Maximizing ROI on ground-up development projects
Covid-19 has impacted most every facet of the commercial real estate arena. Owners, developers and their investment partners are working diligently these days — on every project, and from every angle — to deploy real estate strategies that minimize risk and maximize return, especially given the overall uncertainty of the market. But extracting maximum value from development projects is a foundational strategy that can guide owners and their partners during any market condition, including global pandemics.
At GIS Companies Group, we strive to generate significant wealth for our partners through their land contributions to our development deals — whether it’s for the construction of a single-family custom home, a high-rise condominium or a mixed-use apartment project. In fact, our proformas are often structured to double the value of their investment over the term of the deal, an aggressive approach that’s somewhat unique in the Puget Sound marketplace.
There’s no real secret to achieving this financial objective, but rather some key fundamental business practices that have long guided GIS since our inception as one of the leading real estate development and construction firms in the market.
First, we operate with the philosophy of treating partners’ money like it’s our own. Many firms say that, but it’s important to have everyone on the team – from principals to administrators to building superintendents – to truly believe that we’re collaborating on something very special, for every project.
Secondly, we think preferred returns are wholly dependent upon keen market insights and exhaustive preparation. That means we spend countless hours researching neighborhoods that are both validated and underdeveloped — offering the least risk and maximum upside. For instance, as buyers and renters continue to look outside the downtown core, we’re engaging more in emerging neighborhoods like Kent, for our Madison Plaza apartment project, that are positioned on light rail and in proximity to a host of retail and other goods and services.
Lastly, to maximize value for our development partners, we spend significant time thinking about product type – specifically, how condos, apartments and single-family homes can be designed and built with everything they need but nothing more. Renters and buyers have discriminating tastes, for sure, but there’s always a point of diminishing returns for finishes, amenities and other add-ons whose value can’t be captured by the market’s demand. For example, a 10,000-square-foot luxury home we built recently in Issaquah had a host of “bells and whistles” but our discretionary approach to design and construction saved our investor thousands of dollars on the sale, simply because we resisted employing finishes that didn’t provide return on the investment.
