Before investing in any asset class, it’s crucial to understand the risks involved in it so that as an investor, you can prepare for it. It is also important to know how operators plan to mitigate the possible risks that the deal may face so that it will give investors and other stakeholders the assurance they need.
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In the last part of our three-part conversation with Andrew Brewer of Iron Gall Investments, he discusses the risks involved in ground-up development and shares ways how to mitigate them. He explains that the people involved in the deal, specifically the government and the community where the project is, are the number one risk you will be facing. He also emphasizes that the development should be aligned with the city’s future plans. Tune in now and learn risk mitigation strategies you can apply in ground-up development!
Key Points From This Episode:
- Andrew explains why the number one risk that you’re going to encounter in any kind of development is the government and your neighbors.
- The best way to deal with the government is to simply talk to them.
- Why is it important to understand the city’s vision for the future?
- To what is the deal contract dependent?
- Why running through a series of reports is important in mitigating the risks, especially for the investors?
- Why treat other people’s money the way you would want other people to treat your money?
- How to structure your ground-up development deals to mitigate risks?
- Andrew structures deals in such a way that anything that he is doing is performance-based.
- Andrew’s expectations in the next six to twelve months in the real estate industry.
- Andrew’s best source for meeting new investors is referrals.
- What are the most important metrics that Andrew track right now?
- The daily habits that have produced the highest returns for Andrew.
- How does Andrew like to give back?
“The number one risk that you’re going to encounter in any kind of development is the government and your neighbors. Basically, other people are your biggest risk.”
“Understanding the city’s vision for the future with the current staffing place is another big thing. You know, you can find a lot of stuff like that by looking at a city’s future land use plan, which is usually available online on the city website.”
“If I get any inclination that the city is not going to be on board with the project, I’ll just drop it then and there and go find another project. Like I don’t, I don’t need to go fight with the city or try to force a deal through us. There’s too much risk.”
“Unfortunately, development is an expensive game to play.”
“I treat other people’s money the way I would want other people to treat my money, which is you know, with the highest degree of respect.”
“The best deal structure is one where the sponsors’ and the investors’ goals are aligned. And where the LPs or limited partners, capital is protected, which is really easy to say, but you know, not everybody does that.”
About Andrew Brewer
Andrew Brewer is a real estate investor and developer and is well-versed in all aspects of land development. Andrew has a varied background in real estate and has participated in projects as an owner, developer, operator, engineer, and consultant. During his career, Andrew has acted as a construction manager on commercial reconstruction projects valued at over $12 million each, a consultant in construction defect litigation lawsuits in excess of $60 million each, and an operations engineer in commercial facilities valued individually at over $200 million, and as a developer responsible for directly planning and overseeing multiple ground-up development projects totaling over $160 million in assets. As an operations engineer, he has executed full-building turnarounds of underperforming assets leading to improved operations, lower maintenance costs, and improved resident experiences.
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