The title says it all. I am trying to understand what type of Levered LP Equity Multiple an LP would like to see on a single-family spec home development project.
I'm aware builders tend to base their profit margins off Gross and Net Profit Margins, but I'll need to raise LP equity to do my projects and I'm not really sure what the equity markets are like for this type of project.
A hypothetical would be a roughly 18-month hold period with sell-outs over $1mm+. Equity Waterfall would just be an IRR-based waterfall with a 17% pref and then a 25% promote after surpassing the pref. GP puts in 20% equity.
Fees would be a 3% Developer fee of the Total Project cost. 20% of the fee upfront in lieu of an acquisition fee, and then the balance is straight-lined until the project sells.
Thanks in advance guys!
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