When we provide development finance for clients, there is quite often a request for equity funding as well as the senior debt, and this brings into frame the potential disparity between the expectations of investors and that of property developers.
As ever, there are two sides to the equation when bringing investor funds into a development project (ie. more than just senior debt), and it is often a matter of finding realistic common ground. An investor who chooses to take an equity stake in a development project is taking on the financial risk that the developer isn’t able, or willing, to take on at that point in time. It’s reasonable for an investor to want their interests to be protected to an extent – and it’s the preferred return we often need to balance with the developer’s expectations on the risk/return profile.
An article we liked is on the following link, and it looks into a recent survey of the investment/return expectations of the broader market, with interesting findings on risk appetite and ROI expectations: https://goo.gl/Pj3L9v