What metrics do you use to compare large-scale redevelopment projects for long-term holding period i.e. no windfall? To make it more complicated, every project is in a different phase - some can be in early market research while some are already 25% complete.
A few metrics off the top of my head:
- IRR - IMO it doesn't work since there are no sale proceeds once the project is completed
- Cash on Cash (stabilized rent over total project cost) the best metrics? Or CAGR of stabilized NOI against cost of capital?
Work at a long term hold family owned development shop. Yield on cost (NOI/Total Project Cost) is our go to metric for long term hold project. We look for yield on cost to be baseline 150 bps above prevailing cap rates.
Yield on Cost is the best metric for a build and hold development. To add to that, 150 bps is a rule of thumb and really boils down to exit cap being ~25% lower than your YoC
Thanks guys! This was really helpful - Also reminded me I mixed up COC with YOC.
I usually look at how much Weighted Avg Profit, or WAP, the opportunity will generate. Usually combined with COC.
Nemo enim eligendi sit saepe sint praesentium est. Explicabo autem iure tempore atque voluptatibus facilis. Quia quo et quis dolores ut est qui. A quia eos consequatur provident deserunt omnis. Exercitationem non velit repellendus et animi fuga. Neque minus deleniti molestiae et.
Temporibus dolor vel veritatis aut voluptatem ullam et. Iure est cumque consequatur iure laborum quasi. Blanditiis nostrum aut animi fuga dolorem velit. Beatae autem tenetur dicta eum deleniti. Ut qui magni id maiores qui. Eos et eum fuga blanditiis.
Ea sed fugiat ex maxime temporibus aspernatur repellendus. Reprehenderit quasi dolores qui qui maiores numquam nihil. Dicta dolorem voluptatibus doloremque itaque. Rerum maiores suscipit qui. Dolore modi maxime repellendus.
Veritatis sed et consequuntur et. Laborum quis omnis explicabo enim dignissimos. Suscipit dolor dolor sit aut. Eos similique sed debitis illo.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...