Land Assembly Formula
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A while ago, I had the privilege to work on a very interesting and creative land assembly. That journey is as follows.
THE LOCATION
A substantial gap had emerged between students and apartments in a particular submarket required to house doctors, nurses, support workers, and students through the location of a large and growing regional hospital plus a well-known, established, and growing college.
THE PROPERTIES
Across from the hospital and just down the street from the college were seven independently owned residential homes. Knowing the official plan called for intensification of development, initial concept plans were drawn to determine various potential asset types, including gross floor area (GFA) potentials and so on. For further support, a local active planner was also was engaged to offer further suggestions regarding highest and best use and GFA alternatives.
From that, collective valuation alternatives for all seven properties were undertaken, assuming municipal support for new vertical development. Each property was then valued on its individual land area as part of the collective.
THE DEVELOPER
A qualified developer was then approached to gauge potential interest in a future development at this location, which was quickly established. Also, it was determined what the developer would pay collectively, subject to acquiring all seven properties and receiving the required municipal approvals.
THE HOMEOWNERS’ PROCESS
Next, we carried out individual meetings with each homeowner. All properties were owner occupied, save for one. We reasoned with each that the value of their properties collectively far outweighed the pricing if they simply sold individually. All that was needed was for everyone to buy in and let the qualified developer proceed toward municipal approvals.
In the interview process, discussions with each owner revolved around the net usable land area each owned as it related to the total collective need. To make sure everyone felt the process was fair and equitable, an appraisal for each home was undertaken on the same day by the same qualified independent appraiser.
We then again met with each homeowner to discuss all seven appraisal results as is and how they compared with the major financial gain each party could assume as part of the larger development. Everything was totally transparent. There were only a few minor roadblocks, and then, with 100% homeowner buy in, all conditional agreements were finalized in a very short time.
THE DEVELOPER PROCESS
The developer, who needed to spend many thousands of dollars to achieve required municipal approvals, was then able to carry out his requirements with the confidence that the original process was complete.
THE TAKEAWAYS
This assembly was completed with all parties acknowledging satisfaction with the outcome.
The homeowners each received substantially more than they would have received individually—and in a well-planned timely manner. Also, the agreement structure allowed them sufficient time after transactions firmed up to seek out their future alternative housing accommodations. The developer was able to work through the approval process confidently, knowing the municipality was keen to see this development concept bear fruit in this submarket.
Today, there is an attractive, active 360-bed student housing project completed and operating, plus extra land in the process of being developed for either apartments and/or residential condos.
We were able to witness firsthand the clear advantage that straightforward, honest negotiations, in most cases, brings out the best in people. There was little shadowboxing and few hidden agendas in this successful transaction. It was a great opportunity to work with quality people throughout.
