Agora’s Managing Partner, Howard Kozloff, moderated a standing-room-only session during Urban Land Institute’s Fall Meeting in San Francisco last week. In collaboration with co-moderator Jim Heid, founder of Urban Green, they hosted the second annual session “Small-Scale Development Deals: Perspectives from the Capital Sources.”
Mr. Heid and Mr. Kozloff identified three panelists from different capital sources to provide a glimpse into how each of them assess the same opportunity – in this case, a townhome development deal by Allan Glass of ASG Real Estate – what gets their attention, and what makes or breaks the funding decision.
The Los Angeles development project—in an up-and-coming neighborhood in West Adams—was presented as ASG’s first ground-up development, building on 20 years of experience as a broker, as well as an active investor and renovator in Southern California.
The panelists, representing three capital sources, included: Nav Athwal, Founder and Chief Executive Officer of RealtyShares, a crowdfunding platform; June Munchi, Managing Partner of The CenterCap Group, LLC, a boutique real estate investment bank; and Jim Milligan, the Managing Director of Baker Street Advisors, a private wealth management advisor.
The session, consisting of the project presentation and panelists’ follow-up questions and comments, provided key takeaways:
-Location is key:
The project is walking distance from two new transit stops in an up-and-coming area. If the investor is not familiar with the location, it is important to give context and examples of surrounding landmarks (in this case, proximity to downtown, Santa Monica, and Hollywood).
- List the project’s basic stats and features:
Number of units, bedrooms/bathrooms, square feet, design features, etc.
- Demonstrate that the project fits market demand:
While budget accuracy is crucial to determine costs, understanding the rationale for exit values amidst changing markets requires equal focus.
- Entitlements and approvals status:
Panelists would prefer investing after project was fully entitled so as to bear the least amount of risk.
- Provide a worst- and best-case scenario:
For sale projects should consider a rental scenario in the event sales velocity or values are off-target.
- “Skin in the game”:
Providing “meaningful” developer equity alongside investor equity is mandatory. If cash is not available, a partner with a proven track record provides many advantages.
-Know your numbers:
Without referring to notes or presentation slides, know your overall costs, revenues and return metrics, whether IRR, multiples, yields, etc.
If you would like to learn more about “Attracting Capital to your Project,” join us for our next ULI Real Estate Entrepreneur Program in Denver (Dec. 14-15, 2015): http://uli.org/event/attracting-capital-project/