What resources are typically included under operating capital for predevelopment activities?

Operating capital for predevelopment activities is fundamentally concerned with resources that facilitate the initial steps in a real estate project before any construction begins. This stage often involves various preliminary activities such as site assessments, environmental studies, zoning and permitting work, and legal fees, all of which require immediate funding to ensure the project can progress smoothly.

The resources that fall under operating capital are typically short-term in nature, as they are aimed at covering immediate expenses associated with these predevelopment activities. Short-term resources allow developers to address necessary investigations and legal requirements without the burden of long-term financial commitments.

Long-term investment funds, equity investments, or long-term loans related to construction do not align with the predevelopment phase’s immediate needs. These options are better suited for the later stages of a project once development is underway and tangible assets are being improved or constructed. Hence, the focus on short-term resources provides the essential funding needed to advance a project through its predevelopment phase effectively.