First ever ground up development: 48-unit MF. Am I insane?

[Michael Wayne]

Hello BP,

I am in the middle of my first ground-up development deal - a 48-unit ground up MF - and need help determining if I am in fact insane for thinking I can do this as my first deal. 

My partner and I recently started a real estate investment company and were approached to raise equity for a 48-unit ground-up development in a sprouting northwest suburb of Detroit. We were slated to bring the final piece of equity to the table to complete the deal. The total cash requirement to meet the banks LTC requirement is about $1.7M. While doing so, a separate piece of the financing (PACE loan) was deemed unattainable and it tore the original deal structure apart. Then, the developers offered to sell our equity group the deal out-right in exchange for settling the debts and payables on the project and returning current investment principal, including a negotiated return on said principle (between 50%-100% on the money already in). 

This sounds a little crazy, I know. Allow me to explain: 

The current developers have been working on this deal for 2+ years and initially planned to fund the project using one of HUD's market rate financing products. After 2+ years of seeking HUD approval to no avail, they scrapped that plan and changed their strategy to traditional private equity financing - enter my partner and I (about a month ago). With PACE unattainable and a $300K excess in the "uses" on the proforma to which they had no realistic solution, the developers felt it best that they sell now and allow us to fund the project with equity and retain ownership and control.

Ok so here we are, they have now offered us the entire deal with an option to contract them to develop, or hire a new developer of our choosing. My partner and I see an alternative strategy, where we develop the project ourselves for a fraction of the fee and help bolster returns for our investors by saving the project money. Here's the catch: we have ZERO development experience. (Caveat: some of our investors have some experience and would contribute in a consultative hands-off way)

Candidly, we think the hard part of this development is over and now it is a matter of executing an already developed plan. This development is shovel-ready. We have all necessary permitting, environmental site assessments, and city and state approvals complete. We also already have the general contractor, construction financier, and property manager engaged.  From here, we foresee our job to be managing the relationship between the bank and GC during the construction phase and then managing the relationship with the property management company until stabilization, when we ultimately plan to sell.

Are we being naive to think we can handle it from here? What other tasks are involved in development after the entitlement phase is complete? What are we missing here? 

- MW