Development is hard, very hard. Just ask our clients. So is predicting what your project is worth after it is completed and what the returns will look like. Here is our take on how to best navigate modeling an exit, which has evolved from numerous conversations with our clients and equity partners. – Capitalization rates
Shorting a public stock is easy. Shorting a private company… well, not so much. If shorting was easy, here’s my take on why making a bet against WeWork’s $21 billion value makes sense. First, I have nothing against WeWork. I like the concept and much of what they do. I think they’re visionary
It is well known that California’s attractive environment supports a high standard of living and ample demand for housing. What should be more well-known, however, is how California’s environmental legislation, while well intentioned, can prevent that demand from being satisfied. It has been Jennifer Hernandez’s and her colleagues at Holland & Knight’s goal to prove
In Part 1: National Housing Trends, our recap of the past decade indicated that the United States continues to experience a large housing shortage since household construction fails to keep up with household formation. To supplement this, much of our follow-up research showed which metros get hit the hardest and uncovered important implications for our
Headwinds for Apartment Development Fident has been fortunate to work with many capable multifamily developers throughout the western United States. As we enter 2018, nine years into the current up-cycle, changes in the capital markets’ landscape makes financing apartment construction more challenging. Those challenges most prevalent the current financing landscape include: Lender caution equates to
At a macro level, the U.S economy is on a hot streak. Now into month 100 of the current economic expansion (the 3rd largest in recorded U.S. History), the unemployment rate is flirting with 4.10% as of November 2017, in sync with extremely low jobless claims not seen since the 1970’s, and consumer confidence is
Commercial property investors, and their unique cousin, the developer, often get to (or start at) a point where real estate investment halts without the infusion of additional risk capital. It’s that dynamic, at least partially, which creates the market that we serve. Typically, we do so by engaging on single projects with qualified operators to
I’ve come to understand that a principled commitment to some vital business concepts provides substantial leverage and a competitive edge. Optionality, and its special relative free optionality, is one such concept. Here, I endeavor to define the terms, bring them into relief with real world examples, and illustrate some applications of free optionality within real
At times, there are changes in our great nation’s strategic planning that can have massive implications for the local economy that go largely unnoticed until they play out. At a recent economic forecast by the Institute of Real Estate Management, Terry Magee, a former senior officer of the United States Navy who subsequently held high
After eighteen plus years in the real estate development and capital markets, I have seen both massive successes and failures on the part of real estate developers. As a person who has a degree in medieval history and has never lost a passion for historical studies (yes, I am a history nerd), I naturally developed
With Fident’s relocation to a downtown San Diego office, I find myself driving by the high-rise affordable housing project Ten Fifty B every day. This 23-story, LEED Gold, concrete, glass, and steel tower is really something. The architecture is good and it offers some of the best views of the city, the Pacific, Balboa Park,
Choosing a lender can be a difficult task when you have multiple options. We often see clients focusing heavily on price and proceeds, sometimes to a fault. There are many other important, even critical, factors to consider when selecting a lending partner. We have been part of transactions where a client chose the more expensive
At an estimated population of nearly five million, the San Diego-Tijuana MSA is one of the United States largest bi-national conurbations. Accounting for approximately 40% of the USA/Mexico border population, it is one of the nation’s most populous and productive cross-border partnerships. In 2014 the region generated an estimated GDP of $230 billion, stacking an additional
As a capital advisor, we’ve placed joint venture equity into a variety of project types. We are not in the business of syndication, so the types of equity groups we’ve chosen to align ourselves with are all institutional in nature. These include opportunity funds, hedge funds, private investment firms, and even sophisticated family offices. Some
Fident Capital founder Kevin Choquette featured on the Strictly Business Radio show discussing recent projects, Fident’s role as an advocate for builders and developers and the company’s focus on ‘risk’ projects. The informal 15 minute chat is available here.
The Setup A few years ago I read a comment describing how real estate, unlike the stock market, is built on asymmetry. Asymmetry in local expertise, operational knowledge by market or product type, access to capital, and sometimes pricing knowledge for assets (not just what was paid, but why). Arbitrage in financial markets has become
As a real estate professional, Excel is a part of everyday life. Despite daily use, it’s amazing the little tricks people haven’t picked up. Often times someone will be looking over my shoulder as we examine a model or some data analysis and ask, “Wait, how’d you do that?” Or, “I’ve never seen that function,
Developers, like all entrepreneurs, are great problem solvers. Problems of all varieties occur, and while efficient access to accretive debt financing won’t rate as one of Donald Rumsfeld’s “unknown, unknowns,” the recent challenges associated with securing a construction loan have had, and will continue to have, significant impacts on the developer. What Happened? As we
San Diego is known to many as America’s Finest City, beloved for its endless miles of scenic coastline, amazing weather, top-notch restaurants, and friendly, laid-back attitude. It’s become a top destination for both homebuyers and businesses, and the region’s population is expected to increase by about 33% by 2050. However, the already-strained infrastructure currently in
Developers and real estate operators partnering with 3rd party equity sources typically secure profits larger than the percentage of equity capital they invest into their projects. These outsized profits, often called a promoted interest, allow sponsors (the developer or operator) to get more profits than they would otherwise based solely on their actual ownership or
If you want to achieve, become a world-class learner. That’s the tweet-sized heart of this blog. I grew up in a loving home of modest means. Creating a better reality for my future self became something of a mandate. Like my mom’s best friend used to say, “Money doesn’t suck, the lack of money sucks.”
ULI San Diego/Tijuana just played host to JaJa Jackson at the Quartyard in downtown SD. JaJa is Head of Landlord Partnerships at Airbnb. His mandate is pretty clear: expand Airbnb’s market penetration. The lunch was fascinating and by far one of the more stimulating ULI events I’ve attended in recent years. Maybe that’s just because
SAN DIEGO, Sep. 11, 2014 /GLOBEST/ — Borrowers should know the difference between a deal that’s market ready vs. a notion of a project before approaching lenders, Fident Capital’s principal Kevin Choquette tells GlobeSt.com. We spoke exclusively with Choquette about the opportunities and challenges in equity financing today. GlobeSt.com: What type of financing do you
We’ve written two previous blogs on understanding and reducing developer risk, one illustrating the differences between completion guarantees and repayment guarantees, the other covering the full array of bonding mechanisms. To review, the first article illustrates how completion guarantees offer lower risk for the developer than repayment guarantees. The second points out how bonds can
Borrowers seek the best terms available from prospective lenders. One way to secure such favorable treatment is to simply know the rules of the road when developing your lender relationships. We reached out to several of our better lending resources and gathered opinions on the major mistakes they see borrowers make time and time again.
Developers face a world of uncertainty. Changes in the market, the regulatory environment, the financial condition of their partners, materials costs, capital markets, plus neighborhood opposition and litigation are just a few aspects of this difficult landscape. Developers take on all of these uncertainties and considerable risk to create a successful project. Bonds provide a
Every aspirational real estate entrepreneur wants to do big deals, even if they don’t have the capital to finance them on their own. For example, taking down a $118MM office asset for repositioning can be done partially with debt, but many times the addition of an equity partner to the venture is needed. Joint ventures
Developers and investors often seek non-recourse debt, loans for which they are not personally liable. For investors in existing commercial property, that’s often achievable; the subject property (and its existing cash flow) may provide the lender sufficient collateral in case of a recovery. Developers seeking construction loans find non-recourse debt more difficult and, when found,
SAN DIEGO, Oct. 1, 2014 /PRNewswire/ — Fident Capital secured $14.2 million of real estate project financing for the acquisition, entitlement and development of two properties in Riverside and San Diego County. Combined, the projects will create more than 600 multi-family units and convert each property into highly profitable real estate assets. “We navigated through
SAN DIEGO, Sep. 26, 2014 / San Diego Business Journal/ by: Lou Hirsch/ — Owner Davlyn Investments is in the midst of an extensive renovation of La Plaza, a retail center at Girard Avenue and Wall Street. Property by property, La Jolla’s central Village area is being remade as several older buildings get new owners
You’ve probably heard the real estate crowdfunding buzz. Thanks to the JOBS act, accredited investors can now receive general solicitations, and the land grab to define and dominate a new niche within the real estate capital markets is well underway. Think Kickstarter for real estate, only now you own hard assets instead of receiving a
SAN DIEGO, Sep. 19, 2014 /Daily Transcript/ — Fident Capital secured $24 million of project financing for the acquisition, entitlement and development of an infill town-home project in La Jolla Village. The project will offer 18 town-homes sized at about 2,200 square feet. “We had stellar partners on this project with a proven track record
The wonderful opportunity to become a member of Entrepreneurs Organization (EO) came my way two years ago. Connecting with this group of likeminded, successful, company founders has been truly transformational. As part of my EO experience, I gained admittance to the Entrepreneurial Master’s Program (EMP, co-produced by MIT and EO). The educational content here (which
