Great interview! As someone trying to get into the DFW market, I appreciate pointing out actual examples in specific areas of town. I also enjoyed the conversation about timing. I’d love to hear the nuts and bolts a bit more. Judy mentioned that one of the first steps is site selection. So what makes an attractive site to “most” retailers? Is it corner sites only? At least an acre? Say 10k VPD or does it really need to be 20k+ VPD to turn a retailer’s eye toward the site? Also, when it comes to the purchase price of a site, can it be turned into a math problem? I.e. if market rents are $35/sf, and you want to achieve a 9% cap rate, all in development costs including soft costs/land purchase, would need to be around $390/sf. If that can be achieved, on a 10ksf building, its a $3.9M project. Judy mentioned year 5 exits, say year 5 rents have escalated to $39/sf, at a 6% cap, we could contemplate a sales price of $6.5M, or a gross profit of $2.6M.
Not just corner sites, retailers are looking for convenience for their customers, VPD but can they easily get in and out as well. The actual numbers will vary based on the deal. I'm not sure I follow the hypo, developers are not in the business of holding for 5 years, they would calculate hard and soft costs to develop and place tenants (at the $35), they will exit within a year of completion (if ideal) I think you can definitely build in far north Texas for $390 incl land. Keep in mind your GCs may bid different shell finishes, then you'll need TI dollars later. Still a cost, but helpful to stagger some of that outlay. (or never spend it if you sell that unit vacant) This link may also be useful! www.adventuresincre.com/glossary/development-spread/
Brief introduction to development spread th-cam.com/video/BYh_onXqfSo/w-d-xo.html
Great interview!
As someone trying to get into the DFW market, I appreciate pointing out actual examples in specific areas of town. I also enjoyed the conversation about timing.
I’d love to hear the nuts and bolts a bit more. Judy mentioned that one of the first steps is site selection. So what makes an attractive site to “most” retailers? Is it corner sites only? At least an acre? Say 10k VPD or does it really need to be 20k+ VPD to turn a retailer’s eye toward the site?
Also, when it comes to the purchase price of a site, can it be turned into a math problem? I.e. if market rents are $35/sf, and you want to achieve a 9% cap rate, all in development costs including soft costs/land purchase, would need to be around $390/sf. If that can be achieved, on a 10ksf building, its a $3.9M project. Judy mentioned year 5 exits, say year 5 rents have escalated to $39/sf, at a 6% cap, we could contemplate a sales price of $6.5M, or a gross profit of $2.6M.
Not just corner sites, retailers are looking for convenience for their customers, VPD but can they easily get in and out as well. The actual numbers will vary based on the deal. I'm not sure I follow the hypo, developers are not in the business of holding for 5 years, they would calculate hard and soft costs to develop and place tenants (at the $35), they will exit within a year of completion (if ideal) I think you can definitely build in far north Texas for $390 incl land. Keep in mind your GCs may bid different shell finishes, then you'll need TI dollars later. Still a cost, but helpful to stagger some of that outlay. (or never spend it if you sell that unit vacant) This link may also be useful! www.adventuresincre.com/glossary/development-spread/
Great interview!
Thanks Chad! love the new handle