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09 Nov 2021

Six Days of Feasibility: Day 1 - What is a Feasibility Study?

Jay Garlick

CEO - Greenscape Development Partners

This post is the first in a series of articles entitled: “Six Days of Feasibility” designed to educate the reader on the world of Feasibility Studies. Over the next 6 days Jay Garlick of GDP Feasibility will address the following:

Day 1: See the End from the Beginning: What are Feasibility Studies?
Day 2: Don't Make Business Risky: Why a Feasibility Study?
Day 3: Self Storage = Cash Cow: How a Feasibility Study Makes You Money?
Day 4: Buyer Beware: Why Not all Feasibility Studies are the Same?
Day 5: Get You in the Game: What Do You Do with a Full Feasibility Study?
Day 6: Deal Makers, not Deal Breakers: Do You Have Someone to Walk the Path with You?

Day 1 “See the End from the Beginning: What is a Feasibility Study?”

When we begin to consider how to create successful real estate development, I tend to want to distill our thinking into two pieces of sage advice I learned early in my career.

  1. You make money when you buy real estate and not when you sell.
  2. Begin with the end in mind.

The idea that a developer/investor makes money when they buy seems counter intuitive unless you understand that successful real estate development is about learning how to see the future of a parcel and envisioning what to do with it to make money.

Similarly, beginning with that end in mind, not only includes a vision, it means that you have a plan of action and you have confidence in that plan. It means that you have invested first in the ability to have enough reliable information to act with confidence and strength.

If a developer wants to act with confidence, not guessing, they need clear, reliable, concise and actionable information to know how to avoid risk and make money. Now after 24 years in real estate, if I could re-word or even combine the advice I was given, I would say the following:

You make money when you don’t leave anything to chance and minimize risk with the best information possible. Armed with the confidence that comes with that information you are able to make the most profitable decisions possible regarding the future of your project.

Good feasibility studies are built to see the end from the beginning. No serious project goes forward without one. The banks want them before they lend, the investors want them before they invest, the future buyers want them for comfort that they are doing the right thing. So, if everybody wants one, what exactly is a feasibility study?

Definition of a Feasibility Study:

A feasibility study is a set of analyses that considers a project's relevant factors—including government approvals, market study, project economics, design, etc. They are designed to ascertain the likelihood of completing the project successfully and making everyone money.

4 Common Elements of Self-Storage Feasibility Studies:

  1. Entitlement Feasibility: This element is a professional look at what government approvals may be necessary and what process may be to get a project approved.
  2. Market Feasibility: This element addresses supply and demand factors and whether it is favorable to do a project in it’s specific trade area. This should be the most in-depth of all the studies.
  3. Financial Feasibility: This addresses the dollars and cents of rents, costs, financing, operations, etc and then offers projections over 3-10 years before forecasting a sale of a project. It is designed to forecast both profit and growth. Many assumptions are drawn from the Market Feasibility Study to determine Financial Feasibility. This should never be done without the other.
  4. Design Feasibility: This is the process of blending Development Feasibility, Financial Feasibility, and Market Feasibility into a site plan and a design. If it is done right, it is not a stand alone piece. Unit size and mix should be a market driven decision not guesswork. Making a design fit closely to a proforma won’t happen by accident. Architects are not going to get here without guidance.

A feasibility study differs from the following elements of development:

It is important to distinguish the difference between feasibility and other elements of development. The following is a list of other elements that, while they might be linked to feasibility, should not be considered part of a feasibility study.

  1. Sourcing Land - finding a parcel.
  2. Due Diligence - using consultants and tests to determine what limitations or challenges may or may not stand in the way of development or need to be overcome to move forward or terminate the project. Lenders require these apart from feasibility.
  3. Negotiation & Acquisition - getting to a price and through the purchase process.
  4. Construction - executing on a plan after feasibility, due-diligence, financing and design are complete.
  5. Legal Structure -the use of legal entities to structure the venture moving forward.
  6. Capital Stack -while partly dependent on Financial Feasibility, establishing the capital stack is determining in real life the right combination of debt and equity for the project.
  7. Raising Capital - the proper process of finding investors to help move your project forward and how to reward them for taking the risk.
  8. Hiring Management - the process of matching the project to the best managers possible.

What are the Types of Feasibility Study Deliverables?

Self-Storage Feasibility Studies generally break down into five basic types at our firm. Desktop, Entitlement, Full Market, Financial, and Design. A developer should expect that each of these be “best-in-class” with the most professional approach possible in content, service, and appearance. A bullet point description of each as follows:

Desktop Study:

Entitlement Study:

Full Institutional Grade Market Feasibility Study:

Financial Feasibility:

Design Feasibility Study:

Good feasibility studies are built to see the end from the beginning. The banks want them before they lend, the investors want them before they invest, the future buyers want them for comfort that they are doing the right thing.

All things considered, with millions of dollars at stake, no project should ever move forward without a feasibility study, nor should it be anything less than the very best. The document will establish and minimize risk to developers, investors, lending institutions, and the market as a whole.

Up Next: Day 2: Don't Make Business Risky: Why a Feasibility Study?

Who is Jay Garlick?

A self-storage developer himself, Jay Garlick is the Principal at GDP Feasibility and Partner/CEO of Greenscape Development Partners which specializes in self-storage development nationwide. Garlick began doing feasibility studies in 2004. Since then he has done studies on over 400 sites in the United States. Jay has a Masters Degree in Real Estate Development (MRED) and will soon finish a second in Masters in City and Metropolitan Planning (MCMP). Garlick has developed and or entitled his own projects coast to coast in UT, WA, MO, KS, and VA. Garlick can be reached at jay@gdpfeasibility.com. For more information please visit www.gdpfeasibility.com.