Offering a property owner an equity position in a development

5 Replies

Good morning - I've recently been made aware that a local Grocery Store (owned by a decent sized Grocery Chain in the midwest) owns 16 acres of vacant land which would be a prime site for development of a multi-family property.

The property sits between two major roads and allows access to the local downtown on one side (2 miles driving distance) and the Highway on the other (again, about another two miles).

It is my opinion that this development would have a profoundly positive impact on the Grocery Store Sales by providing 80-250 units within walking distance, and according to our Target Market Analysis, our area is in desperate need of rental units.

To the question -

How would you go about trying to leverage your development idea as being so beneficial to the grocery store, that you could get control of the site to perform your due diligence on the mentioned development with as little $$$ out of pocket as possible?

Moreover, would it be inconceivable to think that the Grocery Store may even want to contribute the property to the deal (contingent upon approved financials and financing) and stay as an equity partner?

first walk into your local planning department and public works and see if its zoned correctly and if there is infrastructure to handle that much sewer and water demand.. many times having to up size or do a lot of offsite work renders a project not fically feasible.

This is a fairly common Joint Venture strategy. Depending on the focus on the land owner, many businesses don't like outside investments other than their core business, but perhaps individuals within the company would invest. Approach them with a strong valuation for their land and clear development goals and returns. This is an area where a good lawyer is invaluable.

Thanks @Jay Hinrichs - I've already checked zoning and the property is properly zoned for multi-family - My father in law was the superintendant for the DPW for 25 years and recently retired. I'm sure he can find the answer to the infrastructure scopes and limits at that site. I'll be sure to ask him.

@Ronald Rohde - Thank you. I'll be sure to reach out to my attorney prior to submitting a LOI - Coming up with a basis for a strong property valuation wouldn't be too difficult, but I'd like to get the property under contract prior to investing any amount of time and money into a nice presentation with initial architectural renderings, market info, and proper financial analysis (construction and operating pro-formas).

I'm looking at this as a "chicken of the egg" situation. I'd like the grocery store (or employees of) to come an as an equity partner, which I'm sure they'd like to see some type of presentation before making some type of situation -

Any recommendations on how to put together a very high level (inexpensive) overview of the deal - I'm asking more marketing wise as in - a company that I could provide with some proforma figures, market analysis, and concept drawings, that could in-turn make a presentation/offering memorandum look like it costs thousands of dollars - to at least let me get some information in front of the decision makers.

Originally posted by @Adam Sheren :

Thanks @Jay Hinrichs - I've already checked zoning and the property is properly zoned for multi-family - My father in law was the superintendant for the DPW for 25 years and recently retired. I'm sure he can find the answer to the infrastructure scopes and limits at that site. I'll be sure to ask him.

@Ronald Rohde - Thank you. I'll be sure to reach out to my attorney prior to submitting a LOI - Coming up with a basis for a strong property valuation wouldn't be too difficult, but I'd like to get the property under contract prior to investing any amount of time and money into a nice presentation with initial architectural renderings, market info, and proper financial analysis (construction and operating pro-formas).

I'm looking at this as a "chicken of the egg" situation. I'd like the grocery store (or employees of) to come an as an equity partner, which I'm sure they'd like to see some type of presentation before making some type of situation -

Any recommendations on how to put together a very high level (inexpensive) overview of the deal - I'm asking more marketing wise as in - a company that I could provide with some proforma figures, market analysis, and concept drawings, that could in-turn make a presentation/offering memorandum look like it costs thousands of dollars - to at least let me get some information in front of the decision makers.

The LOI can be 3-5 pages. Just an overview of how you value the land and what the project will cost. Isn't the land their equity? I suggest making a Powerpoint template, I can shoot you some samples my team has put together in the past.

@Ronald Rohde - Yes, the land would be the equity if they choose to go that route, if not, than perhaps other (high level) employees may be interested in the deal as you had suggested earlier. I need to clarify I meant 'chicken OR the egg' - which i'm sure you understood. My point with that comment is that I don't want to spend a great deal of time, effort, energy, and money on this proposed development only to have another investor scoop up the property, however, I know I'll need something to give the decision makers the ability to make an informed decision on whether or not they'd be willing to contribute the land for an equity stake in the project.

I figure with a high level, but well presented outline, that I may be able to get them to at least consider the thought. My plan as of now would be to submit that with the LOI. It would state general terms & conditions but the main goal to be accomplished is to get the property under some type of contact to provide me the time necessary to perform the due diligence, set up my team, and structure the financing/grant funding - you know how it works.

I would very much appreciate any templates you'd be willing to share.

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