Who pays for pre-construction costs in RED? Like environmental engineers/architects?
Young buck that thinks real estate is incredibly interesting and learning as much as I can about it. I believe I have a decent (shaky) understanding of the general outline of a real estate project but am wondering about the intricacies.

Who is it that pays for the pre-acquisition costs like designs and lawyers? Let's say the equity partners expect the developer to put up 5% of the equity. Because that must be very risky capital to invest not knowing if the project is even feasible. Do equity partners pay for this or the developer? And if the developer is responsible, does his/her contribution to these count towards the 5% equity expected from the partners?

Sorry if this is very basic, I never went to school for this stuff. If anybody has any books/resources to recommend that'd be greatly appreciated. I'm going through case studies but this is still unclear. Thank you!
[{"id": "hxuug1y", "text": "There isn\u2019t a set outline or blueprint for how a deal gets done. I realize this doesn\u2019t answer your question but the devil is in the details", "replies": [], "depth": 1}, {"id": "hxva3du", "text": "It depends.\n\nThink about this slightly differently than you are in it will make more sense.\n\nA developer generally sets a deal up then asks for money.  They will spend exactly as much as needed before someone else funds it and they make their money.", "replies": [{"id": "hxwsurm", "text": "This makes a lot of sense. Kind of hard to sell a deal when you don't really have a deal.. Thanks for making it click!", "replies": [{"id": "hxwtn66", "text": "Pretty much. Just think logically. Doing a star bucks deal ?  Get the lease signed and you are done.\n\nWant to develop a mixed use 100 acre center?  You are going to be deep in that", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hxvndau", "text": "The comments here mentioning that \"everything is negotiable\" and \"the devil is in the details\" are spot on. I know it's not a satisfying answer but I'll try and provide some further context so hopefully you'll feel you have a better understanding than you did before posting.\n\nYou're smart to ask the question, because so much of the commercial real estate process is designed to allow for various parties to demonstrate commitment/push a project forward while also minimizing the risk they take on.\n\nWhen it comes to developers vs. equity partners, this will all be hashed out in a partnership agreement. Honestly, there is no hard and fast rule of thumb here and it'll depend on the negotiating position/power all the individual players have.\n\nThe most important factor in who bears up front costs (in my experience, at least) is where the the developer/equity partners are at in negotiations with potential tenants. For example, if a developer is taking a \"build it and they will come\" approach, with no specific tenant(s) signed into leases that begin on completion of construction, then obviously it's on the developer/equity partners to cover all costs pursuant to their partnership agreement.\n\nThat being said, many developments are turnkey buildouts for specific tenants already signed into a lease for the space before the space is built. In this cases the devil really is in the details, and the division of all of these costs will generally have been a part of the lease negotiation. Here potential tenants may commit to construction allowances (money paid to the developer to cover the cost of construction), or, for example, insist on using their own architects and paying those architects themselves. As far as legal fees go, every deal I've been a part of involves everybody paying their own legal fees.\n\n&amp;#x200B;\n\nHope this helps and let me know if you have any questions", "replies": [], "depth": 1}, {"id": "hxxc4vt", "text": "First comment for sure. It depends. I\u2019ve seen development deals where the developer puts all money up front and carries to close. Then the developer is reimbursed the predevelopment costs at closing and usually paid part of his fee.  I\u2019ve also seen the LPs front the money- at a 20% IRR. Depends on your risk tolerance. Your LPs risk tolerance. \n\nAlso consider this: you, as the developer, are going to have to front some money.  Earnest money, attorney\u2019s fees. The up front costs. Otherwise, it\u2019s just an idea, and not going to attract investors or lenders. \n\nIt\u2019s about your risk tolerance.", "replies": [], "depth": 1}]