What to Do When a Project Only Works If Everything Goes Perfectly
ASK:
The deal pencils, but only under ideal assumptions. Is that enough to move forward?
ANSWER:
A project that only works if everything goes perfectly is not a viable development deal. It is an unpriced risk.
Every development project encounters friction. Approvals take longer than expected. Infrastructure costs increase. Financing terms shift. Market conditions change. These are not exceptions. They are part of the process.
At I&D Consulting, we stress-test projects early and intentionally. We extend entitlement timelines to reflect realistic review cycles. We include contingency across pricing, construction, and soft cost assumptions. We adjust lease-up and absorption expectations to account for delays and market shifts. Only then do we evaluate whether the project still performs.
If small changes cause the deal to fail, the issue is not bad luck or external factors. The issue is that risk has not been properly priced or structured.
In some cases, the solution is redesign. In others, it is repricing the land, restructuring the capital stack, or adjusting scope. And sometimes, the right decision is to walk away.
Walking away early is not failure. Development requires discipline. The most damaging outcome is continuing to invest time, energy, and capital into a project that cannot absorb normal development risk.
KEY TAKEAWAYS:
- Deals must perform under realistic conditions, not ideal ones
• Stress-testing reveals true feasibility
• Early course correction preserves capital
• Discipline matters more than momentum
People Also Ask
1) How much contingency should be built into a development budget?
Typically 5 to 15 percent, depending on entitlement complexity, infrastructure exposure, and market volatility.
2) Should higher entitlement risk justify higher returns?
Yes. Higher risk requires appropriate compensation, or the deal structure should be adjusted.
3) When is it time to walk away from a deal?
When risk cannot be mitigated, priced, or structured responsibly without relying on best-case assumptions.
