Designing the Project Development PresaleThu, 11/01/2018 - 10:24
Real estate developers traditionally mitigate risk by conducting a market study as a first step to determine viability. Grupo Momentum, a young developer helping to shape Queretaro’s skyline, believes more is needed and works under the premise that sales should shape the design of the product. “First, we launch the pre-sale phase, and depending on the interest we receive, we determine whether or not the project is feasible,” says Isaac Orozco, the company’s Commercial Director. “Sales are our real pre-feasibility study.”
Instead of having separate processes, Orozco says that sales, marketing and design must be integrated when developing a project. For example, Momentum Centro Sur in Queretaro, one of the company’s main developments, was meant to be mixed-use, combining offices, health facilities, a clinic and apartments. But the project’s pre-sales showed that the residential aspect did not pique much interest. “We saw that apartments were going to sell but not at the rate we needed,” he says. This led to a re-design and the developer eliminated the residential segment, incorporating a hospital instead of a clinic and doubling the number of offices and health centers offered, which boosted sales.
The pre-sales trial-and-error process is also crucial in determining Grupo Momentum’s growth strategy. Orozco explains that the company aim to grow organically and at a pace it can handle. The company’s business model makes partners its first clients, starting with its shareholders. “The true measure of a valuable project is one we want to own ourselves,” says Orozco. “Selling our properties to a stranger does not ignite confidence in the same way as when we demonstrate to potential clients that we are the first ones to bet on our projects.”
The second financing source is friends and family, although Orozco says this relationship has morphed more into one of regular clients. With foundations in place from seed capital, whether from banks, investment funds or its own resources, Grupo Momentum can kickstart its projects with a unique incentive for those first investors to buy a unit, who can obtain attractive pre-sale prices or financing plans for up to 48 months. Once the seed capital is secured, the company pre-sells the rest of the project before building it. For example, for the construction of Torre Momentum, the group’s headquarters, around one quarter of the cost was paid upfront equity and the rest was obtained in pre-sales.
The company follows two more principles that add value to its projects. First, ease of use. For example, Grupo Momentum built Torre Momentum in the residential neighborhood of Milenio, Queretaro, so people could live close to the office.
Second, Grupo Momentum positions itself and its developments by analyzing its competitors in relation to what the market is really demanding. “We realized that the office market in Queretaro was relatively overlooked,” says Orozco. “Our main lesson learned is that we must always strive to provide a product for any neglected market. We observe what our competitors are doing so we do not duplicate their efforts.”
Although competition is healthy, Orozco believes that companies should instead strive to differentiate themselves. “If there is a high level of competition in the market, a company must look for an added value to transcend that competition,” he says. This differentiator can come from special amenities in the projects, location or quality. But if competition is mandatory, developers should compete against their previous projects, always adding something innovative that elevates the new ones, he adds.