Returned from West Palm Beach last week after seeing a spike in Investments and New Construction projects around the Nation. We underwrote and evaluated 16 different proposals from various Real Estate Syndicators for New Construction Mixed-Use, Multi-family, Senior Housing and Industrial Projects in all different parts of the country.

We have decided to pass on a lot of New Construction projects while moving forward with others. New Construction is a super regional micro-level investment. If the Urban Planning and Master Plan of the City is in alignment with your plan, the upside potential is far greater, than just another New Construction Mixed Use Project.

The best deals came from the unique analytics prepared by the real estate developers. One developer showed a unique pocket of demographics we have not even seen before, which definitely caught our attention. This developer really knew his market and the key players.

Watch out for the tricks people play.

Top 5 Reasons We Decided Not to Move Forward on Several:

1) Exit Cap Rate 5 years from now was lower than what they are purchasing it today (We like to see developers showing us a chart with a 2 pt spread up and down comparing the IRR in these 3 scenarios. a) 2 pts higher b) the same c) 2 pts lower
2) Demographics were outdated from 2016 (just basic misinformation)
3) Non-inclusive of a Macro and Micro Map showing traffic flow and the effect the project will have to increase ingress/egress on a city scale
4) Too many “TBD’s” on the proposal (We like to see developers with experience work with partners they know will succeed in their projects – even if it was “X tenant and/or TBD” is better than just a “TBD”
5) New Construction Oversupply was not factored into the comparison model (If you are building new, you should have a comparable against existing and a comparable against what is coming in the near future)

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