J Darrin Gross
I'd like to ask you, Doug Keirsey. What is the biggest risk?
Doug Kiersey
Well, it's interesting, you should ask to ask that question. A question that I asked myself and I asked our team when we're considering an investment is, what is our risk adjusted return look like? And so I know, or my investors know, if they want to put their money in the so called Risk Free investment, that's also known as the US 10 year treasury, that presently they can get a return of about 3.7% a year? Well, I'm taking a lot more risk than that. And so what kind of a risk premium Dubai and Dubai investors and our company demand in order to take a number of risks. And here are some of the risks, the risk that we build these buildings and no tenants show up. So I'm taking demand risk. There's the execution risk of building the buildings, can I build them on time and on budget, so I'm taking construction risk. While we try to mitigate that as much as we can. I'm taking interest rate risk, because our construction loan is on a floating rate basis. So I have to be able to understand what that looks like over the course of a three year construction loan term. And I'm taking long term interest rate risk, because I put permanent debt on the project, what does that look like three or three to five years from now. And lastly, I'm taking valuation risk. So when I create this income stream, when I build these buildings, and I listen to great companies, and they pay me rent, and I'm creating this massive income stream, what does that income stream going to be worth five years from now. And that's really the biggest risk. So I can I can, I can do all these things and manage all these risks. But I don't really know, five years from now, what that income stream is going to be worth because a lot of that is reflective of the Feds activities and where our interest rates going to be. So we tried to skate to where that we think that puck is going to be in five years. But that's the biggest risk in our business. So we can have taken all that into account. When we look at levered returns for a project, like the logistics campus in the Chicago suburbs. We're looking for high teens and low 20s kind of pro forma returns with appropriate and conservative underwriting on each one of those stocks that I mentioned. And so if my risk free investment is 3.7%, for the 10 year Treasury, and I'm going to do all this, I want something in the teams, that least.