Developing a Raw Land into a Strip Mall

[Sunny Sia]

Hello,

I would like to know your thoughts on developing a raw land into a strip mall.  I signed a contract to purchase and in due diligence period.   The raw land is parallelogram shape approx 900 x 200 ft (approx 4 acres).  Acrea in assessor office did not show any wetlands/lowlands.  It lies suburb of Tampa.  Its an up and coming burb given the explosion of growth of the city last year as people from the north relocated in droves.   

Specifics--the land is 0.5 miles from the exit 14 along I-4 and within 1 mile radius, there's a 2,500 student High school, a 900+ charter K-8 and a 1300 elementary school and behind this land is an RV Resort of at least 500 residents.   There's only a McDonalds, a Burger KIng and Hungry Howies--nothing else. No other stores in the area!  

It does not have county water or sewer meaning, we have to dig a water well system and build a septic. There was no survey done by the seller. Seller bought it back in 1988. In 2017, FL DOT sent seller a letter saying they might buy a portion of their land via Eminent domain with road expansion but no funding and nothing is done. I wrote DOT and they emailed back saying the size is approx 1 acre.

My plan is to convert the R-4 (residential zoning to CG or commercial general).  Got the email from Hillsborough county that its future use is Suburban Mixed Use. 

Here are my questions:

1) Is it fine to purchase the land without a survey?   Seller unwilling to pay for survey acc to seller realtor.   I still have 7 days to do due diligence before backing out.  Is it possible to renegotiate and ask them to pay for it?

2) What about the lack of water and sewer? Whats your experience in developing strip mall with well water and septic for a strip mall with 2 NNN anchors tenants like a restaurant or grocery store with smaller retailers like hair salons, dental office, karate in between.

3) What about the FDOT's plan of eminent domain?   How do you plan on developing such land? I am thinking of converting it now to CG and doing a built to Suit after maximizing plan with an architect given setbacks, etc.  If FDOT pushes their plan say in 3 to 4 years down the line, they have to purchase it as CG market value correct?

4) Financing--can I do the route of EB5 investing on this? 

Thanks in advance for reading this post and would appreciate your wisdom in undertaking this project.   

Sunny 

[Henry Clark]

@Sunny Sia Great your looking at REI. This sounds like a great project.

Recommend you pass on this deal, subject to learning more about REI. But if you go forward.

1. Is this going to be a one off deal for you, or do you plan to start an REI career? Need to develop a system and a team if a career. If one off, then recommend you hire a local realtor as a consultant that handles CRE, and hope it is successful.

2.  Fire hydrants required?  Most cities require Road front property to extend water and sewer systems from the "Last" connection point, to all across the road face of your property.  This allows the city to grow.   This could be $100,000 or more.  Cost me $130,000 to go 800 feet just with water.  Luckily Sewer was right there.

3.  Are you required to install city water and sewer?  Even if not in the City, cities usually have a reach of 1 to 2 miles beyond on zoning requirements.

4.  Storm retention pond?  Cost, plus lost rental space.

5.  Set backs?

6.  Electric?

7.  Fire Sprinklers? Or 3 hour wall?  If not enough water pressure, then cost of a dry (non-water) system?

8.  Where does the 1 acre fit in the 4 acres?

9.  Road access, county, city or state access requirements?  Also do you have enough line of sight?

10.  Septic, this is your main problem.  Leach field, sewer pond, etc.  How much of the 4 acres will be taken up.  Or are there environmental requirements.  Don't know the soil/sand/water levels/etc in your area.

11.  Most importantly have you run your Cost/Revenue/Financing calcs?  Building costs are really high right now.  Don't think they will go down anytime soon though.

12.  Your offer should be subject to re-zoning.  Since Future use is Mixed Use, it will be easier to get rezoned.  But will the Seller wait for 3 to 4 months for you to go through the process.  You might have to go through a rezoning and then a Special Use process.  This could take several more months.

13.  The survey is the smallest part of your cost.

14.  How are you financing?  Do interest only during construction and part of the rent up phase, otherwise you have to personally cover P/I with no or little rental income for a phase.  You will probably have to do this using Personal money.  Do you have $3mm or up available, or collateral at 65% to cover this figure.  Most banks won't loan to you, if you don't already have a track record for an investment of this size.

15.  Parking units per square foot requirements.  Key of all of these questions is to also find out how much Buildable/Rentable square footage you might have, before you do your Revenue estimates.

16.  FDOT eminent domain possibility.  Your bank may not finance.  Depends on where the 1 acre lies and how you plan to build.

No matter what, go through the analysis on this property. Bring it back to this group and ask for a review. Then do 5 more analysis of this type of investment, if that is what you want to focus on. Make sure you focus on 1 type of REI investment, don't do several types. There is a lot of learning on each type.