Commercial real estate development question

[Account Closed]

Just wanted to test my luck to see if there are any active BPers who are familiar with commercial development. 

I have a 1.09 acre parcel zoned for commercial and am looking to develop a small 4-5k square foot restaurant in this space. It is a great location surrounded by three large apartment complexes with no nearby food aside from a gas station next door, the value in this is there is already an entrance, there is also a large 6.8 acre PUD parcel zoned for apartment or assisted living right across the street. It is located right off of two major Indianapolis highways so there is even more potential for foot traffic.

My vision is to develop a small fast food building, lease it, then sell it as a turnkey property to either the tenant or an out-of-state commercial investor.

So my question is; as an inexperienced developer with limited capital and unlimited sweat equity, how would I go about beginning this process? Would my first step be to find a retailer who is interested in leasing my building? Or would I work on obtaining the construction loan? Or simply find a JV partner? 

I understand there is limited value in sweat equity. Does this make it impossible for me to accomplish? Would it be better for me to simply sell/lease this parcel as-is and save up capital for other future projects? 

[Nick L.]

There are a number of ways you could do this. The essential problem you are trying to solve is to prove that there is a market demand for the space at a rent that would justify development. The easiest way is to do the following:

1. Comp out the space against similar ones in similar local trade areas. Make sure the comparisons are like for like in terms of NNN vs modified gross, annual bumps, TIs etc. A commercial broker can help with this.

2. (Optional) Find a couple of live prospects to prove there is active demand for this space. Again a broker can help you with this if you are not connected to the industry.

3. Work with a construction company to get an estimate for the type of building that would be required

4. Verify that you have appropriate zoning and entitlements, or can get them easily.

With this information in hand you can build a plausible business case showing your construction costs and operating income/expenses. 

You can then use this business case to attract partners, financing and whatever else you need. If you have a specific named restaurant interested you can build to suit; otherwise you can move forward with planning and tailor it to a specific tenant later on.