Real estate projects are intrinsically risky due to their inherent complexity, unavoidable external factors, involvement of multiple agencies and long implementation timelines. With professional guidance, these risks can be identified, quantified, mitigated and managed right from the start of the project.
Founder of DesCon Ventures, Sarang Kulkarni, brings an invaluable experience in Underwriting, Transactions, Deal Structuring and Development having previously worked at Goldman Sachs (top investment bank), Vornado Realty Trust (top office REIT in US) and with an India focused Private Equity (India Property Fund). He was part of several teams that carried out transactions collectively valued at over $3.5bn USD comprising of Corporate M&A, Asset-level Acquisitions Underwriting and Disposition of Stabilized Assets, Portfolio Refinancing, and JV Structuring for Development projects.
Sarang's experience helps DesCon Ventures, tailor our Financial Advisory services specifically to meet Client's needs. Every opportunity is evaluated considering the Client's Financial Goals, Equity Contributions, Risk Tolerance, Holding Capacity, Break-even Period and expected Returns on Exit.
This is the first stage in a real estate project lifecycle, and often the most crucial. Our services for this stage includes:
1. FINANCIAL FEASIBILITY:
Many a times we come across Clients who are well informed about the sub-market and have a Gut feeling of what would provide a good return on their parcel of land. However, this often needs to be re-validated against other development options to arrive at the highest and best use of the land.
DesCon Ventures takes a high-level view at various development options by considering broad market trends, macro-economic factors, projected demand and supply, space absorption, new product concepts, and other market forces to narrow down the possible options. Each option is then discussed with the Client to assess and analyze its alignment with Client's financial goals. DesCon Ventures also analyses the potential sources for financing, tentative cost of capital, constructability review, and possible revenue streams. The final Feasibility Report provides a roadmap for the project, wherein, in-depth study needs to be carried out to help prepare overall Business Plan.
2. MARKET RESEARCH:
This is a comprehensive study of the sub-market with reference to the development options shortlisted in feasibility study. Market area catered by the project is defined and detailed studies are conducted on consumer demographics, demand and supply, sales volume, vacancy and absorption, pricing and rentals, and competitor's offerings.
The information collected from market research is then analyzed to finalize the development option best suited for the land and providing the highest return on equity from amongst those outlined in the Feasibility analysis. The Market Research strengthens the Business case, provides the necessary insight in to the market dynamics and provides some of the critical data required by the Financial Institutions and Equity Investors to make Investment decisions with regards to the funding of the project.
3. BUSINESS PLAN:
A Real Estate Project Business Plan is a formal document that lays out the Development Strategy based on the supporting market research, Funding Schedule for Pre-construction and Construction Stages, Equity/Debt Structuring with assumed Cost of Capital, a broad Sales & Marketing Strategy, Pro forma Cash Flows from Operations/Sales, key Project Risks & Mitigation Plan, and Project Exit Strategy to meet overall Financial goals of the Client.
Clearly, the prerequisites to a realistic Business Plan is the team's experience in Project Finance, Design, Development, and Asset Management. The team at DesCon Ventures provides the proven expertise in each of these functions at one place, thereby, creating a robust and practical Business Plan. The project milestones and funding schedule listed in this document becomes a tracking tool for the Owner to check the progress of work in the subsequent stages. Business Plan needs to be monitored and updated from time to time to reflect any deviations from the original strategy.
4. EQUITY/DEBT SOURCING:
Depending on the nature of development, the Owner may choose to invest his own equity, or prefer to share a piece of profit with a Third Party by limiting his exposure and reducing the risk. This Third Party equity funding may be obtained from one or more of the multiple sources, however, in each case, the Roles and Responsibilities and the Profit Sharing needs to be clearly defined and agreed upon. Since the Equity comes at a high price, optimal Capital Structure needs to be worked out to maximize the Return on Equity for the project Owner.
DesCon Ventures prepares an Investment Memorandum providing the necessary project information required by the potential Investors to make Equity Placements decision. The team conducts Roadshows, make representations at various Exhibitions/Conferences, carry out Project Presentations to the interested Investors and assist Owners in signing the JV Agreement with the Equity Investor. Similar presentations are also made to raise Debt funding from Banks, NBFC's and/or Mezzanine lenders, as per the requirement.
After the Business Plan is approved and Funding is secured, the project is ready to move from Inception Stage to the Pre-Construction Stage. The focus also shifts from Financing to the Design and Project Management, where multiple parties start to get involved with the project. DesCon Ventures provides its Clients with the unique advantage of a seamless Integration between all stages without losing the sight of the Financial goals.