Investing in advance of a major development project

[Serge S.]

I have a multifamily complex of 16 units that I am considering purchasing. The complex is miles from a new development beginning construction. It is located in a city of 50,000 and there is a large scale project scheduled for development:

http://phoenixmart.com/what-is-phoenixmart/

This project is estimated to create 9,000 jobs and sits on 500 acres. The city has a 9.8% unemployment rate so if even a fraction of these jobs stay local this will have a significant impact. The county has had very little residential or multifamily building in the past 4 years due to the downturn and cheap cost of foreclosure housing. I already own a good number of SFRs in the city so i am already vested.

Wondering what to expect from this size of project coming to a somewhat rural town. I'm paying more than I usually would for a complex this size and its a deal I usually would not do but I am counting on the stimulus from the new development and everything that comes with it. The numbers still should work but at a smaller return than I would normally take.

Would love to hear from others that bought or held through such a cycle.

[Joel Owens]

The fact that they shoveled dirt for a ground breaking ceremony means nothing.

These types of projects require rounds and rounds of construction financing and many phases over years to create a development this size. It should definitely impact the area something this large but nothing is guaranteed. Something this size has already or should have had a regional impact study. Smaller projects have small ripples and generally do not come under DRI review. Bigger projects like this do because they create a massive ripple effect of development for the area.

I am sure there are estimates of impact to the area where your building is in reports completed for this project. You just have to dig around to find them. I have seen projects like this halt mid project and not get finished for years or decades. So you really have nothing concrete at this point.