First commercial property, looking for input for development of best use

[Jeff Kovac]

First commercial property, looking for input for development.

I offer the following as back ground and would ask for your input.

Energy booms create many types of opportunities, and after working in three, Alaska, Wyoming, and North Dakota, we have firsthand experience of their cycles and trends. As we were working our business (not real estate related) in early 2011 it was hard not to notice the scale of real estate activity and the potential that this boom was generating. Since then we've had several near misses with property and have learned some hard lessons. In early 2012 we began to see a following trend developing in our area and made a short list of the attributes a property would need to be of value. We located a parcel of commercial property that fit the criteria and secured its purchase. Wiser from our first experiences, we did a few things differently and we are now in the final stages of closing.

That brings us to my current situation which provides more questions than answers.

Here is what I know:
Property will be Commercial – supply is low - demand is high
Located in an area with quick access to all main travel corridors
Parcel is 1½+ acre
Property has a permanent easement for access through a large, well established and shared entry with a new restaurant (In operation 5 months and drawing 300% of original projections)
One of three new hotels is across the street (Open approx. 6 month and booked for the foreseeable future)
Property is ready for the shovel
City plans to pave frontage road
Property has all city utilities
Property will be purchased using an llc (one silent partner - I am majority owner/managing member)
The property will be debt free at closing

**As an additional note - I am purchasing the parcel from the owner of the restaurant and have an agreement with him not to build a competing restaurant on my property.

I’m sure there are many others but it seems I have four basic options:

#1 – Land Lease
#2 – Build to Suite
#3 – Lease Purchase of some type
#4 – Flip for prophet and move on

While many would quickly say that all booms will bust (and, for the most part that would be correct) there are nearly always areas within that Boom that, for many reasons, attract and sustain the highest and longest growth patterns – This property is located within an area fitting that description.

As this property would provide ample parking (a problem in this area) and quick access to residential and multifamily developments as well as being positioned near the intersection of the major traffic patterns I believe this property would be well suited to a national or regional store front or perhaps a financial institute or office building. All are needed in this area. Unfortunately I'm not quite sure where to start with this type of project. If these are a no go, I am not in a panic as the property will be debt free and I can continue down the list of other commercial possibilities that could fit here as well.

Because of this, it would be my first inclination to explore all reasonable options that would allow for a buy and hold strategy.

I will answer all inquiries as completely and accurately as possible.

Thank You, in advance, for your time and consideration.

Best Regards,

[Jeremy Cyrier]

I suggest looking into having a highest and best use study done. For a small fee, you can hire a commercial real estate advisor, such as a CCIM, to conduct a feasibility analysis that will cover market and competitive factors, legal and political factors, site factors, and your financial analysis so that you can develop a best use decision to pursue.