In case you missed the press release and coverage in late June (I did), the American Institute of Architects announced on June 29th that it is in the process of creating a database to house listings of ground-up development and retrofit projects that are stalled due to lack of equity and debt financing.
The AIA to the rescue?
Is the lack of equity capital a result of investors not being able to find opportunities, or simply a recognition of cruddy market fundamentals?
What impact do you think this will have, if any, on the ability for projects to secure investors and construction debt?
I hope that for maximum exposure the AIA makes a graphical link to their database available for sidebar placement on blog sites. I think that the number of investors who would seek out projects at the AIA website without knowing of the database would be minimal.
Like most things, there’s no single cause. Certain investors to cling to the notion of investing in core assets in gateway cities which narrows their choices while bidding up prices. There is certainly limited demand for ground up projects in select asset classes where space demand is sluggish but it still seems that a fair amount of the investment capital is chasing inordinately high returns that require financial engineering rather than relying on real estate to produce decent cash on cash return even where there might be demand for new space. My guess is that the AIA database will have minimal influence since it will be have a fair amount of new construction where there’s limited opportunityexcepting a few markets and asset classes.
Hi, thanks for the comment. I hope the AIA database surprises us all in terms of its ability to resuscitate projects.
Hey Bruce, I’m not exactly sure what kind of impact this will have. On one hand are the good projects started by good developers that simply fell victim to the market. If the timing is right, I’m sure these projects have no problem privately finding additional capital.
Then there’s the good projects by unknown developers with little track record that could use a capital infusion to be completed. These projects will benefit the most from the public exposure.
Lastly, there’s bad projects that should have never been conceived that cannot be saved by a capital infusion.
Working for a small investment firm, I’ll definitely be keeping an eye on this resource. Thanks for passing it along.
Hi Joe, thanks for the comment. I am in support of the AIA’s database, and hope that it makes an impact.