Been out for awhile… Good to be back… btw this is SD Realtor, not sdrealtor….
I am not an expert but I believe once ground is broken the developer is well past committing to the project. I would imagine that developers work as follows…. Large tracts of land are identified for possible development. Studies are made, projections, etc and if it can be shown that the developer will receive at least a minimum ROI they will move forward with the plan. It is not like any other business. One of the large engineering firms I work for requires a minimum margin of over 40% on thier products. So let’s say the numbers pan out for the developer. Then they would logically solicit financing for the purchase of the land and other costs. The financing would come from big players, banks, insurance companies, whoever. I do not believe the developers themselves underwrite all of these projects. Once the land is purchased, it would most likely need to be developed in a timely manner. Perhaps not immediately but developers do not just buy land and sit on it. Again, most of the time they are buying it with other peoples money. One of the recent financial reports from one of the big developers was a write off of some large amount of monies due to forfeited deposits. In essence the developer put down deposits on land purchases but the recent swing in the market blow thier ROI projections to a less then tolerable value. So they lose the deposit which is the cost of doing business.
Kind of a long winded answer but I believe once ground breaking is done, they finish out the project regardless of market conditions…. The caviot would be what the legalese with whoever underwrote the project allows.
