A typical development project starts with the acquisition of a plot of land. The conclusion of a land purchase transaction is often preceded by a preliminary agreement, which lays down in detail the conditions for concluding the sale agreement (final agreement) and makes its conclusion contingent upon the fulfilment of defined conditions (e.g. resolving the legal status of the plot, acquiring the expected zoning decision, etc.).

Each development project is implemented through a separate special-purpose vehicle established exclusively in order to implement a given project. This structure ensures the necessary level of security and transparency of the project, in particular from the point of view of co-investors, lenders and purchasers.

Except for certain specific situations, the owner of the plot on which the development project is implemented is always the special-purpose vehicle, which is also party to all agreements relating to the implementation of the project, including loan agreements. 

Investors such as BBI Development NFI participate in the implementation of development projects by acceding to the special-purpose vehicle and/or granting it a loan. Own financing provided jointly by investors usually constitutes no more than 25 per cent of a project’s budget. The remaining financial resources come from advance payments from purchasers and bank loans (for whom the plot upon which the project is implemented constitutes security).

Key agreements for a development project also include the agreement on design works and the agreement on project management. The total remuneration of the contracting parties on account of design works and project management usually amounts to approximately 9 – 10 per cent of the value of the building works. In the case of projects with a high degree of difficulty, that indicator may be closer to 15 per cent.

Building works commence after a legally binding building permit has been obtained, issued to the owner of the real estate for a precise building design, prepared on the basis of the assumptions set out in the local zoning plan. In Poland, the majority of areas for development investments are not covered by such a plan, which means that in each project a decision on construction conditions must be obtained for a specific item of real estate (plot). This is one of the most important risk factors in development projects, sometimes causing delays of even several years.

For projects where units in the premises created are designated for sale (residential buildings and predominantly residential multifunctional buildings), the venture is finalised immediately upon the sale of the last unit. In the case of projects where the area created is designated mainly for office, commercial, services or entertainment purposes (office buildings, shopping and leisure centres, etc.) usually used under a lease agreement, the entire building is sold. The transaction is usually preceded by the special-purpose vehicle concluding long-term lease agreements for particular premises, which increases the rate of return on the project.