Greg Patch, Vice President Site and International Groups, LJA Engineering
The simple answer is yes, but the deals are a little tougher to make happen. Maybe a better question is are there any easy deals left and that one is probably no. I have often found it is the difficult and complicated projects that are overlooked by many, and they have the greatest success, but it takes time. So often I have clients coming in and inquiring about a particular piece of property which is surrounded by development and there’s a reason the site has not been purchased and we dig in to find out why. In my 50 years of doing due diligence on prospective land acquisitions it is still true that those that work the hardest, hire the most creative and talented and remain persistent in evaluating every aspect of the site come up with the winners.
What often makes them winners is the ability to quantify the cost of development, its relationship to adjoining comps and educating the seller on the realistic value of the property and or contingents that the seller must solve before closing. This should always include the investigation by a seasoned land professional or civil engineer. Early on in my career I worked for the real estate development arm of a restaurant chain which was opening 36 stores a year.
In all cases partnering with a local team of seasoned professionals experienced in property evaluations and due diligence investigations often help make for the best deals
At the time of my departure seven years later they were opening a store a day. With a dropout rate of 60% of the sites that required the evaluation of close to 1000 sites annually and the reason some sites were passed on was complexity. After college I worked for the largest privately held commercial industrial developer working on 500 to 1000 acre deals and finding ways to create value were both unique and different in every site and in most cases were not apparent to the inexperienced. In some instances, it requires title companies to endorse over blanket easements, in other instances recorded easements on the property had the special provision that there would be no fees required for the use of that line in cities that had utility connection feels that amounted to millions of dollars which they honored the provision.
In recent years many cities have required very stringent and costly regulations that have increased the development costs making many sites unfeasible to develop unless there is a significant reduction in the land cost. In the most affected areas sites that were originally outside of the 100-year floodplain are now being included creating massive amounts of grading cost and or time to remove them.
The pitfalls and opportunities in land acquisition and development are enormous. But many of my clients often who are out of state looking for opportunities in a hot market, will always seek out the services of a qualified land professional to acquaint them with the market, regulations of cities, and guide them through the development process, assist them in evaluating the development cost and timing. We often deal directly with the brokerage community both on the seller’s behalf as well as a buyer. In one instance is to educate the seller on the obstacles of developing their property and on the buyer side to help quantify the value of the site they purchase. In all cases partnering with a local team of seasoned professionals experienced in property evaluations and due diligence investigations often help make for the best deals.
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