I just found this place a recently. Excellent. Excellent!
My trolling over the last few weeks has uncovered interesting and useful information which I'm using to help me formulate my next move for my RE business. I'm making this post in hopes that I can get input on scaling.
A partner and I recently formed a development company. We are currently on our second project. The first project was a 4.5MM office project and the second one is a 6MM retail center. We have a 7MM flex warehouse development in the pipeline as well as a 6MM office redevelopment project we are considering. We both had development and construction real estate experience before starting this company and were able to use our past investors and/or clients as investors to get our first few projects off the ground. We are using a fairly standard syndication GP/LP model which has worked to cobble together the requisite LP capital. If returns are realized as assumed, our investors should be high teens to low 20s irr.
I'm looking to scale.
In order to scale I'm having second thoughts on development and if ground-up asset agnostic location specific development has longevity and can scale. I'm in a second tier market with 1MM population. Has anyone grown a development company from my size to something larger? If so, how did you continually find good investments and were you required to go outside of your market and specify your asset type?
I'm starting to consider if we should scale this company to handle more volume and less risky deals. It seems much more sustainable because of less dependence on the condition of the short-term market. Development is a shitload of work and we just sell for quick gains. It feels kind of like we are house flippers. There are so many advantages to holding real estate long-term. Should we look to bring on partners with institutional background and grow a company that does high volume value add long term deals? My partner and I are both successful entrepreneurs, but we lack any institutional background, so I'm contemplating the idea of finding partners with institutional background who would join our team to grow this type of business. If that is the case, I have a preconceived notion that it would take us having a novel concept in order to give investors a reason to invest with us. Am I wrong in that assertion? It seems like there is a lot of competition giving moderate returns. If we give market rate returns and do what we say we are going to do, is that enough?
There is much more to discuss outside of this initial ramble. Hopefully that will be enough to start a conversation. Any input is greatly appreciated. If you've made it this far, I owe you a beer next time I see you...