A contrarian voice is challenging the notion that real estate development requires big risks to yield big returns. Alec McElhinny, founder and CEO of Land Play, argues that his actuarial background has revealed a counterintuitive truth: careful risk mitigation may be the key to surviving today’s challenging market conditions.
“I’m actually not a very big risk taker,” McElhinny says, challenging conventional wisdom in an industry often associated with bold bets. “I do everything I can to mitigate risk in every step of the development process.”
McElhinny’s approach stems from his actuarial background, where mathematical precision meets real-world application. His strategy begins with land acquisition, focusing on properties that offer built-in safety nets.
“If you’re a developer, you have to make sure that you get your land for good basis,” McElhinny explains. “Because if things don’t work out, you need to be able to get out of the piece of land and still make a profit and give investors a good return.”
This mathematical approach extends beyond just land costs. McElhinny says he evaluates every aspect of a project through the lens of risk reduction, from construction methods to jurisdiction selection.
The current high-interest-rate environment, which many developers view as a challenge, actually reinforces McElhinny’s risk-mitigation strategy. “I think the best people in business were made in the recession, were made in hard times,” he says, arguing that difficult conditions force developers to find truly exceptional opportunities.
“Building in a harder time forces you to make a really great project that would work in any environment,” McElhinny notes. He contrasts this with periods of easy money, observing that “in America, we’re very spoiled with we can get really good debt, and we can build things that maybe might not necessarily be the highest best use.”
A key element of McElhinny’s risk-reduction strategy involves identifying and dominating specific market niches where competition is limited. “As long as you’re in a niche and you’re the best at your niche, and nobody else is doing it, you’re able to get rid of a lot of that risk,” he explains.
This approach has led him to focus on flex space development in specific Texas submarkets where he sees unique opportunities. For instance, in New Braunfels, McElhinny says he acquired land at $5.70 per square foot in a location where he believes entitled land could sell for $8-$9 per square foot.
McElhinny’s company, Land Play, represents one emerging example of how mathematical precision and careful risk management might reshape real estate development. While it’s too early to declare this approach the new industry standard, rising interest rates and market uncertainty may drive more developers to consider similar risk-mitigation strategies.
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