Mixed Use Multi-Family with Commercial Space

[Eddie W.]

I purchased 5 acres and now entitling ~25 townhome units with 3,400 SF of commercial space to be located at the entrance of the development. The jurisdiction may not allow me to subdivide the commercial space from the residential space. Our original intent was to sell the entire entitled development to a builder, but one particular builder does not want the commercial land. His valuation for the residential land is based on a fixed price per entitled door/unit.

If I want to explore retaining control of the commercial piece and go vertical with a leasable commercial space, what would you recommend as the best mechanism for monetizing/cashing out of the residential piece? Perhaps the builder purchases shares in the 5 acre partnership equal to the 25 unit valuation? Perhaps he signs a ground lease for the residential land? Both of those options require a long-term relationship with the builder, which I'm not necessarily opposed to, just curious if there is a cleaner way to break out this deal.

[Barry Ruby]

@Eddie W. Have you run the numbers on this project? 3,500 sq ft of retail should not have an impact significant enough to kill the deal. Is the retail element physically separated from the residential element?

Whatever the answers to the questions above are there should be a solution that addresses the legal, physical and financial structure of the project.

I’d be happy to look at your pro forma analysis to see if the solve can be found.