All Forum Posts by: Kenneth Bell

Yes we have done a tiered structure before. It is common in GP/LP deals the straddle or hurdle allows for the developers performance to earn him a better return. As he does better for the LP's he does better for himself as well. We base the straddle on the IRR and all other fees are disclosed up front so there is no way to manipulate the numbers. I have not published any numbers or solicited to anyone on this deal. I wanted some thoughts and feedback from people on the forum.

 Wow that is great!! You have BTR deals that you are 20% per year back on invested capital!! I would love to hear more about that. Please DM the information

 I will agree that the build out process takes a while and then you must lease up as well. I do think that in the end you have a superior product to a value add. We have done research for absorption and the market size for the units we will develop. The land is also already entitled for mixed use so we have the commercial piece as well. I do consider the time and the type of investor I would look for in a deal like this. We have a management team that is ready to manage the residential and commercial space. 

No I have not published any numbers or to anyone in the way of returns as of yet. We have a few preliminary meetings with some investment groups that that like to participate as  LP's. Would you be willing to share structure for any ground up or value add deals you have done? I would really appreciate the insight!

 Thanks for the reply Brian.  I will take what you said into consideration. I am curious as to why you consider ground up development more more risky than value add? I have heard this a few times and I want to understand from the investors perspective why that is.  

 Hey Jay,

I would prefer not to have 100 investors to manage for sure. I don't want yet another job. Because we are in house with our development deals I am not counting on someone else's ability to find a good development deal. I do also love my develop and sell model bit it comes with its down sides as well. You must keep your pipeline full because there is no cashflow without it. I have been fortunate to be in a city that has been resistant to the volatility of other markets. It is also growing so fast income would be welcomed because values continue to rise. It is a balancing act for sure. I hope to pick a direction.  This is one we just got entitled for 35 door and its in an opportunity zone so it has some great long term tax benefits. new 35 door townhome community possible BTR

 Thanks Gino, I have already had engagement with attorneys and I am moving forward. Deal structure would be leverage GP/LP equity for A and D and vertical construction debt and then refi to perm and hold the asset. I have lenders I have relationships with who will lend end to end.  We could possibly refi out some equity on the perm but it would depend on rates. We have used investors before but we sold assets in the past.  I like ground up development as well. Even though the time frame to monetize is longer. I also ramp up debt service as I go, not all at once. I have a brand new product at the end and I should have less cost in the way of maintenance.  I am confident in our model also because most bigger developers will pass on a 30-50 door apartment site because of their operational overhead is so high.

 I get your point. I have dealt with investors before who want a grand slam  all the time and that is not realistic nor is it the type of deals I tend to do. If I cannot make a great land deal then I don't take on the project for development. I am also not looking for investors that think that every deal is going to make them rich. Thanks for your insight.

@Kesha Hamilton

Hey Kesha,

I would also not buy land until you have done all needed DD and have an exit that will work. If you can tie up the land and give yourself enough time so see if the value is there. You also need to understand what the current zoning is and and current development value. You could possibly rezone for greater density if possible. Until you have a proper valuation for raw land you cannot make an offer. Land valuation is a derivative of the value that can be placed on the land. This takes some dd and homework to come up with.

Hello all,

I am a real estate developer who has for the past 10 year solely focused on develp build and sell assets. I am now looking at a few deals that we will develop and then keep them in a GP/LP relationship. I am looking at the landscape of other multifamily GP/LP deals and it seems there is a wide range for both IRR and equity splits between GP/LP. I am trying to get a pulse on what is a good return metric for LP's. I am a strictly ground up developer. I am new to GP/LP deals but not new to development. I was targeting a 20/80 GP/LP with a 12-13% IRR with a 2 hurdles +14% IRR GP/LP goes to 30/70

+15.5% IRR GP/LP goes to 40/60.

These will be usually 25 to 50 unit infill multifamily deals usually townhomes or apartments

I would love the feedback

Hey @Ilan Cohen,

I sometimes sell some of my entitled deal that I don't want to go vertical on. One good way is to list the property if you have purchased it of course. If not if you have site control you can look at other permits for construction in the area for other projects. These are all public record and you can find the builder who will lead you to the developer if they are different people.

What type of deals are you doing in Atlanta? I am interested in that market. Depending on density and price of course!!