Monday, July 30, 2007

Writing a Compelling Executive Summary

By now (7/30/07), the word is out on the housing slump, but the verdict is still out as to its affect on the commercial markets (one side note - I received an email from a fellow CCIM in St. Louis that is advising for sale a local 184k SF shopping center for $3.9M or $21.14/SF with two large vacancies totally 72% of the property - I haven't seen these types of properties since the RTC days).

So, as the credit crunch grows from Wall Street to Main Street, the need for developers and brokers to artfully pitch their ventures will become tantamount as more projects chase tighter purse strings from private sources. It might be time to recall an article and website that I found effective in developing a "compelling executive summary". As the San Jose VC firm, Garage Technology Ventures, points out on their website, the job of the executive summary is to sell, not to describe (although designed for the submitting technology ventures to the fund, I still think this applies to real estate developers in this market).

Here's the short list (click 'website' link above for full article) in writing a compelling executive summary (adapted for the 'real estate' slant):
  1. The Grab - Direct, specific and concise statement why you have a really big project;
  2. The Problem - Make clear that this is a big problem (or need) in the market that you're going to solve with your project;
  3. The Solution - Make clear that you fit into the market after the project is complete (and absorption is taken into account in your proforma);
  4. The Opportunity - Basic market info why your project works in the local market and why there could exist further expansion after the initial phase and absorption is complete;
  5. Your Competitive Advantage - Know your project's price points vs. the existing competition;
  6. The Model - How specifically are you going to generate income (i.e.: lower rents than competition, taking advantage of pent-up demand, etc.) and when?
  7. The Team - Why is your team uniquely qualified to use these funds for this project;
  8. The Promise - Your fundamental objective is to show the financial viability of the project and how it will meet the lenders' needs (5 yr, 10 yr proforma and any levels of equity participation promised with the project); and,
  9. The Ask - State the minimum amount that you will need to complete the project (assuming that you'll include a "fudge factor" for entitlement overruns that always occur in development).

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