Ground up development doesn’t pencil
Is anybody getting ground up development to pencil? If so, what asset classes are you focusing on?
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Yup. Sucks out here.
Difficult to rent units too with the economy in the toilet.
Yep- self storage
For self storage, what stabilized cap rate or IRRs are you need for ground up?
Stabilized ROC of at least a 9%+, IRR’s of 22%+. This is trended at the property level
MF & Industrial.
1 out of 25 deals makes sense to underwrite.
It’s getting close on some wood-frame multifamily
"No. That's the whole point." - Jerome Powell
Condo development for sale
Yup right here. Condo development I’ve been seeing a lot of these
Haven’t gotten anything to pencil (multi) in last 12 months. Even our deals in design/entitlement have been held up as we’ve gotten updated sitework pricing, new impact fees, market rents softened and collection loss grown across our portfolio, etc. We’ll still likely push through but this is 3-story walk up, surface parked product. Don’t how you make sense of anything with podium/structured parking. Suppose some groups are doing deals mainly to keep the lights on.
How is everyone staying busy? Are you offering on sites / optioning land?
I’ve read 50 books this year and we’re only in October.
I think my previous single-year adult peak was 7.
any book recs?
What are you into? Non-fiction? Sci fi & fantasy? Literary? Thrillers?
Non-fiction or thrillers
For non-fiction, Andrew Ross Sorkin’s 1929 about the 1929 crash and the Great Depression just came out. That will keep you busy for a while. William Dalrymple’s The Anarchy about the British East India Company is fascinating too. The idea of a trading company essentially running a country is wild.
Thriller-wise, SA Crosby’s King of Ashes is new this year, but his All The Sinners Bleed from two years ago is even better. And then I re-read Jurassic Park for the first time in like twenty years too. It still holds up.
Special shout outs also to China Miéville’s The City and The City, which is a weird detective story in a fictional Eastern European country, and C Mallon’s Dogs, which is about some utterly bleak high school kids.
Read Dune twice this year
starting a fragrance business. way better industry. probably the best sector to be in right now. its exploding with money
I'll review some samples for you
legit? how did you get into this?
I used to be in this space on the mfg side. You have to be VERY careful with what kind of contracts you sign with retailers.
I have seen a healthy number of "missing middle" (duplexes, quads, row homes, etc) new development pencil in solidly middle-tier cities. This is probably not the type of real estate you are talking about, but at least one part of real estate is seeing decent new build opps.
Much more accessible for a budding entrepreneur too
This is where I always recommend people looking to get into development start off. You can build to commercial codes, it requires less capital, localities will generally be more willing to help facilitate the opportunity, etc.
what are you underwriting your hard cost per square foot at?
Luxury condo + hotel is the only ground-up deal we've taken on since the pandemic...nothing else has penciled.
Everything pencils, you just have to realize that your IRR isn't going to be 25%.
Can you elaborate please as a smaller brand? Specifally what? Are you in the retail space? Would love to hear your insight :)
That’s a Loser’s mindset
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