Developemnt Return Metrics from 5 years ago
I just started full time as an analyst at a Developemnt shop. I understand that deals are difficult to get done these days. Just curious what return metrics you would need for a deal to pencil from say 5 years ago. Would a 25% IRR and 5.5% UYOC be enough?
5 years ago we were looking for an 18%-20% IRR and a 6-6.5 yield more or less.
3 years ago, some companies were getting wild and accepting 5 or sub 5 yields, but even at our most aggressive we weren’t sub 6 where I worked, and a 25% IRR was always more than our equity required, not that they’d argue with it if it presented.
People targeted a 2x EM and 20% IRR. Usually that meant you actually hit a 1.7x EM and 15-17% IRR. UYOC depended on product type.
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