Start with the property
Identify the proposed use, market demand, comparable properties, existing condition, entitlement status, and work required. Understand which facts have been verified and which remain assumptions.
- What supports the proposed rents or sale prices?
- What permits or approvals remain outstanding?
- Where are the major construction and operating uncertainties?
Understand the developer and governance
Review comparable project experience and references. Define who controls the budget, approves changes, reports to investors, and resolves disagreements. Ask how each participant’s incentives relate to the investor’s outcome.
Follow every use of capital
Reconcile acquisition, construction, reserves, professional expenses, fees, and financing costs to the capital raise. Examine the source of additional funding if the project runs over budget or takes longer than expected.
Financing proceeds are borrowed money. If a refinance is modeled to return capital, assess the debt it leaves behind and the cash flow needed to support it.
Read the actual waterfall
A percentage split alone does not explain investor economics. Identify return-of-capital provisions, any preferred return, catch-up mechanics, allocation tiers, recurring fees, and the expenses charged to the investment.
Separate cash distributions, accounting profit, and possible tax benefits. Review a downside case as well as the base case.
Document the OZ case
Request the applicable designation evidence and specialist analysis of the vehicle, acquisition, project plan, and ongoing requirements. Know who maintains the supporting records and how unresolved issues will be addressed.