Let’s treat this pre Covid for all intents and purposhe’s.The developer put the ball in my court to come back to him with a proposal. 

The scenario you propose is not really 'investing' in real estate, it's managing your family affairs. #1 is the 'right' answer. 

What are the possible implications of this seller proposal?

If it were not for the current events and assuming this thing is in the buybox for Zillow they'd offer way more than you were proposing assuming your values are correct, and if they call around to others I'm sure they can find a better all cash quick close offer than $460k. 

@Mike JonesNot sure exactly your proposed structure...

Do they have a Reserve study showing the proposed timeline of major capX repairs and the money required for it (and how much money they actually have for those repairs.)

. - don't accept the first proposal, add to it or negotiate downward , ask for last 2-3 jobs for references.Don't label yourself - don't talk about your successes.

Buyers are proposing Site plan for Self Storage for the portion of the land that will be left over for my Seller and I want to know if that is the best design for Self Storage.  

Requesting experienced apartment rehab folks to share with me any proposal templates used to present to investors / banks to get approval.

I read their proposal materials and it seems like they've been doing fairly well since 2016, with >20 units flipped and ~25% annualized return.