Delivered 22 units into the softest quarter I've seen, and it still cleared

Sorry for the basic one, what does yield on cost actually mean here? Is that just NOI divided by the $4.91M?

rigging, yes, stabilized NOI over total project cost. It's the development version of a cap rate. The reason quarry compares it to what similar buildings trade at is that the gap between the two is where the profit comes from. Build at 6.4, the market pays for 5.1, the spread is your value creation.

quarry, my actual question is about the concessions. One month free on fourteen of twenty two units is real money against year one NOI. Did you underwrite yield on cost on gross rents or on the concession-adjusted number?

The bit I keep rereading is that four partners had to write a second check with seven weeks of notice. What happens if one of them can't?

plumb, that outcome is written in the operating agreement long before it happens, and it's one of the sections people skim. The common mechanics are a mandatory call with dilution for non-participants, an optional call where the funding members get a preferred return on the new money ahead of everyone, or a member loan that accrues interest and is repaid before any distribution. Each of those produces a very different split at exit from the same shortfall. Which one applies is a document question for your attorney, and the terms vary by how the agreement was drafted rather than by any general rule.

On the substance of quarry's post, the interest reserve is the line that most often fails first in a development budget, and it fails for a structural reason. The reserve is sized off an assumed lease-up curve, and the lease-up curve is the single assumption most exposed to what competitors deliver near you after you break ground. You commit to your budget at closing and the absorption environment gets decided 18 to 24 months later by people you never spoke to.

The answer isn't a bigger reserve alone, because reserve dollars are borrowed dollars and they cost you. Two things help. Model reserve exhaustion as its own event with a date, so you know the week it hits under a slow case. And confirm in writing with your lender, before closing, what an extension actually requires, whether that's a paydown to a stated loan-to-value, a debt service coverage test, or an additional deposit. Lenders differ and current terms move, so get it from them rather than from a forum.

quarry's 6.4% against a 6.8% underwrite is a normal miss for this vintage. The reason it survived is the spread to market cap rates was wide enough to absorb 40 basis points.

The guarantee burndown is the clause I'd want to see quoted. "Burns off at stabilization" is doing a lot of work in your post. Stabilization defined how, 90% physical occupancy, or 90% for three consecutive months, or a debt service coverage ratio test on trailing three annualized? Because with one month free on fourteen units, a trailing three DSCR test can push your burndown a full quarter past the day the building looks full.

I've read agreements where the sponsor thought they were out of the guarantee in month nine and were still on it in month fifteen for exactly that reason.

$223k a unit all in, three stories, surface parked, wood frame. That's the number I keep failing to hit in my own spreadsheets and I'm not sure whether my market is just more expensive or whether I'm padding. What was hard cost per square foot?

Piling on pike's question, I'd also want the split between hard, soft, and land. When I try to build these I always get soft costs wrong by a wide margin.

What happens to this deal if the eight month lease-up is twelve? You get the paydown request at the same time, but now the partners are being asked for something closer to $400k and the mood is different. Do you think the four of them fund that, or does someone tap out and the dilution language gets tested for real?

I ask because I've been sitting on my own analysis for a year mostly because I can't get comfortable with the version of the story where one variable slips twice.

windlass that's the exact question I can never answer either, and I've started thinking the answer isn't in the model. It's whether you know your partners well enough to know who folds.

Reading fathom's point again and it changed what I'd ask a lender first. I'd been treating the guarantee as a yes or no thing. The definition of stabilization is where the actual months live.