The frustration of trying to invest in my hometown
I recently led an $80mm mixed use investment in a 10 derelict properties in an offbeat part of Memphis next to a few large government housing projects. Some takeaways reading the article. Banks are not the problem; banks are just doing their jobs by trying to make securable loans. Appraisals aren’t the problem; appraisers  are hired and paid to be non-creative and non-biased they assign a value to property. If a group of properties were acquired for next-to-nothing because they’ve been vacant for a decade, it’s tough to assign more than a pittance because there is simply no value comps. The market agrees with the banks and the appraisers, hence not enough people have attempted to concurrently try to develop in Ensley, thus there’s not enough value.<p>What succeeded for us in Memphis is threefold: 1) proximity to jobs, 2) group buy-in of participation into the vision, and 3) some very wealthy investors who believe in the vision.<p>I’ve toured Ensley, I looked at buying that mid rise in the back of the article’s picture, and it’s a neat place. It has the fabric of old small towns that used to thrive. However, I don’t think Ensley has any proximity for high quality jobs or prospects for job growth, so that’s probably square one for Ensley. Historically, this has been “the creatives” who need cheap space but also like to buy expensive lattes And generate a micro economy, but in our case in Memphis, a bank wanted to move its headquarters into the neighborhood, alongside several smaller businesses.<p>Modern day construction is extremely expensive and complicated, to the point that acquisition price in cheap parts of town are a rounding error on the project budget. You need to find a way to guarantee that rents will be sufficient for the long haul, and if you believe banks and appraisals are being short sighted (and they always are..) then you have to provide that guaranty yourself by setting aside a pile of cash or stock to secure the debt.<p>I could write for days on this topic, more than happy to continue discussion offline or elsewhere