I’m a development manager and as everyone know dev doesn’t work right now. Is anyone (any asset class) making money right now? Or are we all just trying to make it thru to fed rate cuts? I imagine acq. Is doing well either with cost of capital. Your prob negative leverage. Just curious if anyone’s able to do any business right now or if we’re all just riding this thing out
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Property management companies are gouging properties on known and hidden fees.
Private debt funds
Honestly, in MF, I'm sure Acq's are doing fine, as well as the brokers/originators covering them, as that huge uptick in new construction is coming to lease up/stabilized and needs to come off floating rates. Some are just extending, but those in the funnel are making a bunch. It seems a lot have already laid off across the asset class and are running lean, so those that stayed are making ok money with the potential for strong growth when they make it out.
In my day job, I'm running some large developments that my company got into at low land basis 2-3 years ago. We're moving more slowly and deliberately than we did several years ago, but the projects should still be profitable (though not as profitable as they would have been if cap rates had stayed in the 4s). Starting to see some softening in construction pricing, which helps.
I've also been trying to do some smaller stuff on the side: small townhouse and multifamily value-add reno or ground-up new. Working with a contractor partner. This is in the outer suburbs of a HCOL area. We have solid market knowledge and pricing knowledge, and we're getting blown out of the water on every acquisition attempt. We find a property, very carefully underwrite the construction costs, and back into an acquisition price that's way lower than what the seller wants. Then we approach the seller about a price reduction and find out that they just got an all-cash offer for above asking with no contingencies. The numbers make no sense, and they're making me question my own sanity.
Of course development works right now.
What you meant to say is "the kind of shitty development I used to do, where I'd buy land at any price and without considering anything with any hair or complexity and rely on a rising rental market and rock bottom rates to bail me out doesn't work"
Entitle land. Find local or state subsidies. Use tax abatements. There are a ton of ways to make development work, which is why so many developers are making money hand over fist right now. Bad development doesn't work, but I suppose all crappy developers are biased to confuse "development" and "crappy development" since they don't know any other kind.
LOL
This is exactly what we've been doing. Highly subsidized deals, nothing else makes sense. Grants, tax credits, tax abatements etc
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