Every developer will tell you they are aligned with your interests. The structure of the deal tells you whether that is actually true.
Development management is where this gets decided. A development manager runs a project on the owner’s behalf, from predevelopment through completion: assembling the design team, driving the drawings through permitting, building and holding the budget and schedule, managing approvals, keeping the work moving. The owner sets the goals and holds the capital. The development manager executes. In effect, it is the in-house development team for an owner who does not have one.
The question that matters is how that manager gets paid.
Fee development and equity development are not the same business
A traditional developer takes equity. They put capital at risk, control the project, and take a share of the profit, often through a promote that pays them disproportionately on the upside. Their interests overlap with the owner’s, but not completely. The promote introduces a seam.
A fee developer works differently. The development manager takes no equity. It is paid a development fee for managing the work, usually with a performance bonus tied to defined results. The owner keeps control and keeps the upside.
This is the model Promont uses. We do not take an equity position in the projects we manage. We are paid through development fees, performance bonuses, and, when we also build, construction margin.
Why the structure holds
The standard worry with any developer is that at some point their interest and yours diverge. Fee-based development management removes the most common source of that divergence. The manager is not negotiating against the owner for a share of the deal, because there is no share to negotiate. The manager functions as the owner’s team because, structurally, that is all it is.
The performance bonus does the rest. Tie part of the fee to hitting the budget or the schedule, and the incentive points where the owner is already looking.
When it makes sense
Fee-based development management earns its place when the project is complex enough to be a full-time job, when the owner has no in-house development team, when the deal depends on a realistic budget and schedule, or when the owner wants one accountable party rather than a chain of vendors.
For a simple project run by an experienced owner, the fee may not be warranted. For a conversion, a ground-up build, or anything carrying entitlement and financing risk, going without it usually costs more than the fee ever would.
Alignment is easy to claim. A fee structure with no equity and a bonus tied to results is what makes it real.
