Hi Karen thanks for your interest and response. To answer some questions, first the land is free and clear. We are currently in the negotiation process, so as a rough estimate the land can potentially be sold anywhere between $120k- $180k per acre.
We had some engineering done many years back and had a tentative tract map created which changed our zoning from agricultural to its current R-1 & C-1 zoning. We didn’t proceed with that project due to the time of the real estate market collapse. Since then we sat on the property. The existing tentative tract map also did not utilize the highest and best use for the property, as a higher density would have been more desirable.
We’ve been approached with several proposals. One was to change the zoning to a higher density.
Estimated Costs:
Engineering Firm: $65,000.00
Architectural Firm: $60,000.00
Estimated special studies: $50,000.00
Consultant: $50,000.00
Basically to process the general plan amendment from the existing land use of the residential portion LMR R-1 to an HR R-3(highest and best use), or alternatively to an HMR R-2 if the HR R-3 is denied. Then keep the commercial as is.
One of my questions is… are these cost accurately priced to achieve this? What costs are missing if any? Is there a simpler way to accomplish this? We wouldn’t actually build/construct anything at that time, just seek city approvals for the zone change and an approved tract map.
If we achieve this zone change I believe we would be adding value to the land. At that point we could sell the residential portion at HR R-3 or HMR R-2 zoning to a multi-family developer. Then we could hold the commercial portion until after development of the residential R-2 or R-3 is complete or sell during. This is one of the exit strategies we have in mind.
If we joint venture, it would most likely be as a small equity investment in lieu of a 100% all cash deal (ie. 80% of the purchase price paid upfront and the other 20% would be held back by the buyer in exchange for equity in their project… simple math not actual numbers ($1,000,000 sales price, $800,000 paid to seller, $200,000 remains as investment capital to developer)
I don’t think the family would be comfortable with joint venturing through the entire build out unless they received something substantial upfront and a smaller percentage on the back end. Then there would be less risk on the table and a majority of the money out.
We want to look at all possibilities and assess the risk/reward before making a final decision.
The family members involved are older, so would tend to be more conservative. However the intent is also for the benefit of the heirs and we have a say as well.
