Deal Structure/ Land Development

[Andrew Michael]

Hi BP,

It has been a while since I posted but rest assured I have been working hard structuring deals while keeping a close eye on the BP forums and posts.  Thank you all for the valuable information.  I have a handful of really exciting projects going on that I hope to post about in the near future.  

In the meantime, another opportunity has presented itself to me.  Before I begin please know that I understand most answers, strategies, and solutions are going to be way over my experience level.  So be it, I am determined on focusing why this can work vs all the reasons why it cant.  So lets get to it.

I have been brought on board by a land owner in Rockville, MD to help go over some options for them.  The .3 acre lot is located very close to the heart of Rockville and is commercially zoned.  Currently, there is an old home on the lot that is being used as an office space.  The recent interest shown by land developers has prompted the land owner to evaluate all possible options.  The developers proposals are to knock down the home and build a commercial office building (which the rest of the street/ area consists of).

I am reaching out to see if anyone has contacts, resources, or reading suggestions on the matter. I understand the basic options available like selling the property for sticker price, leasing the land, etc. I was hoping come up with a more creative deal structure where upon the owner could receive some upfront capital while maintaining a future residual income stream as well. What are some common/ reasonable JV structures or terms to suggest when it comes to a land owners working with developers?

Thank you for any and all feedback!   

[Joe Fairless]

@Andrew Michael I'm actually working on something similar with a land owner. You could the your client do a JV with the buyer where your client puts the land in the deal and the buyer does their build. The downside is minimal for your client because you get some upside on the cash flow if the construction happens. If bad things happen to the development and it doesn't get completed then your client keeps the land with any improvements on the property. Usually, at least what I've seen, is that the buyer partners with the seller until the build is complete then, upon getting permanent financing, the seller is bought out for sales price plus an additional fee on top of that.