According to the EY Real Estate Capital Program Transformation: Developer–Investor Partnerships report, the structure of joint development processes is undergoing a redistribution of functional roles and increased procedural regulation. Changes in the regulatory environment, rising construction costs and the need to control operational parameters of assets are shaping new requirements for capital programs, including documentation standardization, expanded monitoring and detailed allocation of responsibilities.
A key element is the unification of Development Agreements. These agreements define the project’s baseline characteristics, technical specifications, procedures for approving changes and the structure of investment-committee decision-making. Particular attention is paid to construction phasing, including the work schedule, key milestones and the system of performance verification. Transparency of these parameters forms the basis for capital allocation between participants and determines mechanisms for funding adjustments.
During the pre-development phase, investors require an expanded set of materials. This includes technical due diligence of the site, assessment of engineering systems, preliminary energy-efficiency calculations and analysis of transport-infrastructure parameters. These inputs form the foundation of project documentation and have a direct impact on the financial model. For refurbishment projects, an audit of existing engineering networks and an assessment of upgrade costs are mandatory components.
Changes in capital-expenditure structure are driving the broader use of hybrid financial models. Combinations of equity, mezzanine and structured debt are applied to finance site preparation, engineering works and core construction stages. Agreements specify milestone-based capital allocation, reporting requirements and conditions for independent monitoring. These elements allow investors to control the sequencing of works and ensure compliance with approved parameters.
The monitoring system is becoming more detailed. Investors employ regular inspections of construction progress, including verification of work volumes, deviation analysis and assessment of delay risks. In some cases, digital tools are integrated to track construction progress in real time. Monitoring results form the basis for adjusting the funding schedule and updating the financial model.
Change management receives separate attention. Any modification to design solutions, technical specifications or timelines requires a formal approval process. Investors set thresholds for acceptable deviations; exceeding these limits triggers a revision of the project model. Such mechanisms help prevent cascading delays and cost escalation.
The financial model of a capital program incorporates future operational parameters of the asset. Considerations include energy efficiency indicators, automation systems, engineering solutions and projected operating expenses. These data become part of the investment package and are used to calculate lifecycle ownership costs. For mixed-use projects, separate cost–income analyses are performed for each functional component.
Thus, the transformation of capital programs reflects a shift toward more formalized and transparent investor–developer interaction models. The foundation lies in standardized documentation, expanded monitoring structures and detailed financial mechanisms that ensure controlled project delivery under changing regulatory and economic conditions.
Commentary from M24 Investment Division:
The shift toward formalized capital programs reflects the institutionalization of development as a managed investment process. Centralized control through unified Development Agreements, digital monitoring integration and milestone-based capital allocation reduce risks across all stages — from site preparation to commissioning. For investors, this provides a clearer mechanism for protecting capital and the ability to adapt participation structures as market conditions evolve.
