvious answers. you rarely have the luxury having of having a hundred percent certainty, but anything when you're in the game of development. And you can ask that from anyone who has ever developed something that they have to make decisions after decisions after decisions on a daily basis. And if you're lucky, if you're lucky, you have 51% certainty when you're making that decisions. And quite honestly, most of the time you end up making decisions with less than 50% certainty. that's a game. and you still need to decide. You need to choose a site. You need to choose a partner. You need to just choose your design. You need to select your consultants. You need to come up with a legal structure, contract structure, density approval and design strategy. And what I've found. Over and over throughout my career, and this has been best echoed by, one of our great clients and a personal friend, Steven Val at Windmill Developments. He's a partner that he always keeps saying in every meeting we had, he kept saying, no. Decision is often the worst decision. You need to make a decision, and move forward. You adjust as you go. That's definitely the most critical skill a real estate developer needs to develop is to be able to make decisions quickly to the best of their ability and move on. Okay. And quite frankly, that's why mindset matters so much. You need to be a certain breed of person to want to take on that leadership and development role. You can't sit around waiting for others to tell you what to do. You need to be leading the team. You need to be the leader of a team and for being the leader, you need to make decisions so and so's decisions you will regret down the road. One of the things that I've learned over time, and it has come up on this podcast as well, is you cannot get emotional. You have to stay disciplined. I had a, I remember asking this question from Justin Aler on one of the episodes, a third generation developer who I have worked with quite a bit. And he mentioned, I asked him, how do you stay so calm after receiving all these news that something has gone wrong, something is not working the way he's supposed to be? And I guess his response, and I'll refer you to that episode, but his response somewhat came down to. We know the game. This is what it's, you can't freak out at anytime. It's messy, it's ambiguous, it's relentless, and it just keeps happening. So Shaquille Ji from Share Corporation had a similar statement. You roll with it, you go to bed, sleep, breathe, exercise, take a shower. You wake up the next morning and you go from there. Why is this an important conversation to have right now? This is also important to talk about. There's some good things happening. We live in a crazy world. Trust me, I know it. Fully understand it. You open the news. There's too many things that you can worry about, but I also want to look at glass half full, a silver lining, maybe a. Finally, eventually, in our city, in Toronto and the GT area, for the most part, there are some changes happening. There are new avenues being pro provided for smaller first time developers who want to get into the business, be part of the solution, and do something about the problems that we're having. Being at a multiplex project, four plus one, it being a midrise on an avenue or a major street or other types of projects that are becoming feasible and viable gradually some more than the others through government incentives, through programs such as CMHC, and I'm seeing increasingly number of people who are coming in. Again, wealthy individuals very smart individuals from other industries, citizen developers is what they're calling them, and they're coming into this game. And I worry sometimes, quite honestly, because a lot of them are very smart and they've done great before, and it might take them by surprise, how different our game is when it comes to building a new project. Starting a new project, because. As anyone who's gone through this would tell you it's not rocket science. Anyone and everyone can probably figure it out. It's just a million different decisions that you need to make most of them on a daily basis. Results of which you will probably not know for a few years and that's a long learning curve, which can turn into an expensive exercise if you haven't done that before, or you, if you don't have the right people on your team. Who can provide you with those inputs. So if you're a lawyer, if you're a business owner, if you're a landowner, if you're a landlord who has capital, who's trying to take on the challenge of becoming a real estate developer, which is why we are here, which we are here to empower you with, you're able to help you. We wanna make sure that at least you understand what your business, what business you're in. You're not in the business of building beautiful things. My architect parents would disagree with me, but you're not in the building business of building beautiful things. You're in the business of risk, managing risk, getting a return on the investment while leaving a legacy, making an impact on your society, and providing a service to your community so that you can do it again. Otherwise, we're in trouble. It's a one-off. You're never gonna do it again. You're gonna probably discourage other people from doing it as well. We don't want that. that's not what's gonna be part of the solution. So it's very important to not understand what the business we were in. What's the critical skills, and I'm gonna wrap this episode by just touching base on we, we talked about the development readiness model and framework, and I'm going to just quickly touch on what this framework is, and in the future episodes we're gonna dive deep into these. The part different. Parts of this framework and hopefully it will help you even more. So we went through all of the transcripts of these episodes and we tried to narrow it down or too many things that have our guests have touched on. But after a couple spending a couple months, we've managed to narrow it down to, which I think is a generally acceptable framework. Again, it's not science, it's not research, it's just me trying to organize my thoughts. And we've narrowed it down to six pillars, or six parts to successful development. And like I said, in the future episodes, we're gonna go through them all in detail. But these are the six pillars that we think are important for any new developer or first time developer to be wary of or aware of when making decisions, acting on a daily basis, and hopefully having a very successful project. which by the way, if I forgot to say this before, these are none of these rocket science. they all sound pretty simple, but they're not easy to deal with. So number one is local market fundamentals. Knowing the market. Number two, capital structure and financial feasibility that could all perform A do my numbers make sense questions, and can I get other people to invest in my project? That's the second part of that question. Third is the ownership tax liability. And basically the legal structure, which we have talked about this on the, on this podcast, and unfortunately I don't think enough people pay enough attention to those three items because they will have an impact, especially on the tax side in different capacities and the legal liabilities. Number four is design an approval strategy. what I've learned again through this podcast and through real life experience is that you cannot have a successful project if you actually don't have a strategy for your design and approvals. So that's, we're going to talk about that in more detail. We're gonna talk about the execution and risk management. Again, we touched it. This whole thing is about risk management, and these are different categories of basically risk, but there needs to be a system. There needs to be a practice as a framework for you to actually do that on a daily basis, not just know about it, but actually do it and look after it. We're gonna talk about that. And number six on the final one, the final pillar is. The operational, discipline and mindset. And, some of that we touched on in this episode. We're gonna dive into it a little bit more in future episodes, and those six will form the pillars of this framework. So this development redness framework that we've created and. we've also created, an assessment. It's a free assessment. Takes like five minutes to complete. There are like 25, 30 questions that you answer and it kind of gauges you on where you, where you are in your journey on these six different categories. So if you wanna take that assessment, please go to development readiness assessment.com. Development readiness assessment.com. That's the website. You can find it also in the show notes. It's a free assessment. Five minutes. You get a basic reading on where you are and hopefully you can repeat that reading again in a few years and see how, how far you've come. And with that, I want to thank you again for being here for our 50th episode. It has been such a fun ride, such an informative ride, great people to meet, great connections. Lots of things I've learned and I thank you for all of that. if you find this episode interesting, or if you have other suggestions for us, please feel free to Reach out to us on LinkedIn, or our website where you can go to our website if you can find a link in description and let us know what you think in the future episodes. We're gonna dive deeper into those pillars and talk more about them. Thank you, and I hope you've enjoyed listening. I.