Why would a multi-family developer look to sell a project prior to stabilization?Subscribe
Question for the acquisition and development monkeys: My group is looking at a 135 unit multifamily acquisition in a third tier suburban market. The broker is marketing at a favorable cap rate for new, luxury, amenitized multifamily. Here is the rub - construction is still ongoing, the owners are at 50% occupancy and have made the commitment to sell the project once construction is complete and at 70% occupancy. We toured the property and there were not glaring signs of shoddy construction - in fact the property looked pretty good, lots of high end finishes. The developers are historically condo builders - this is their first foray into multi-family. We see this as an opportunity to take advantage of a hairy situation at a reasonable price but I am wondering why would anyone ever look to sell prior to stabilization and leave money on the table? Are there any red flags to look for here?