How much do investors and developers really understand about each other?
Each ‘side’ is often so preoccupied with their own objectives and fears that they neglect to ‘walk a mile in the other’s shoes’ and strive for a partnership in which both parties enjoy the ride and are left wanting more. Having discussed this endlessly with developer Claire Norwood, it felt like the right time to explore both perspectives. I hope that, in doing so here, we can start a conversation that will make for better working relationships, and help prevent some of the recent ‘negative experiences’ from repeating themselves.
1. What priorities do you have in a deal?
Claire: Having embarked on our two projects almost simultaneously with the main objective of ‘making some money and having some fun’ (in hindsight hugely simplistic), my mind-set quickly shifted to ‘What have I gone and done?’. I soon realised that developing is a juggling act of epic proportions, so although I’ve had adventures being part of a small team, some were definitely of the nail-biting variety. The need to protect everyone’s money – the bank’s, our investors’, our own – led to a collective hypervigilance within the team, meaning daily attention to the needs and demands of the council, highways department, lenders, utility companies, adjacent landowners, and of course the lawyers. Development involves people and relationships and legal due process, so even with the best professional team, things can and will go wrong. By the end my priority had morphed into, ‘Please let us be in a position to pay the bank and the investors their money back’.
Yet we’ve survived a global pandemic and returned our investors’ money with 21% annualised returns on one project, and are nearing the end of a similarly successful second deal. My priorities now definitely feel more grown up and worldly wise.
Helen: I’m with Warren Buffett on this one; His first rule of investing is “Don’t lose money” His second rule of investing is “Don’t forget Rule #1.”
So #1 Return OF capital, before return ON capital. Security is my paramount concern, i.e. is there collateral if the worst case scenario happens?
#2 I’m looking for an experience and a chance to stretch my learning. I enjoy wrapping my head around challenges (seems to be a prerequisite for property).
#3 I’m not really a transactional person. I don’t want this to be a one off. I’ve put too much time, effort and emotional investment into the deals I select to just walk away at the end with a handshake and a nice return. I want to build ongoing relationships, I want to find people I want to repeat these experiences with and to me it makes sense for developers to want that from investors too.