#2 isn't really an optionIn the eventuality of #1, what are the costs incurred (how much money needs to be in reserve) to ensure refinancing can be covered -- is it just the normal costs of refinancing?

That would come off of the sales price or a reserve credit at closing.

They want to see signed leases with all the details confirmed and locked in while our construction process will likely take at least 18 months...

Also, your holding costs are essentially a reserve for operating expenses.  

For instance, 1 month of rent on a property that generates $400 rent vs $1500 rent is very different reserve (but cost of replacing a roof isn't THAT different). 

I've confirmed that I am able to do this, logistically speaking, but would like to know if there are any tax repercussions.

Reserves should be adequate." 

The in-house counter-bid keeps winning because I'm not bidding up to the reserve, and they keep putting it back up for auction over and over.

I’d keep the cash from bonds as reserves.

Once split, confirm that the zoning is remains R2 (some cities have minimum lot sizes).