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Research Outline
Prepared for Daniel L. | Delivered March 23, 2020
Construction Benchmarks
Review your project details
Goals
To determine a normal internal rate of return (IRR) for a
K
a
t
e
r
r
a
project, as well as a typical NREP project.
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Early Findings
NREP
It was reported in late 2019 that
"NREP is
planning to raise €1.25bn for its latest fund to invest in
u
n
d
e
r
s
e
r
v
e
d
market segments." The target net internal rate of return for the value-add fund is
13%
.
NREP's Fund II value-add fund had a
32% IRR
.
An undated article reported that since NREP was founded in 2005, the average IRR across all investments is
more than 20%
.
Katerra
SoftBank, a major investor in Katerra, reported that Katerra was approaching
$2 billion in revenue
for 2019.
It was also reported that Katerra had
pulled out of
several projects, including hotels and apartments.
General
A report published in 2018 found that there was
little publicly available data
on return rates for property development projects.
The report does, however, provide an in-depth analysis of
calculating IRR
when the information is not available.
A survey of U.S.investors and managers found IRRs ranging from
7.9 to 10.2%
.
Other metrics that need to be considered along with IRR are Net Present Value (NPV), payback period, and weighted averages cost of capital (WACC).
Summary of Findings Related to Goals
We were able to find some data on NREP's IRR as it relates to investments, but we did not find any data on IRR related to specific construction projects.
For Katerra, we did not find any data on IRR, either overall for the company, or as it related to individual projects. As a private company, it is likely that this data is not publicly released.
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