Strategy for a parcel in the middle of potential Development Site

[Jeffrey Gordon]

We bought a 3,000 SF lot w/ teardown home in April for $400k ($130/SF) We bought it with 25% down 2 year interest only loan through a local S&L we have a good relationship with.

We bought the site because a new stadium is going to start construction (in 2017) 2 blocks away and our site is zoned mixed use comm/resid. with a residential FAR of 8.2.

A week after closing an agent approached us with an offer for $600k from a neighboring parcel owner.  We said thanks but we wanted to develop the site into 8 unit apartment building to hold.

Our strategy was to obtain the necessary entitlements during the first 12 months and then see where the market is and make a decision to proceed to construction permits or hold/sell.

In July we were approached by a major developer who was evaluating a 6,100 SF parcel adjacent to our south property border. They are a corner lot and are now listed at $2,550,000.  Again we told the developer we are for sale at $400+SF but we are proceeding with our development plans in the interim.

Last week the property owner to the north contacted us (we had sent out a notice that we razing the existing structure and that the work might entail us needing limited access to their property to remove some asbestos shingles from our building).  He has a 13,600 SF lot and was interested in assembling his lot with ours to develop something.

Again we told him we were for sale at $485/SF which is the most recent comp we have for this area.  He said he would be back in touch next week.

The stadium was just approved last December, while there are several large projects approved in the area, none of them have broken ground yet--i.e. the visual scope of what is about to happen in this neighborhood is till at 12-18 months away to the average person visiting the area.

We have our conceptual plans 95% complete and are only resolving a small code issue and then we will be submitting for a Design Review and small highly likely variance.  Because we are the first mover in this neighborhood we want to get our review  completed by March of 2016 and then we will have at least 2 years to obtain construction permits etc.

This site is narrow and deep with no alley access, it is only going to be about 60% of the potential FAR.  If/when the adjacent parcels develop we will be towered over by the new most likely taller buildings.  It would also be 10 times bigger than anything we have completed before--i.e. tough site and big project means very high risk for us to build it.

We envision we could partner with a developer with a deeper track record on our plans to reduce the risk a lot.

With the two parcels in play on both sides of us, we suspect the better strategy is to continue forward with out entitlement process and see if someone comes forward that wants to buy all three parcels and have 22,700SF to develop to an 8.2FAR for a residential or mixed use project.

We would like to encourage the property owners or any developers to put together the parcels but we feel like we have to be careful showing an interest while we are in the entitlement process (community support might be challenging if they think we are a seller vs developer).

Would it be best for us to encourage a commercial broker to get involved in assembling the project?  The corner lot is listed by a residential broker and we are not sure what type of experience/contacts he has for a 185,00+SF development.

We have been referred to a Cushman Wakefield broker with a lot of MF experience/contacts.  I think we could combine with either of the properties effectively or we could assemble all three parcels.

Sure could use some wisdom here, we know this is a great deal even if we decide to build it for our goals, if we can get above $400/SF we then have a big start on buying an existing MF building with existing cash flow etc.

thanks

jeff