Operators Take
Let's work backward. The construction loan alone was $35.8 million in 2016. Assuming a typical 70%-75% loan-to-cost, total development costs were likely $48M-$52M. My guess is the land cost was around $8M, hard construction around $35M-$38M, and another $5M-$7M went toward architecture, engineering, permits, financing, legal, leasing, carrying costs, and developer overhead. In other words, someone probably had around $50M invested to create this asset.StarPoint acquired the finished product for $31.5M, roughly an $18M discount to what it likely cost to build. That's why I'm spending more time underwriting acquisitions than development sites. Today's market is full of 5.5%-7% cap rate and 8-11 GRM opportunities where someone else already took the entitlement, construction, lease-up, financing, and cost overrun risk.
Unless I have an irreplaceable location, exceptional design, and a submarket with very low vacancy and strong rent growth, I'd rather buy someone else's development at a discount than build my own.
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Send OMs to David@AtlasBrief.La
Send OMs to David@AtlasBrief.La
Listing Broker
Not recorded in the Atlas database for this transaction.
Buyer
StarPoint Properties · (310) 247-0550