Underwriting Process and Investment Criteria
For our funds, proposed development projects must meet certain criteria before being considered, including the following:
I. Nature of Underlying Real Estate: Our primary focus is the residential & commercial real estate development industry, specifically lower class to middle class residential markets. Land development, single-family homes, multi-family construction and retail developed in conjunction with residential projects.
II. Market Opportunity: We generally consider projects in markets with large populations of at least one million. Each of the markets in which our funds invest typically have, according to management’s judgment, solid underlying real estate fundamentals including strong job and population growth (in the long term) and rising or stable rental rates, occupancy rates and asset prices. Only markets with significant upside potential in the short- to medium-term are considered.
III. Investment Size: We typically seek development projects that require commitments from our funds in the $1-10 million range. We also consider smaller or larger investments that, among other things, obtain a position in a new sector or market, or offer above-target risk-minimized returns.
IV. Investment Period: In the case of development projects, return of capital is typically sought within two to four years of the initial investment, with complete project build-out expected within three to six years.
V. Returns and Underwriting Standards: Investments are generally made by our funds only in development projects that have sufficient margin on cost to absorb reasonable variations in the business plan.
VI. Due Diligence: Investments are subject to extensive due diligence reviews, generally including in-depth reference checks, environmental audits, market analysis, site analysis, financial and construction cost analysis and legal review.
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