My business partner @Dean R. and I went under contract today on a commercial lot in Gwinnett County, GA (Lawrenceville). We have been looking at both residential and commercial properties (with and without existing buildings) for a few months and identified this lot as one that meets the criteria for building a residential assisted living facility - or, in this case what we have dubbed residential style assisted living, as this will be in a small office park vs. a residential setting, with between 16 and 24 beds, so smaller than a Big Box ALF.
We have a 60-day due diligence period (starting today), so we're fleshing out our due diligence checklist (see below) and would welcome input from anyone with experience purchasing and developing a commercial property.
Our pre-contract DD included the following:
1. Confirm zoning allows for a personal care home (as RAL's are known in GA). It does - the county allows congregate personal care homes in the zoning district of this lot, with a minimum of 16 beds.
2. Confirm county has no restrictions on being within a certain distance of a similar facility (we are literally next door neighbors with a large ALF (AKA Big Box). It does not, although we'll do additional DD to verify this.
3. Determine if there are any CC&Rs for the small office park that would prevent us from opening this type of facility, or build the type of building we plan to build So far, we haven't identified any but additional research will happen during our 60-day DD
4. Speak with lenders about lending on the project We did; one lender summarily dismissed it because we don't have experience with ALFs, but based off the initial description of the project, a lender who did the loan for my 24-unit apartment complex gave us a preliminary yes. We'll be working on a business plan, projections and a presentation for him to take to committee for approval of the construction and development loan. The seller of the land agreed to seller-financing for 6 months but we'll need to ensure we can get the full project financing we need prior to conclusion of DD.
5. Analyze demographics Having a Big Box facility on the same street helps give us some degree of confidence in demand for ALFs in the area. Gwinnett County/Lawrenceville also meet our criteria for median income for household and population size.
6. Run income projections under multiple rent/occupancy/financing/build cost scenarios Done, but will continue to update/inform our numbers during DD.
7. Preliminary research on viability of project for this lot We have had 2 conversations with the architect who developed a spec site plan of the lot for the seller. At a high level, he believes the lot will meet the needs of this project based on his level of familiarity with the property, but one of our first DD steps will be to have a face-to-face (social distancing, of course) with his team to discuss in more detail what we plan to do, and get a proforma of project cost. We are also considering using his services to guide us through permitting, etc., as he has designed a similar facility and knows the Gwinnett County process well.
Below is our 60-day DD checklist (not necessarily in order):
1. Schedule meeting with architect to discuss preparation of construction plans (site plan, grading/drainage plan, utility plan, erosion control plans and construction details): GOAL: walk away with proforma of project cost to compare to our projections.
2. Research utility/street maintenance easement: This is something that we are aware exists, but need to fully understand what it entails.
3. Determine if any undiscovered CC&Rs exist for the office park.
4. Fully develop business plan, projections and presentation for lender to move toward loan commitment.
5. Secure private money commitments for downpayment and initial operating costs (we'll be seeking a 1-2 yr bridge loan until we can refi and pay back private lenders)
6. Develop refi plan based on anticipated value of property after lease up to ensure private money can be returned.
7. Order Phase 1 environmental study (for those who have purchased/developed commercial properties, are there any circumstances where you would forego this?).
8. Order full boundary and topography surveys
9. Order preparation of site development plan
10. Apply for permits (land development, building)
11. Secret shop other ALF's in the area
12. Fully explore and confirm all licensing requirements for a PCH with the state Dept. of Community Health
13. Contact Gwinnett County Health Department for regulations pertaining to the construction/operation of the RAL.
14. Title search/review (closing attorney)
This is where we are so far. I would love some input on other DD items we haven't accounted for and other things to consider. 60 days is an aggressive due diligence schedule, so we'll need to hustle; county backlogs may not be our friend, so if we get into significant delays, we might have to ask for an extension.
@Joel Owens ... would love your in put on this. Thanks in advance everyone!
